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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS
Table of Contents
As filed with the Securities and Exchange Commission on October 20, 2014
Registration No. 333-198837

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

AMENDMENT NO. 2
TO
FORM S-1
 REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

Sientra, Inc.
 (Exact name of Registrant as specified in its charter)

Delaware
 (State or other jurisdiction of
incorporation or organization)	 	3842
 (Primary Standard Industrial
Classification Code Number)	 	20-5551000
 (I.R.S. Employer
Identification Number)	
420 South Fairview Avenue, Suite 200
Santa Barbara, CA 93117
(805) 562-3500
 (Address, including zip code, and telephone number, including
area code, of Registrant's principal executive offices)

Hani Zeini
Founder, President and Chief Executive Officer
Sientra, Inc.
420 South Fairview Avenue, Suite 200
Santa Barbara, CA 93117
(805) 562-3500
 (Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

C. Thomas Hopkins, Esq.
Charles J. Bair, Esq.
Cooley LLP
1333 2 nd Street, Suite 400
Santa Monica, CA 90401
(310) 883-6400	 	Matthew Pigeon
Chief Financial Officer and Treasurer

Joel Smith, Esq.
General Counsel, Secretary and
Chief Compliance Officer

Sientra, Inc.
420 South Fairview Avenue, Suite 200
Santa Barbara, CA 93117
(805) 562-3500	 	Charles K. Ruck, Esq.
Shayne Kennedy, Esq.
Latham & Watkins LLP
650 Town Center Drive, 20 th Floor
Costa Mesa, CA 92626
(714) 540-1235	

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, check the following box.     o
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.     o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

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

CALCULATION OF REGISTRATION FEE

	 	 	 	 	 	 	 	 	
 	
Title of each class of securities
to be registered	 	Amount to be
registered (1)	 	Proposed maximum
offering price
per share	 	Proposed maximum
aggregate offering price (1) (2)	 	Amount of
registration fee (3)	
 	
Common Stock, $0.01 par value per share	 	5,750,000	 	$16.00	 	$92,000,000	 	$10,690.40	
 	
(1)
Includes the additional shares that the underwriters have the option to purchase.

(2)
Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(a) under the Securities Act of 1933, as amended, based on an estimate of the proposed maximum aggregate offering price.

(3)
Previously paid.
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, as amended, or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the Securities and Exchange Commission declares our registration statement effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.
Subject to completion, dated October 20, 2014
5,000,000 Shares

			
SIENTRA, INC.	 	
	
Common Stock
$                per share

•
Sientra, Inc. is offering 5,000,000 shares. 

•
We anticipate that the initial public offering price will be between $14.00 and $16.00 per share. 

•
This is our initial public offering and no public market currently exists for our shares. 

•
Proposed trading symbol: "SIEN."

This investment involves risk. See "Risk Factors" beginning on page 14.
We are an "emerging growth company" as defined in the Jumpstart Our Business Startups Act of 2012, and as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings.

	 	 	 	 	 	 	 	 	 	

 	

 	
Per Share	
 	
Total	
 	
Public offering price	 	 $	 	 	 $	 	 	
Underwriting discount (1)	 	 $	 	 	 $	 	 	
Proceeds to Sientra, Inc., before expenses	 	 $	 	 	 $	 	 	

(1)	 	    See "Underwriting" for additional information regarding underwriting compensation.	 	

 	

 	

 	

 	 	
	 	 	 	 	 	 	 	 	 	
We have granted to the underwriters an option to purchase up to 750,000 additional shares of common stock from us at the public offering price, less the underwriting discount, for 30 days after the date of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission 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 investors on or about           , 2014.

			
Piper Jaffray	 	Stifel	

Leerink Partners	
 	
William Blair	
    
The date of this prospectus is                    , 2014.

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 	 	Page	 	
Prospectus Summary	 	 	1	 	
Risk Factors	 	 	14	 	
Special Note Regarding Forward-Looking Statements	 	 	45	 	
Use of Proceeds	 	 	47	 	
Dividend Policy	 	 	48	 	
Capitalization	 	 	49	 	
Dilution	 	 	51	 	
Selected Financial Data	 	 	54	 	
Management's Discussion and Analysis of Financial Condition and Results of Operations	 	 	56	 	
Business	 	 	71	 	
Management	 	 	94	 	
Executive Compensation	 	 	104	 	
Certain Relationships and Related Party Transactions	 	 	113	 	
Description of Capital Stock	 	 	116	 	
Principal Stockholders	 	 	122	 	
Shares Eligible for Future Sale	 	 	126	 	
Material United States Federal Income and Estate Tax Considerations for Non-U.S. Holders	 	 	129	 	
Underwriting	 	 	134	 	
Legal Matters	 	 	143	 	
Change in Independent Accountants	 	 	143	 	
Experts	 	 	143	 	
Where You Can Find More Information	 	 	143	 	
Index to Financial Statements	 	 	F-1	 	

You should rely only on the information contained in this prospectus or any related free writing prospectus we may authorize to be delivered to you. We have not, and the underwriters have not, authorized any other person to provide you with different information. We and the underwriters take no responsibility for, and can provide no assurances as to the reliability of, any information that others may give you. This prospectus is not an offer to sell, nor is it seeking an offer to buy, these securities in any state where the offer or sale is not permitted. The information in this prospectus is only accurate as of the date of this prospectus, regardless of the time or delivery of this prospectus and any sale of our common stock.
We further note that the representations, warranties and covenants made by us in any agreement that is filed as an exhibit to the registration statement of which this prospectus is a part were made solely for the benefit of the parties to such agreement, including, in some cases, for the purpose of allocating risk among the parties to such agreement, and should not be deemed to be a representation, warranty or covenant made to you or for your benefit. Moreover, such representations, warranties or covenants were accurate only as of the date they were made. Accordingly, such representations, warranties and covenants should not be relied on as accurately representing the current state of our affairs.
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 Trademarks
Our trademark portfolio contains five registered U.S. trademarks, including Sientra®, Simplicity is Beauty®, Sientra Simplicity is Beauty®, Anatomical Controlled® and ACX®, and six Canadian trademark applications. This prospectus contains additional trademarks and trade names of others, which are the property of their respective owners. Solely for convenience, the trademarks and trade names in this prospectus are referred to without the ® and ™ symbols, but such references should not be construed as any indicator that we will not assert, to the fullest extent under applicable law, our rights thereto.

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

 Market and Industry Data and Forecasts
Certain market and industry data and forecasts included in this prospectus were obtained from independent market research, industry publications and surveys, governmental agencies and publicly available information. Industry surveys, publications and forecasts generally state that the information contained therein has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We believe the data from such third-party sources to be reliable. However, we have not independently verified any of such data and cannot guarantee its accuracy or completeness. Similarly, internal market research and industry forecasts, which we believe to be reliable based upon our management's knowledge of the market and the industry, have not been verified by any independent sources. While we are not aware of any misstatements regarding the market or industry data presented herein, our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the heading "Risk Factors," "Special Note Regarding Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus.
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 PROSPECTUS SUMMARY
This prospectus summary provides an overview of certain information appearing elsewhere in this prospectus. This prospectus summary is not complete and does not contain all of the information that you should consider before making a decision to invest in our common stock. You are encouraged to carefully read this entire prospectus, including the information provided under the headings "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the related notes, before investing in our common stock. Unless otherwise stated in this prospectus, references to "Sientra," "we," "us," "our" or "the Company" refer to Sientra, Inc.
Overview
We are a medical aesthetics company committed to making a difference in patients' lives by enhancing their body image, growing their self-esteem and restoring their confidence. We were founded to provide greater choice to board-certified plastic surgeons and patients in need of medical aesthetics products. We have developed a broad portfolio of products with technologically differentiated characteristics, supported by independent laboratory testing and strong clinical trial outcomes. We sell our breast implants and breast tissue expanders, or Breast Products, exclusively to board-certified and board-admissible plastic surgeons and tailor our customer service offerings to their specific needs, which we believe helps secure their loyalty and confidence. These advantages have allowed us to increase our market share each year since we entered the market in 2012.
Our primary products are silicone gel breast implants for use in breast augmentation and breast reconstruction procedures, which we offer in over 120 variations of shapes, sizes and textures. Our breast implants are primarily used in elective procedures which are generally performed on a cash-pay basis. Many of our breast implants incorporate one or more differentiated technologies, including a proprietary high-strength, cohesive silicone gel and proprietary texturing branded TRUE Texture. Our breast implants offer a desired balance between strength, shape retention and softness due to the high-strength, cohesive silicone gel used in our manufacturing process. TRUE Texture provides texturing on the implant shell that is designed to reduce the incidence of malposition, rotation and capsular contracture, a complication in which the patient's body creates a scar-tissue capsule around the implant that can tighten and squeeze the implant potentially causing discomfort, pain and even dislocation of the implant. We also offer breast tissue expanders and a range of other aesthetic and specialty products. We do not have any patents or patent applications, but rely on trade secrets, proprietary know-how and regulatory barriers to protect our products and technologies.
Our breast implants were approved by the U.S. Food and Drug Administration, or FDA, in 2012, based on data we collected from our ongoing, long-term clinical trial of our breast implants in 1,788 women across 36 investigational sites in the United States. Our clinical trial is the largest prospective, long-term safety and effectiveness pivotal study of breast implant patients in the United States. The clinical data we collected over a five-year follow-up period demonstrated rupture rates, capsular contracture rates and reoperation rates that were comparable to or better than those of our competitors, based on our competitors' published six-year data. In addition to our pivotal study, our clinical data is supported by our Continued Access Study of 2,497 women in the United States. We have also commissioned a number of bench trials run by independent laboratories that we believe further demonstrate the advantages of our breast implants over those of our competitors.
We sell our Breast Products exclusively to board-certified and board-admissible plastic surgeons, as determined by the American Board of Plastic Surgery, who we refer to as Plastic Surgeons. These surgeons have completed the extensive multi-year plastic surgery residency training required by the American Board of Plastic Surgery. Plastic Surgeons are thought leaders in the medical aesthetics
 
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industry. According to the American Society of Plastic Surgeons, or ASPS, there are approximately 6,400 board-certified plastic surgeons in the United States. We seek to provide Plastic Surgeons with differentiated services, including enhanced customer service offerings, a ten-year limited warranty that is the best-in-the-industry based on providing patients with the largest cash reimbursement for certain out-of-pocket costs related to revision surgeries in a covered event; a lifetime no-charge implant replacement program for covered ruptures; and our industry-first CapCon Care Program, or C3 Program, through which we offer no-charge replacement implants to breast augmentation patients who experience capsular contracture within the first five years after implantation with our smooth or textured breast implants.
Breast augmentation surgery remains the leading aesthetic surgical procedure by dollars and number of procedures in the United States. Based on the number of procedures reported by either the American Society for Aesthetic Plastic Surgery, or ASAPS, or by ASPS, and our estimates of average selling price, implant mix and implants per procedure, we estimate that the U.S. market for breast implants and breast tissue expanders exceeded $600 million in 2013. Based on data from ASAPS and ASPS, between 1997 and 2013, the number of breast augmentation and breast reconstruction procedures has grown at a compound annual growth rate of approximately 7.3% and 4.4%, respectively.
We commenced sales of our breast implants in the United States in the second quarter of 2012. Our net sales were $35.2 million for the year ended December 31, 2013, as compared to $10.4 million for the year ended December 31, 2012. Our net sales were $21.9 million for the six months ended June 30, 2014, as compared to $17.9 million for the six months ended June 30, 2013. Our net loss was $19.1 million for the year ended December 31, 2013, as compared to $23.4 million for the year ended December 31, 2012. Our net loss was $1.2 million for the six months ended June 30, 2014, as compared to $9.6 million for the six months ended June 30, 2013. Our accumulated deficit as of June 30, 2014 was $129.4 million.
Our Market
The overall market for medical aesthetic procedures is significant, and awareness and acceptance of these procedures is growing in the United States. According to ASAPS, in 2013, consumers in the United States spent approximately $12.4 billion on aesthetic procedures overall, including both surgical and non-invasive cosmetic treatments. Of this amount, more than $7.2 billion was spent on aesthetic surgical procedures.
Breast augmentation surgery remains the leading aesthetic surgical procedure by dollars and number of procedures in the United States. According to ASAPS, over 313,000 primary breast augmentation procedures and 55,000 revision augmentation procedures were performed in the United States in 2013. These procedures provide cosmetic solutions generally to enhance breast size and shape, correct breast asymmetries or help restore fullness after breastfeeding. For breast reconstruction, ASPS estimates that approximately 96,000 procedures were performed in the United States in 2013. These procedures are a surgical solution generally used to restore a breast to near normal shape and appearance following a mastectomy and typically utilize a breast tissue expander prior to implantation of a breast implant. Based on the number of procedures reported by ASAPS and by ASPS, and our estimates of average selling price, implant mix and implants per procedure, we estimate that the U.S. market for breast implants and breast tissue expanders exceeded $600 million in 2013. Based on data from ASAPS and ASPS, between 1997 and 2013, the number of breast augmentation and breast reconstruction procedures has grown at a compound annual growth rate of approximately 7.3% and 4.4%, respectively.
 
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Our Opportunity
We believe a significant opportunity exists in the U.S. marketplace due to the high barriers to entry in the U.S. breast implant market and the historical lack of product and service innovation for Plastic Surgeons.
For more than 20 years prior to the FDA approval of our breast implants in 2012, only two companies manufactured and distributed breast implants in the United States. We believe that this market concentration is largely a result of the considerable costs and risks associated with the lengthy regulatory approval process required by the FDA, which has created a significant barrier to entry in the U.S. breast implant market. All new breast implants require pre-market approval, or PMA, from the FDA before they may be marketed in the United States. The PMA application process is lengthy and uncertain, and the PMA application must be supported by valid scientific evidence, which typically requires long-term follow-up of a large number of enrolled patients, as well as extensive technical, pre-clinical, clinical and manufacturing data to demonstrate safety and effectiveness. At present, we are not aware of any ongoing clinical studies in the United States for silicone breast implants other than those post-approval studies being performed by us and our two U.S. competitors. We believe that in the near term, it is likely that the companies currently providing silicone breast implants in the United States will continue to be the only companies servicing the U.S. silicone breast implant market.
We believe the rigorous FDA approval process and the existence of only two competitors in the U.S. market have historically contributed to a lack of technological innovation in the U.S. breast implant industry resulting in limited product choices. Until recently, surgeons in the United States were only able to purchase basic round breast implants from our two U.S. competitors, while surgeons outside of the United States were able to purchase technologically-advanced round and anatomically-shaped breast implants.
Our Competitive Strengths
We believe that we are well positioned to take advantage of opportunities afforded by current market dynamics. By focusing on products with technologically differentiated characteristics, demonstrating strong clinical data, offering more product choice and providing services tailored specifically to the needs of Plastic Surgeons, we believe we can continue to enhance our position in the breast implant market. Our competitive strengths include:
Differentiated silicone gel and texturing technologies.     We incorporate differentiated technologies into our breast implants, including a proprietary high-strength, cohesive silicone gel and proprietary texturing branded TRUE Texture. Our breast implants offer a desired balance between strength, shape retention and softness due to the high-strength, cohesive silicone gel used in our manufacturing process. In addition, TRUE Texture technology provides texturing on the implant shell that is designed to reduce the incidence of malposition, rotation and capsular contracture. We do not have any patents or patent applications, but rely on trade secrets, proprietary know-how and regulatory barriers to protect our products and technologies.
Strong clinical trial outcomes.     Our clinical trial results demonstrate the safety and effectiveness of our breast implants. Our breast implants were approved by the FDA based on data we collected from our ongoing, long-term clinical trial of our breast implants in 1,788 women across 36 investigational sites in the United States. The clinical data we collected over a five-year follow-up period demonstrated rupture rates, capsular contracture rates and reoperation rates that were comparable to or better than those of our competitors, based on our competitors' published six-year data.
 
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Innovative services that deliver an improved customer experience.     Our customer service offerings are intended to accommodate and anticipate the needs of Plastic Surgeons so that they can focus on providing better services to their patients. We provide a ten-year limited warranty that is the best-in-the-industry based on providing patients with the largest cash reimbursement for certain out-of-pocket costs related to revision surgeries in a covered event; a lifetime no-charge implant replacement program for covered ruptures; and our industry-first C3 Program through which we offer no-charge replacement implants to breast augmentation patients who experience capsular contracture within the first five years after implantation with our smooth or textured breast implants. We also offer specialized educational initiatives and a streamlined ordering, shipping and billing process.
Board-certified plastic surgeon focus.     We sell our Breast Products exclusively to board-certified and board-admissible plastic surgeons who are thought leaders in the medical aesthetics industry. We address the specific needs of Plastic Surgeons through continued product innovation, expansion of our product portfolio and enhanced customer service offerings. We believe that securing the loyalty and confidence of Plastic Surgeons is essential to our success and that our association with Plastic Surgeons enhances our credibility and aligns with our focus on making a difference in patients' lives.
Proven and experienced leadership team.     We have a highly experienced management team at both the corporate and operational levels with significant experience in the medical aesthetics industry. Members of our senior management team collectively have more than 125 years of medical aesthetics industry experience.
Our Strategy
Our objective is to become a leading provider of differentiated medical aesthetic products and services tailored to meet the needs of Plastic Surgeons, allowing us to deliver on our commitment to enhance and make a difference in patients' lives. We are currently focused on growing the breast implant and breast tissue expander markets and our share of them in the United States, and intend to leverage our capabilities into new or complementary aesthetic products or technologies and new geographic markets or market segments. To achieve our objective, we are pursuing the following business strategies:
Create awareness of our differentiated technologies, products and services with Plastic Surgeons and consumers.     To date, we have focused most of our marketing efforts on Plastic Surgeons to promote and create awareness of the benefits of our products. We believe that investing in expanded marketing initiatives will have a positive impact on our business. We offer educational initiatives exclusively to Plastic Surgeons through our Sientra Education Forum. We also plan to expand our recent initiative to educate consumers considering breast augmentation or breast reconstruction about our technologies, products and services to drive adoption of our products.
Enhance our sales capabilities and marketing programs to drive adoption of our products.     We intend to increase our direct sales capabilities through the hiring of additional, experienced sales representatives and support staff. We believe that continued expansion of our sales team will allow us to broaden our market reach and educate a broader group of Plastic Surgeons on the benefits of our products.
Invest in clinical studies and peer reviewed articles with key opinion leaders.     We intend to continue to invest in clinical studies in order to provide published peer reviewed articles that support the clinical benefits of our products and technologies over those of our competitors. We believe our relationship with Plastic Surgeons and our continued focus on providing differentiated products and services will allow us to leverage our existing capabilities to increase our share of the breast implant market specifically and the medical aesthetics market generally.
 
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Broaden our product portfolio and launch new products and services.     We plan to continue to develop products that address the unmet needs of Plastic Surgeons and patients by leveraging our innovative technologies in combination with our regulatory and product development expertise. We have a number of new Breast Products under development with different characteristics and configurations. We believe these expanded product choices will allow Plastic Surgeons to potentially achieve better outcomes for their patients.
Expand to new markets.     We are pursuing regulatory approval for our breast implants in Canada and intend to expand into the Canadian market upon receipt of such approval. We regularly evaluate additional expansion opportunities and in the future may also expand our business to cover new markets and geographic territories.
Selectively pursue acquisitions.     We may selectively pursue domestic and international acquisitions of businesses or technologies that may allow us to leverage our relationships with Plastic Surgeons and our existing commercial infrastructure to provide us with new or complementary products or technologies, and allow us to compete in new geographic markets or market segments or to increase our market share.
Recent Developments
Our financial results for the three and nine months ended September 30, 2014 are not yet finalized. However, the following information reflects our preliminary expectations with respect to such results based on information currently available to management.
•
We expect to report that our net sales for the three months ended September 30, 2014 will be between approximately $10.3 million and $10.6 million, representing an increase of 29% to 33%, as compared to approximately $8.0 million for the three months ended September 30, 2013. Additionally, we expect to report that our net sales for the nine months ended September 30, 2014 will be between approximately $32.3 million and $32.6 million, representing an increase of 24% to 26%, as compared to approximately $25.9 million for the nine months ended September 30, 2013. These estimated increases in our net sales from the same periods in the prior year are primarily driven by sales of our Breast Products in the United States resulting from increased commercialization activities, including the expansion of our sales organization, increased marketing activities and greater familiarity with our products and customer service offerings by Plastic Surgeons. As of September 30, 2014, our sales organization included 42 employees, as compared to 36 employees as of September 30, 2013. 

•
We expect to report that our cost of goods sold for the three months ended September 30, 2014 will be between approximately $2.8 million and $3.0 million, as compared to approximately $2.0 million for the three months ended September 30, 2013. Additionally, we expect to report that our cost of goods sold for the nine months ended September 30, 2014 will be between approximately $8.3 million and $8.5 million, as compared to approximately $6.4 million for the nine months ended September 30, 2013. These estimated increases in our cost of goods sold from the same periods in the prior year are primarily due to an increase in sales volume. Our gross margin for the three and nine months ended September 30, 2014 is expected to decrease, as compared to the same periods in the prior year, primarily due to manufacturing price increases, targeted pricing programs and an increase in overhead related to warehouse operations.
 
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•
We expect to report that our operating expenses for the three months ended September 30, 2014 will be between approximately $8.5 million and $8.8 million, as compared to approximately $12.2 million for the three months ended September 30, 2013. Additionally, we expect to report that our operating expenses for the nine months ended September 30, 2014 will be between approximately $27.7 million and $28.0 million, as compared to approximately $35.0 million for the nine months ended September 30, 2013. These estimated decreases in our operating expenses from the same periods in the prior year are primarily due to a decrease in expenses related to the Mentor litigation and the Grader Street arbitration, partially offset by an increase in employee related expense for the sales department, an increase in marketing costs and expenses related to the federal excise tax and accounting costs. 

•
We expect to report that other (expense) income, net for the three months ended September 30, 2014 will be approximately ($0.7) million, as compared to approximately ($0.3) million for the three months ended September 30, 2013. Additionally, we expect to report that other (expense) income, net for the nine months ended September 30, 2014 will be approximately $0.7 million, as compared to approximately ($0.7) million for the nine months ended September 30, 2013. Other (expense) income, net for the three months ended September 30, 2014 is primarily associated with interest expense on our term loans. Other (expense) income, net for the nine months ended September 30, 2014 is primarily associated with income from recovery of costs associated with the Mentor litigation of approximately $2.4 million, partially offset by interest expense on our terms loans of approximately $1.5 million. Other (expense) income, net for the three and nine months ended September 30, 2013 was primarily associated with interest expense on our term loans.
These preliminary estimates are the responsibility of management, reflect management's estimates based solely upon information available to it as of the date of this prospectus and are not a comprehensive statement of our financial results for the three and nine months ended September 30, 2014 and 2013. In addition, our independent registered public accounting firm, KPMG LLP, has not audited, reviewed or performed any procedures with respect to these preliminary financial estimates or the accounting treatment thereof and does not express an opinion or any other form of assurance with respect thereto. We expect to complete our unaudited financial statements for the quarter ended September 30, 2014 subsequent to the completion of this offering. It is possible that we or our independent registered public accounting firm may identify items that require us to make adjustments to the financial information set forth above and those changes could be material.
The ranges for the preliminary estimated financial results described above constitute forward-looking statements. Actual results may vary materially from the information contained in these forward-looking statements based on a number of factors, including those discussed under the heading "Risk Factors" and "Special Note Regarding Forward-Looking Statements." Accordingly, you should not place undue reliance upon this preliminary information. The preliminary information should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the related notes included elsewhere in this prospectus.
Risks Related to Our Business and Our Industry
Our business is subject to numerous risks and uncertainties of which you should be aware before you decide to invest in our common stock. These risks may prevent us from achieving our business objectives, and may adversely affect our business, financial condition, results of operations and
 
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prospects. These risks are discussed in greater detail in the section entitled "Risk Factors" beginning on page 14 of this prospectus, including the following:
•
we have incurred significant net operating losses since inception and cannot assure you that we will achieve profitability; 

•
our future profitability depends on the success of our Breast Products; 

•
we rely on a foreign, sole source, third-party to manufacture and supply our silicone gel breast implants, tissue expanders and other products; 

•
there are inherent risks in contracting with manufacturers located outside of the United States such as in Brazil; 

•
various factors outside our direct control may adversely affect manufacturing and supply of our breast implants, tissue expanders and other products; 

•
we have a limited operating history and may face difficulties encountered by companies early in their commercialization in competitive and rapidly evolving markets; 

•
if we fail to compete effectively against our competitors, many of whom have greater resources than we have, our net sales and operating results may be negatively affected; 

•
pricing pressure from customers and our competitors may impact our ability to sell our products at prices necessary to support our current business strategies; 

•
the long-term (defined as 10 years or more) safety of our products has not fully been established and our breast implants are currently under study in our PMA and post-approval studies, which could reveal unanticipated complications; 

•
we are subject to extensive federal and state regulation, and if we fail to comply with applicable regulations, we could suffer severe criminal or civil sanctions or be required to restructure our operations, any of which could adversely affect our business, financial condition and operating results; 

•
if our intellectual property rights do not adequately protect our products or technologies, others could compete against us more directly, which would hurt our profitability; 

•
any negative publicity concerning our products could harm our business and reputation and negatively impact our financial results; and 

•
other factors set forth under "Risk Factors" in this prospectus.
Corporate Information
We were incorporated in Delaware in August 2003 as Juliet Medical, Inc. and changed our name to Sientra, Inc. in April 2007. Our principal executive offices are located at 420 South Fairview Avenue, Suite 200, Santa Barbara, California 93117 and our telephone number is (805) 562-3500. Our website is www.sientra.com . The information on our website or accessible through our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website or accessible through our website to be a part of this prospectus or in deciding whether to purchase our common stock.
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
 
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requirements and is relieved of certain other significant requirements that are otherwise generally applicable to public companies. As an emerging growth company:
•
we are permitted to present only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations in this prospectus; 

•
we are exempt from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002; 

•
we are permitted to provide less extensive disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; and 

•
we are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute arrangements.
We may take advantage of these provisions until the last day of the fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer" as defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended, our annual gross revenue equals or exceeds $1.0 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
We may choose to take advantage of some but not all of these reduced burdens. We have taken advantage of reduced reporting requirements in this prospectus. Accordingly, the information contained herein may be different from the information you receive from our competitors that are public companies, or other public companies in which you have made an investment.
In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
 
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 The Offering

			
Shares of common stock offered by us	 	5,000,000 shares.	
Shares of common stock to be outstanding immediately after this offering	 	14,152,275 shares (or 14,902,275 shares if the underwriters exercise in full their option to purchase additional shares).	
Option to purchase additional shares	 	We have granted the underwriters an option to purchase up to 750,000 additional shares of common stock from us. The underwriters can exercise this option at any time within 30 days from the date of this prospectus.	
Use of proceeds	 	We estimate that we will receive net proceeds from this offering of approximately $66.8 million, or $77.2 million if the underwriters exercise in full their option to purchase additional shares, based on an assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us.	
	 	We intend to use the net proceeds from this offering to expand our sales force and marketing programs, to fund research and development activities and for working capital and other general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in complementary products, technologies or businesses; however, we currently have no agreements or commitments to complete any such transaction. For additional information, see "Use of Proceeds."	
Risk factors	 	Investing in our common stock involves risks. See the section entitled "Risk Factors" beginning on page 14 of this prospectus and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our common stock.	

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Directed share program	 	At our request, the underwriters have reserved for sale at the initial public offering price up to 250,000 shares of common stock, or approximately 5% of the shares offered by this prospectus, for our employees, directors and other persons associated with us. Any directed shares purchased by our executive officers, directors, principal stockholders and employees will be subject to the 180-day lock-up restriction described in the "Underwriting" section of this prospectus. Any participants in the directed share program that have not entered into a 180-day contractual lock-up agreement with the underwriters will not be subject to any lock-up arrangements with any underwriter with respect to the directed shares sold to them. The number of shares of common stock available for sale to the general public in the offering will be reduced by the number of shares sold pursuant to the directed share program. Any directed shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus. The directed share program will be arranged through Stifel, Nicolaus & Company, Incorporated.	
Proposed NASDAQ Global Select Market symbol	 	"SIEN."	
The number of shares of our common stock to be outstanding immediately after this offering is based upon 9,152,275 shares of common stock outstanding as of June 30, 2014, and excludes:
•
47,710 shares of common stock issuable upon exercise of outstanding warrants as of June 30, 2014, at a weighted average exercise price of $14.671 per share; 

•
1,566,670 shares of common stock issuable upon exercise of outstanding options to purchase shares of common stock under our 2007 Equity Incentive Plan, or the 2007 Plan, at a weighted average exercise price of $3.49 per share; 

•
69,266 shares of common stock issuable upon exercise of outstanding options granted on July 22, 2014 to purchase shares of common stock under the 2007 Plan at an exercise price of $13.26 per share; 

•
1,027,500 shares of common stock reserved for future grant or issuance under our 2014 Equity Incentive Plan, or the 2014 Plan, which will become effective upon the execution and delivery of the underwriting agreement for this offering; and 

•
255,500 shares of common stock reserved for future grant or issuance under our 2014 Employee Stock Purchase Plan, or the ESPP, which will become effective upon the execution and delivery of the underwriting agreement for this offering.
Except as otherwise indicated or the context otherwise requires, the information in this prospectus assumes:
•
no exercise of the underwriters' option to purchase additional shares;
 
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•
the filing and effectiveness of our amended and restated certificate of incorporation and the adoption of our amended and restated bylaws upon the closing of this offering; 

•
no exercise of the outstanding warrants or options described above; 

•
the automatic conversion of all outstanding shares of our preferred stock as of June 30, 2014 into an aggregate of 8,942,930 shares of our common stock in connection with the closing of this offering, as consented to by the requisite holders of our preferred stock; and 

•
a 1 for 2.75 reverse stock split of our common stock effected on October 17, 2014.
 
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 Summary Financial Data
The following tables set forth our summary financial data for the periods and as of the dates indicated. We derived the summary statement of operations data presented below for the years ended December 31, 2012 and 2013 from our audited financial statements included elsewhere in this prospectus. We derived the summary statement of operations data presented below for the six months ended June 30, 2013 and 2014 and the summary balance sheet data as of June 30, 2014 from our unaudited financial statements included elsewhere in this prospectus. In the opinion of management, the unaudited financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of our results for those periods. Our historical results are not necessarily indicative of future operating results and our interim results are not necessarily indicative of results for a full year or any future period.
You should read the summary financial data presented below in conjunction with the information included under the headings "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the related notes included elsewhere in this prospectus.

														
 	 	Year Ended
December 31,	 	Six Months Ended
June 30,	 	
 	 	2012	 	2013	 	2013	 	2014	 	
 	 	 	 	 	 	(Unaudited)	 	
 	 	(In thousands, except per share and share amounts)	 	
Statement of operations data:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	 $	10,447	 	 $	35,171	 	 $	17,940	 	 $	21,947	 	
Cost of goods sold	 	 	2,352	 	 	8,592	 	 	4,384	 	 	5,455	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Gross profit	 	 	8,095	 	 	26,579	 	 	13,556	 	 	16,492	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales and marketing	 	 	17,919	 	 	22,229	 	 	10,797	 	 	11,863	 	
Research and development	 	 	3,670	 	 	4,479	 	 	2,166	 	 	2,305	 	
General and administrative	 	 	9,938	 	 	18,078	 	 	9,768	 	 	4,908	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total operating expenses                     	 	 	31,527	 	 	44,786	 	 	22,731	 	 	19,076	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Loss from operations                     	 	 	(23,432	)	 	(18,207	)	 	(9,175	)	 	(2,584	)	
Other (expense) income, net:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	—	 	 	(872	)	 	(380	)	 	(842	)	
Other (expense) income, net	 	 	(1	)	 	(46	)	 	(20	)	 	2,264	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total other (expense) income, net                	 	 	(1	)	 	(918	)	 	(400	)	 	1,422	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Loss before income taxes                         	 	 	(23,433	)	 	(19,125	)	 	(9,575	)	 	(1,162	)	
Income taxes	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Net loss	 	 $	(23,433	)	 $	(19,125	)	 $	(9,575	)	 $	(1,162	)	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Per share data:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted net loss per share attributable to common stockholders (1)	 	 $	(85.01	)	 $	(82.25	)	 $	(36.98	)	 $	(5.58	)	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Weighted average outstanding common shares used for net loss per share attributable to common stockholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted (1)	 	 	275,642	 	 	232,512	 	 	258,928	 	 	208,294	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Pro forma net loss per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted (unaudited) (1)	 	 	 	 	 $	(2.08	)	 	 	 	 $	(0.13	)	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average outstanding common shares used in computing pro forma net loss per share attributable to common stockholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted (unaudited) (1)                                      	 	 	 	 	 	9,175,442	 	 	 	 	 	9,151,224	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	

(1)
See Notes 3(d) and 3(u) to our financial statements appearing elsewhere in this prospectus for an explanation of the method used to calculate the basic and diluted net loss per share and pro forma net loss per share and the number of shares used in the computation of the per share amounts.
 
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 	 	As of June 30, 2014
(Unaudited)
(In thousands)	 	
 	 	Actual	 	Pro Forma (1)	 	Pro Forma
As Adjusted (2)(3)	 	
Balance sheet data (at end of period):	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 $	21,637	 	 $	21,637	 	 $	88,387	 	
Working capital	 	 	33,773	 	 	33,773	 	 	100,523	 	
Total assets	 	 	63,397	 	 	63,397	 	 	130,147	 	
Long-term debt	 	 	25,177	 	 	25,177	 	 	25,177	 	
Convertible preferred stock	 	 	150,456	 	 	—	 	 	—	 	
Total stockholders' (deficit) equity	 	 	(127,627	)	 	22,829	 	 	89,579	 	

(1)
Pro forma amounts reflect the automatic conversion of all our outstanding shares of preferred stock as of June 30, 2014 into an aggregate of 8,942,930 shares of our common stock in connection with the closing of this offering, as consented to by the requisite holders of our preferred stock.

(2)
Pro forma as adjusted amounts further adjusts the pro forma amounts to reflect the sale of 5,000,000 shares of our common stock in this offering at an assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us.

(3)
A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover page of this prospectus, would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders' equity by approximately $4.7 million, assuming the number of shares offered by us as stated on the cover of this prospectus remains unchanged and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us. Similarly, a 1,000,000 share increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) each of cash and cash equivalents, working capital, total assets and total stockholders' equity by approximately $14.0 million, at the assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover of this prospectus, and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us. The pro forma information discussed above is illustrative only and will be adjusted based on the actual initial public offering price and other terms of our initial public offering determined at pricing.
 
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 RISK FACTORS
An investment in our common stock involves risks. You should consider carefully the risks described below, together with all of the other information included in this prospectus, including our financial statements and the related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations," before investing in our common stock. If any of the events contemplated in following risks actually occur, our business, financial condition, operating results and prospects could suffer. In that case, the trading price of our common stock may decline and you might lose all or part of your investment.
Risks Relating to Our Business and Our Industry
We have incurred significant net operating losses since inception and cannot assure you that we will achieve profitability.
Since our inception, we have incurred significant net operating losses. As of June 30, 2014, we had an accumulated deficit of $129.4 million. To date, we have financed our operations primarily through sales of preferred stock, borrowings under our term loans and, since 2012, sales of our products. We have devoted substantially all of our resources to the acquisition and clinical development of our products, the commercial launch of our products, the development of a sales and marketing team and the assembly of a management team to manage our business.
We commenced sales of our breast implants in the second quarter of 2012. For the year ended December 31, 2013, our gross profit was $26.6 million. However, although we have achieved a positive gross profit, we still operate at a substantial net loss. The extent of our future net operating losses and the timing of profitability are uncertain, especially in light of the recent commercialization of our silicone gel breast implants, which makes forecasting our sales more difficult. We will need to generate significant sales to achieve profitability, and we might not be able to do so. Even if we do generate significant sales, we might not be able to achieve, sustain or increase profitability on a quarterly or annual basis in the future. If our sales grow more slowly than we have forecasted, or if our operating expenses exceed our forecasts, our financial performance and results of operations will be adversely affected.
Our future profitability depends on the success of our Breast Products.
Sales of our Breast Products accounted for 98% and 97% of our net sales for the year ended December 31, 2013 and for the six months ended June 30, 2014, respectively. We expect our net sales to continue to be based primarily on sales of our Breast Products. Any product liability lawsuits, introduction of competitive products by our competitors and other third parties, the loss of market acceptance of our Breast Products, adverse rulings by regulatory authorities, adverse publicity or other adverse events relating to us or our Breast Products may significantly impact our sales and profitability, which would adversely affect our business, financial condition and results of operations.
We rely on a foreign, sole source, third-party to manufacture and supply our silicone gel breast implants, tissue expanders and other products.
We rely on Silimed Industria de Implantes Ltda. (formerly, Silimed-Silicone e Instrumental Medico-Cirugio e Hospitalar Ltda.), or Silimed, our sole source, third-party manufacturer located in Brazil, to manufacture and supply our silicone gel breast implants, tissue expanders and other products, and Silimed relies on Applied Silicone Corporation, or ASC, its sole source, third-party supplier of medical-grade silicone based in Santa Paula, California. If ASC becomes unable or willing to supply medical-grade silicone to Silimed or if Silimed becomes unable or unwilling to manufacture and supply our silicone gel breast implants, tissue expanders and other products, we will not be able to replace ASC
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or Silimed quickly, and we have not qualified another silicone supplier nor another manufacturer to source our implants in that event. Even if we were able to identify a replacement manufacturer or silicone supplier, either would have to be qualified with the FDA, which is an expensive and time-consuming process during which we may experience a supply interruption. As a result, our financial position and results of operations may be adversely affected. There can also be no guarantee that ASC or Silimed will be able to meet our demand to produce sufficient quantities of medical-grade silicone or our products in a timely manner. Furthermore, our current contract with Silimed expires in 2017, and there can be no assurance that Silimed will agree to continue to manufacture and supply our products after the expiration of our contract, which would have a material adverse effect on our business, financial condition and results of operations.
In addition, our reliance on Silimed involves a number of other risks, including, among other things, that:
•
our products may not be manufactured in accordance with agreed upon specifications or in compliance with regulatory requirements, or its manufacturing facilities may not be able to maintain compliance with regulatory requirements, which could negatively affect the safety or efficacy of our products or cause delays in shipments of our products; 

•
we may not be able to timely respond to unanticipated changes in customer orders, and if orders do not match forecasts, we may have excess or inadequate inventory of materials and components; 

•
we may be subject to price fluctuations when a supply contract is renegotiated or if our existing contract is not renewed; 

•
our agreement with Silimed does not permit us to sell the products we obtain from Silimed in any country other than the United States and Canada; 

•
we, Silimed or ASC may lose access to critical services and components, resulting in an interruption in the manufacture or shipment of our products; 

•
Silimed may not be able to find an alternate supplier in a timely manner if the medical-grade silicone becomes unavailable from ASC or we may not be able to find an alternate supplier in a timely manner if the products become unavailable from Silimed; 

•
we may be required to obtain regulatory approvals related to any change in our supply chain; 

•
ASC may wish to discontinue manufacturing and supplying products to Silimed for risk management reasons; 

•
Silimed may wish to discontinue manufacturing and supplying products to us for risk management reasons; and 

•
Silimed or ASC may encounter financial or other hardships unrelated to our demand for products, which could inhibit its ability to fulfill our orders and meet our requirements.
If any of these risks materialize, it could significantly increase our costs, our ability to generate net sales would be impaired, market acceptance of our products could be adversely affected and customers may instead purchase or use our competitors' products, which could materially adversely affect our business, financial condition and results of operations.
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There are inherent risks in contracting with manufacturers located outside of the United States such as in Brazil.
Silimed is our sole source, third-party manufacturer and its manufacturing plant is located in Brazil. There are inherent risks in contracting with manufacturers located outside of the United States such as in Brazil, including the risks of economic change, recession, labor strikes or disruptions, political turmoil, new or changing tariffs or trade barriers, new or different restrictions on importing or exporting, civil unrest, infrastructure failure, cultural differences in doing business, lack of contract enforceability, lack of protection for intellectual property, war and terrorism. If any of these risks were to materialize, we and Silimed would both be materially adversely affected and our business, financial condition and results of operations would suffer.
Various factors outside our direct control may adversely affect manufacturing and supply of our breast implants, tissue expanders and other products.
Manufacturing and supply of our breast implants, tissue expanders and other products is technically challenging. Changes that our manufacturer may make outside the purview of our direct control can have an impact on our processes, on quality and the successful delivery of products to Plastic Surgeons. Mistakes and mishandling are not uncommon and can affect production and supply. Some of these risks include:
•
failure of our manufacturer to follow Good Manufacturing Practices, or cGMP, requirements or mishandling of our products while in production or in preparation for transit; 

•
transportation and import and export risk, particularly given the global nature of our supply chain; 

•
delays in analytical results or failure of analytical techniques that we depend on for quality control and release of products; 

•
natural disasters, labor disputes, financial distress, lack of raw material supply, issues with facilities and equipment or other forms of disruption to business operations affecting our manufacturer or its suppliers; and 

•
latent defects that may become apparent after products have been released and which may result in a recall of such products.
If any of these risks were to materialize, our ability to provide our products to customers on a timely basis would be adversely impacted.
We have a limited operating history and may face difficulties encountered by companies early in their commercialization in competitive and rapidly evolving markets.
We commenced operations in 2007 and began commercializing silicone gel breast implants in the second quarter of 2012. Accordingly, we have a limited operating history upon which to evaluate our business and forecast our future net sales and operating results. In assessing our business prospects, you should consider the various risks and difficulties frequently encountered by companies early in their commercialization in competitive markets, particularly companies that develop and sell medical devices. These risks include our ability to:
•
implement and execute our business strategy; 

•
expand and improve the productivity of our sales force and marketing programs to grow sales of our existing and proposed products;
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•
increase awareness of our brand and build loyalty among Plastic Surgeons; 

•
manage expanding operations; 

•
respond effectively to competitive pressures and developments; 

•
enhance our existing products and develop new products; 

•
obtain regulatory clearance or approval to enhance our existing products and commercialize new products; 

•
obtain and maintain adequate levels of coverage and reimbursement for our products; 

•
perform clinical trials with respect to our existing products and any new products; and 

•
attract, retain and motivate qualified personnel in various areas of our business.
Due to our limited operating history, we may not have the institutional knowledge or experience to be able to effectively address these and other risks that we may face. In addition, we may not be able to develop insights into trends that could emerge and negatively affect our business and may fail to respond effectively to those trends. As a result of these or other risks, we may not be able to execute key components of our business strategy, and our business, financial condition and operating results may suffer.
If we fail to compete effectively against our competitors, many of whom have greater resources than we have, our net sales and operating results may be negatively affected.
Our industry is intensely competitive and subject to rapid change from the introduction of new products, technologies and other activities of industry participants. Our competitors, Mentor Worldwide, LLC, or Mentor, a division of Johnson & Johnson, and Allergan, Inc., or Allergan, are well-capitalized pharmaceutical companies that have been the market leaders for many years and have the majority share of the breast implant market in the United States. These competitors also enjoy several competitive advantages over us, including:
•
greater financial and human resources for sales, marketing and product development; 

•
established relationships with health care providers and third-party payors; 

•
established reputations and name recognition among health care providers and other key opinion leaders in the plastic surgery industry; 

•
in some cases, an established base of long-time customers; 

•
products supported by long-term clinical data; 

•
larger and more established distribution networks; 

•
greater ability to cross-sell products; and 

•
more experience in conducting research and development, manufacturing, performing clinical trials and obtaining regulatory approval or clearance.
If we fail to compete effectively against our competitors, our net sales and operating results may be negatively affected.
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Pricing pressure from customers and our competitors may impact our ability to sell our products at prices necessary to support our current business strategies.
Our 2012 entry into the U.S. breast implant market represented a significant expansion of the breast implant choices and technologies available in the United States. As a result of our entry into the U.S. breast implant market, our competitors intensified competitive pricing pressure for traditional round-shaped breast implants. If we are not successful in convincing customers or third-party payors of the differentiation of the gel technology used in our implants and selection of shapes and products as compared to our competitors' products, third-party payors may not cover or adequately reimburse our products and customers may choose our competitors' products. Additionally, as more competitors introduce anatomically-shaped products that compete with ours, we may face additional pricing pressure that will impact our future results.
The long-term safety of our products has not fully been established and our breast implants are currently under study in our PMA and post-approval studies, which could reveal unanticipated complications.
We currently market our silicone gel breast implants in the United States. These products have received pre-market approval from the FDA. However, there could still be unanticipated complications or unforeseen health consequences of being implanted with our silicone gel breast implants over the long-term (defined as 10 years or more). Additionally, we compare our five-year data to our competitors' six-year data in some cases in this prospectus, and our longer term data may change due to an increase in such complications or consequences over time. Further, future studies or clinical experience may indicate that treatment with our products is not differentiated to treatment with competitive products. Such results could slow the adoption of our products and significantly reduce our sales, which could prevent us from achieving our forecasted sales targets or achieving or sustaining profitability. Moreover, if long-term results and experience indicate that our products cause unexpected or serious complications, we could be subject to mandatory product recalls, suspension or withdrawal of FDA clearance or approval and significant legal liability.
Any negative publicity concerning our products could harm our business and reputation and negatively impact our financial results.
The responses of potential patients, physicians, the news media, legislative and regulatory bodies and others to information about complications or alleged complications of our products could result in negative publicity and could materially reduce market acceptance of our products. These responses or any investigations and potential resulting negative publicity may have a material adverse effect on our business and reputation and negatively impact our financial condition, results of operations or the market price of our common stock. In addition, significant negative publicity could result in an increased number of product liability claims against us.
If we are unable to train Plastic Surgeons on the safe and appropriate use of our products, we may be unable to achieve our expected growth.
An important part of our sales process includes the ability to educate Plastic Surgeons about the availability of anatomically-shaped breast implants and train Plastic Surgeons on the safe and appropriate use of our products. If we become unable to attract potential new Plastic Surgeon customers to our education and training programs, we may be unable to achieve our expected growth.
There is a learning process involved for Plastic Surgeons to become proficient in the use of our anatomically-shaped products. It is critical to the success of our commercialization efforts to train a sufficient number of Plastic Surgeons and provide them with adequate instruction in the appropriate use of our products via preceptorships and additional demonstration surgeries. This training process
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may take longer than expected and may therefore affect our ability to increase sales. Following completion of training, we rely on the trained Plastic Surgeons to advocate the benefits of our products in the marketplace. Convincing Plastic Surgeons to dedicate the time and energy necessary for adequate training is challenging, and we cannot assure you that we will be successful in these efforts. If Plastic Surgeons are not properly trained, they may misuse or ineffectively use our products. This may also result in, among other things, unsatisfactory patient outcomes, patient injury, negative publicity or lawsuits against us, any of which could have an adverse effect on our business and reputation.
We are required to maintain high levels of inventory, which could consume a significant amount of our resources and reduce our cash flows.
We need to maintain substantial levels of inventory to protect ourselves from supply interruptions, provide our customers with a wide range of shapes and sizes of our breast implants, and account for the high return rates we experience as Plastic Surgeons typically order our products in multiple sizes for a single surgery and then return what they do not use. As a result of our substantial inventory levels, we are subject to the risk that a substantial portion of our inventory becomes obsolete, which could have a material adverse effect on our earnings and cash flows due to the resulting costs associated with the inventory impairment charges and costs required to replace such inventory.
If we are unable to continue to enhance our existing Breast Products and develop and market new products that respond to customer needs and preferences and achieve market acceptance, we may experience a decrease in demand for our products and our business could suffer.
We may not be able to compete effectively with our competitors, and ultimately satisfy the needs and preferences of our customers, unless we can continue to enhance existing products and develop and market new innovative products. Product development requires the investment of significant financial, technological and other resources. Product improvements and new product introductions also require significant planning, design, development and testing at the technological, product and manufacturing process levels and we may not be able to timely develop product improvements or new products. Our competitors' new products may beat our products to market, be more effective with new features, obtain better market acceptance or render our products obsolete. Any new or modified products that we develop may not receive clearance or approval from the FDA, or achieve market acceptance or otherwise generate any meaningful sales or profits for us relative to our expectations based on, among other things, existing and anticipated investments in manufacturing capacity and commitments to fund advertising, marketing, promotional programs and research and development.
If changes in the economy and consumer spending, preferences and trends reduce consumer demand for our products, our sales and profitability would suffer.
We are subject to the risks arising from adverse changes in general economic and market conditions. Certain elective procedures, such as breast augmentation and body contouring, are typically not covered by insurance. Adverse changes in the economy may cause consumers to reassess their spending choices and reduce the demand for these surgeries and could have an adverse effect on consumer spending. This shift could have an adverse effect on our net sales. Furthermore, consumer preferences and trends may shift due to a variety of factors, including changes in demographic and social trends, public health initiatives and product innovations, which may reduce consumer demand for our products.
Any disruption at our facilities could adversely affect our business and operating results.
Our principal offices are located in Santa Barbara, California. Substantially all of our operations are conducted at this location, including customer and technical support, development and management and administrative functions. In addition, substantially all of our inventory of finished goods is held at
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a second location in Santa Barbara, California. Despite our efforts to safeguard our facilities, including acquiring insurance, adopting health and safety protocols and utilizing off-site storage of computer data, vandalism, terrorism or a natural or other disaster, such as an earthquake, fire or flood, could damage or destroy our inventory of finished goods, cause substantial delays in our operations, result in the loss of key information and cause us to incur additional expenses. Our insurance may not cover our losses in any particular case. In addition, regardless of the level of insurance coverage, damage to our facilities may have a material adverse effect on our business, financial condition and operating results.
If there are significant disruptions in our information technology systems, our business, financial condition and operating results could be adversely affected.
The efficient operation of our business depends on our information technology systems. We rely on our information technology systems to effectively manage sales and marketing data, accounting and financial functions, inventory, product development tasks, clinical data, and customer service and technical support functions. Our information technology systems are vulnerable to damage or interruption from earthquakes, fires, floods and other natural disasters, terrorist attacks, computer viruses or hackers, power losses, and computer system or data network failures. In addition, a variety of our software systems are cloud-based data management applications hosted by third-party service providers whose security and information technology systems are subject to similar risks.
The failure of our or our service providers' information technology could disrupt our entire operation or result in decreased sales, increased overhead costs and product shortages, all of which could have a material adverse effect on our reputation, business, financial condition and operating results.
We may be adversely affected by earthquakes or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.
Our corporate headquarters and other facilities are located in Santa Barbara, California, which in the past has experienced both severe earthquakes and wildfires. We do not carry earthquake insurance. Earthquakes, wildfires or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects.
If a natural disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters, that damaged critical infrastructure, such as our enterprise financial systems or manufacturing resource planning and enterprise quality systems, or that otherwise disrupted operations, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business.
Failure to obtain hospital or group purchasing organization contracts could have a material adverse effect on our financial condition and operating results.
A portion of our net sales is derived from sales to hospitals. Many hospital customers, through the contracting process, limit the number of breast implant suppliers that may sell to their institution. Hospitals may choose to contract with our competitors who have a broader range of products that can be used in a wider variety of procedures or our competitors may actively position their broader product portfolios against us during the hospital contracting process. Any limitations on the number of hospitals to which we can sell our products may significantly restrict our ability to grow.
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In addition, contracts with hospitals and group purchasing organizations, or GPOs, often have complex insurance and indemnification requirements, which may not be beneficial to us, or we may not be able to successfully negotiate contracts with a substantial number of hospitals and GPOs at all, which could adversely affect our business, financial condition and results of operations.
Our business could suffer if we lose the services of key personnel or are unable to attract and retain additional qualified personnel.
We are dependent upon the continued services of key personnel, including members of our executive management team who have extensive experience in our industry. The loss of any one of these individuals could disrupt our operations or our strategic plans. Additionally, our future success will depend on, among other things, our ability to continue to hire and retain the necessary qualified sales, marketing and managerial personnel, for whom we compete with numerous other companies, academic institutions and organizations. The loss of key personnel or our inability to attract or retain other qualified personnel could have a material adverse effect on our business, results of operations and financial condition.
We will need to increase the size of our organization, and we may experience difficulties in managing growth.
As of September 30, 2014, we had approximately 93 full-time employees. Our management and personnel, and the systems and facilities we currently have in place, may not be adequate to support future growth. Effectively executing our growth strategy requires that we increase net sales through sales and marketing activities, recruit and retain additional employees and continue to improve our operational, financial and management controls, reporting systems and procedures. If we are not able to effectively expand our organization in these ways, we may not be able to successfully execute our growth strategy, and our business, financial condition and results of operations may suffer.
We may not realize the benefits of partnerships with other companies, acquisitions of complementary products or technologies or other strategic alternatives.
From time to time, we may consider opportunities to partner with or acquire other businesses, products or technologies that may enhance our product platform or technology, expand the breadth of our markets or customer base or advance our business strategies. Potential partnerships or acquisitions involve numerous risks, including:
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integration of the acquired products or technologies with our existing business; 

•
maintenance of uniform standards, procedures, controls and policies; 

•
unanticipated costs associated with partnerships or acquisitions; 

•
diversion of management's attention from our existing business; 

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uncertainties associated with entering new markets in which we have limited or no experience; and 

•
increased legal and accounting costs relating to the partnerships or acquisitions or compliance with regulatory matters.
We currently have no commitments with respect to any partnership or acquisition. We do not know if we will be able to identify partnerships or acquisitions we deem suitable, whether we will be able to successfully complete any such partnerships or acquisitions on favorable terms or at all, or whether we will be able to successfully integrate any partnered or acquired products or technologies. Our potential
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inability to integrate any partnered or acquired products or technologies effectively or realize anticipated synergies may adversely affect our business, financial condition and results of operations.
Risks Related to Our Financial Results and Need for Financing
Our quarterly net sales and operating results are unpredictable and may fluctuate significantly from quarter to quarter due to factors outside our control, which could adversely affect our business, results of operations and the trading price of our common stock.
Our net sales and operating results may vary significantly from quarter to quarter and year to year due to a number of factors, many of which are outside of our control and any of which may cause our stock price to fluctuate. Our net sales and results of operations will be affected by numerous factors, including:
•
the impact of the buying patterns of patients and seasonal cycles in consumer spending; 

•
our ability to drive increased sales of anatomically-shaped breast implants products; 

•
our ability to establish and maintain an effective and dedicated sales organization; 

•
pricing pressure applicable to our products, including adverse third-party coverage and reimbursement outcomes; 

•
results of clinical research and trials on our existing products; 

•
timing of our research and development activities and initiatives; 

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the mix of our products sold due to different profit margins among our products; 

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timing of new product offerings, acquisitions, licenses or other significant events by us or our competitors; 

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the ability of our suppliers to timely provide us with an adequate supply of products; 

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the evolving product offerings of our competitors; 

•
regulatory approvals and legislative changes affecting the products we may offer or those of our competitors; 

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increased labor and related costs; 

•
interruption in the manufacturing or distribution of our products; 

•
the effect of competing technological, industry and market developments; 

•
changes in our ability to obtain regulatory clearance or approval for our products; and 

•
our ability to expand the geographic reach of our sales and marketing efforts.
Many of the products we may seek to develop and introduce in the future will require FDA approval or clearance before commercialization in the United States, and commercialization of such products outside of the United States would likely require additional regulatory approvals, CE Certificates of Conformity and import licenses. As a result, it will be difficult for us to forecast demand for these products with any degree of certainty. In addition, we will be increasing our operating expenses as we expand our commercial capabilities. Accordingly, we may experience significant, unanticipated quarterly losses. If our quarterly or annual operating results fall below the expectations of investors or securities analysts, the price of our common stock could decline substantially. Furthermore, any quarterly or annual fluctuations in our operating results may, in turn, cause the price of our common stock to fluctuate substantially. We believe that quarterly comparisons of our financial results are not necessarily meaningful and should not be relied upon as an indication of our future performance.
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Our future capital needs are uncertain and we may need to raise additional funds in the future, and these funds may not be available on acceptable terms or at all.
As of June 30, 2014, we had $21.6 million in cash and cash equivalents. We believe that our available cash on hand and proceeds from this offering will be sufficient to satisfy our liquidity requirements for at least the next 18 months. However, the continued growth of our business, including the expansion of our sales force and marketing programs, and research and development activities, will significantly increase our expenses. In addition, the amount of our future product sales is difficult to predict, especially in light of the recent commercialization of our silicone gel breast implants, and actual sales may not be in line with our forecasts. As a result, we may be required to seek additional funds in the future. Our future capital requirements will depend on many factors, including:
•
the net sales generated by our silicone gel breast implants and tissue expanders and any other future products that we may develop and commercialize; 

•
the costs associated with expanding our sales force and marketing programs; 

•
the cost associated with developing and commercializing our proposed products or technologies; 

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the cost of obtaining and maintaining regulatory clearance or approval for our current or future products; 

•
the cost of ongoing compliance with regulatory requirements; 

•
expenses we incur in connection with potential litigation or governmental investigations; 

•
anticipated or unanticipated capital expenditures; and 

•
unanticipated general and administrative expenses.
As a result of these and other factors, we do not know whether and the extent to which we may be required to raise additional capital. We may in the future seek additional capital from public or private offerings of our capital stock, borrowings under term loans or other sources, subject to the restrictions under our term loan agreement. If we issue equity or debt securities to raise additional funds, our existing stockholders may experience dilution, and the new equity or debt securities may have rights, preferences and privileges senior to those of our existing stockholders. In addition, if we raise additional funds through collaborations, licensing, joint ventures, strategic alliances, partnership arrangements or other similar arrangements, it may be necessary to relinquish valuable rights to our potential future products or proprietary technologies, or grant licenses on terms that are not favorable to us.
If we are unable to raise additional capital, we may not be able to expand our sales force and marketing programs, enhance our current products or develop new products, take advantage of future opportunities, or respond to competitive pressures, changes in supplier relationships, or unanticipated changes in customer demand. Any of these events could adversely affect our ability to achieve our strategic objectives, which could have a material adverse effect on our business, financial condition and operating results.
Our term loan agreement contains restrictive covenants that may limit our operating flexibility.
Our term loan agreement with Oxford Finance LLC, or Oxford, contains certain restrictive covenants that limit our ability to transfer or dispose of certain assets, engage in new lines of business, change the composition of our management, merge with or acquire other companies, incur additional debt, create new liens and encumbrances, pay dividends or subordinated debt and enter into material transactions with affiliates, among others. We therefore may not be able to engage in any of the
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foregoing transactions unless we obtain the consent of the lender or terminate the term loan agreement. The term loan agreement also contains financial reporting requirements. There is no guarantee that we will be able to pay the principal and interest under the term loan agreement or that future working capital, borrowings or equity financing will be available to repay or refinance the amounts outstanding under the term loan agreement. In addition, we may enter into debt agreements in the future that may contain similar or more burdensome terms and covenants, including financial covenants.
Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.
As of December 31, 2013, we had federal net operating loss carryforwards, or NOLs, of approximately $96.9 million, which expire in various years beginning in 2027, if not utilized to offset taxable income. In general, under Section 382 of the 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 NOLs to offset future taxable income. In general, an "ownership change" occurs if there is a cumulative change in our ownership by "5% shareholders" that exceeds 50 percentage points over a rolling three-year period. Our existing NOLs may be subject to limitations arising from previous ownership changes, and if we undergo one or more ownership changes in connection with this offering or future transactions in our stock, our ability to utilize NOLs could be further limited by Section 382 of the Code. As a result of these limitations, we may not be able to utilize a material portion of the NOLs reflected on our balance sheet and for this reason, we have fully reserved against the value of our NOLs on our balance sheet.
Future changes in financial accounting standards may cause adverse unexpected net sales or expense fluctuations and affect our reported results of operations.
A change in accounting standards could have a significant effect on our reported results and may even affect our reporting of transactions completed before the change is effective. New pronouncements and varying interpretations of existing pronouncements have occurred and may occur in the future. Changes to existing rules or current practices may adversely affect our reported financial results of our business.
Risks Related to Our Intellectual Property and Potential Litigation
If our intellectual property rights do not adequately protect our products or technologies, others could compete against us more directly, which would hurt our profitability.
Our success depends in part on our ability to protect our intellectual property rights. Our intellectual property portfolio consists of no patents or patent applications, and we do not currently plan to file for patent protection in the future, in the United States or elsewhere. We instead rely on trade secrets, proprietary know-how and regulatory barriers to protect our products and technologies and seek protection of our rights, in part, through confidentiality and proprietary information agreements. However, these agreements may not provide sufficient protection or adequate remedies for violation of our rights in the event of unauthorized use or disclosure of confidential and proprietary information. Without additional protection under the patent laws, such unauthorized use or disclosure may enable competitors to duplicate or surpass our technological achievements. Moreover, the laws of certain foreign countries do not recognize intellectual property rights or protect them to the same extent as do the laws of the United States. Failure to protect our proprietary rights could seriously impair our competitive position.
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If our exclusive license to use certain trademarks in the United States is terminated, we may be required to cease using those trademarks, which could interfere with our ability to market existing or future products under those trademarks.
We rely on a license from our manufacturer for use of the Silimed trademark. In the event Silimed believes that our products do not meet its commercially reasonable quality expectations and we do not cure any deficiency within a commercially reasonable period of time to Silimed's reasonable satisfaction, Silimed may revoke our exclusive license to use the Silimed trademark. If such license is terminated, the inability to use that trademark could result in a loss of sales to us as a result of the goodwill associated with the Silimed trademark, and a competitor may use that trademark to capitalize on the goodwill associated with the Silimed trademark. Either of these outcomes could seriously impair our competitive position.
The medical device industry is characterized by patent litigation and we could become subject to litigation that could be costly, result in the diversion of management's time and efforts, require us to pay damages or prevent us from marketing our existing or future products.
Our commercial success will depend in part on not infringing the patents or violating the other proprietary rights of others. Significant litigation regarding patent rights occurs in our industry. Our competitors in both the United States and abroad, many of which have substantially greater resources and have made substantial investments in patent portfolios and competing technologies, may have applied for or obtained or may in the future apply for and obtain, patents that will prevent, limit or otherwise interfere with our ability to make, use and sell our products. Generally, we do not conduct independent reviews of patents issued to third parties. We may not be aware of whether our products do or will infringe existing or future patents. In addition, patent applications in the United States and elsewhere can be pending for many years, and may be confidential for 18 months or more after filing, and because pending patent claims can be revised before issuance, there may be applications of others now pending of which we are unaware that may later result in issued patents that will prevent, limit or otherwise interfere with our ability to make, use or sell our products. We may not be aware of patents that have already issued that a third party might assert are infringed by our products. It is also possible that patents of which we are aware, but which we do not believe are relevant to our product candidates, could nevertheless be found to be infringed by our products. The large number of patents, the rapid rate of new patent applications and issuances, the complexities of the technology involved and the uncertainty of litigation increase the risk of business assets and management's attention being diverted to patent litigation. In the future, we may receive communications from various industry participants alleging our infringement of their patents, trade secrets or other intellectual property rights and/or offering licenses to such intellectual property. Any lawsuits resulting from such allegations could subject us to significant liability for damages and invalidate our proprietary rights, even if they lack merit. Any potential intellectual property litigation also could force us to do one or more of the following:
•
stop making, selling or using products or technologies that allegedly infringe the asserted intellectual property; 

•
lose the opportunity to license our technology to others or to collect royalty payments based upon successful protection and assertion of our intellectual property rights against others; 

•
incur significant legal expenses; 

•
pay substantial damages or royalties to the party whose intellectual property rights we may be found to be infringing;
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•
pay the attorney fees and costs of litigation to the party whose intellectual property rights we may be found to be infringing; 

•
redesign those products that contain the allegedly infringing intellectual property, which could be costly, disruptive and/or infeasible; or 

•
attempt to obtain a license to the relevant intellectual property from third parties, which may not be available on reasonable terms or at all.
Any litigation or claim against us, even those without merit, may cause us to incur substantial costs, and could place a significant strain on our financial resources, divert the attention of management from our core business and harm our reputation. If we are found to infringe the intellectual property rights of third parties, we could be required to pay substantial damages (which may be increased up to three times of awarded damages) and/or substantial royalties and could be prevented from selling our products unless we obtain a license or are able to redesign our products to avoid infringement. Any such license may not be available on reasonable terms, if at all, and there can be no assurance that we would be able to redesign our products in a way that would not infringe the intellectual property rights of others. If we fail to obtain any required licenses or make any necessary changes to our products or technologies, we may have to withdraw existing products from the market or may be unable to commercialize one or more of our products, all of which could have a material adverse effect on our business, results of operations and financial condition.
In addition, we generally indemnify our customers with respect to infringement by our products of the proprietary rights of third parties. Third parties may assert infringement claims against our customers. These claims may require us to initiate or defend protracted and costly litigation on behalf of our customers, regardless of the merits of these claims. If any of these claims succeed, we may be forced to pay damages on behalf of our customers or may be required to obtain licenses for the products they use. If we cannot obtain all necessary licenses on commercially reasonable terms, our customers may be forced to stop using our products.
We may be subject to damages resulting from claims that we or our employees have wrongfully used or disclosed alleged trade secrets of our competitors or are in breach of non-competition or non-solicitation agreements with our competitors.
Many of our employees were previously employed at other medical device companies, including our competitors or potential competitors, in some cases until recently. We have been the subject of and may, in the future, be subject to claims that we, our employees have inadvertently or otherwise used or disclosed alleged trade secrets or other proprietary information of these former employers or competitors. In addition, we have been and may in the future be subject to claims that we caused an employee to breach the terms of his or her non-competition or non-solicitation agreement. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and could be a distraction to management. If our defense to those claims fails, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Any litigation or the threat thereof may adversely affect our ability to hire employees. A loss of key personnel or their work product could hamper or prevent our ability to commercialize product candidates, which could have an adverse effect on our business, results of operations and financial condition.
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We may be subject to substantial warranty or product liability claims or other litigation in the ordinary course of business that may adversely affect our business, financial condition and operating results.
As a supplier of medical devices, we may be subject to substantial warranty or product liability claims alleging that the use of our products has resulted in adverse health effects or other litigation in the ordinary course of business that may require us to make significant expenditures to defend these claims or pay damage awards. The breast implant industry has a particularly significant history of product liability litigation. The risks of litigation exist even with respect to products that have received or in the future may receive regulatory approval for commercial sale. In addition, our silicone gel breast implants are sold with a warranty providing for no-charge replacement implants in the event of certain ruptures that occur any time during the life of the patient and this warranty also includes cash payments to offset surgical fees if the rupture occurs within 10 years of implantation.
We maintain product liability insurance, but this insurance is limited in amount and subject to significant deductibles. There is no guarantee that insurance will be available or adequate to protect against all claims. Our insurance policies are subject to annual renewal and we may not be able to obtain liability insurance in the future on acceptable terms or at all. In addition, our insurance premiums could be subject to increases in the future, which may be material. If the coverage limits are inadequate to cover our liabilities or our insurance costs continue to increase as a result of warranty or product liability claims or other litigation, then our business, financial condition and operating results may be adversely affected.
Fluctuations in insurance cost and availability could adversely affect our profitability or our risk management profile.
We hold a number of insurance policies, including product liability insurance, directors' and officers' liability insurance, general liability insurance, property insurance and workers' compensation insurance. If the costs of maintaining adequate insurance coverage increase significantly in the future, our operating results could be materially adversely affected. Likewise, if any of our current insurance coverage should become unavailable to us or become economically impractical, we would be required to operate our business without indemnity from commercial insurance providers. If we operate our business without insurance, we could be responsible for paying claims or judgments against us that would have otherwise been covered by insurance, which could adversely affect our results of operations or financial condition.
Risks Related to Our Legal and Regulatory Environment
We are subject to extensive federal and state regulation, and if we fail to comply with applicable regulations, we could suffer severe criminal or civil sanctions or be required to restructure our operations, any of which could adversely affect our business, financial condition and operating results.
As a device manufacturer, even though we do not control referrals or bill directly to Medicare, Medicaid or other third-party payors, we are subject to healthcare fraud and abuse regulation and enforcement by the federal government and the states in which we conduct our business. The laws that may affect our ability to operate include:
•
the federal Anti-Kickback Statute, which applies to our business activities, including our marketing practices, educational programs, pricing policies and relationships with healthcare providers, by prohibiting, among other things, knowingly and willfully soliciting, receiving, offering or providing any remuneration (including any bribe, kickback or rebate) directly or indirectly, overtly or covertly, in cash or in kind, intended to induce or return for the purchase or recommendation of any good, facility, item or service reimbursable, in whole or in part, under a federal healthcare program, such as the
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Medicare or Medicaid programs. A person or entity does not need to have actual knowledge of the Anti-Kickback Statute or specific intent to violate it. In addition, the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the false claims laws;
•
federal civil and criminal false claims laws and civil monetary penalty laws, including the federal False Claims Act, or FCA, that prohibit, among other things, knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid or other third-party payors that are false or fraudulent, or making a false statement material to an obligation to pay or transmit money or property to the federal government, and which may apply to entities that provide coding and billing advice to customers; 

•
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its implementing regulations, which created federal criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting to execute a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and, as amended by the Health Information Technology for Economic and Clinical Health Act, also imposes certain regulatory and contractual requirements regarding the privacy, security and transmission of individually identifiable health information; 

•
federal "sunshine" requirements imposed by the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, or PPACA, on certain device manufacturers regarding any "transfers of value" provided to physicians and teaching hospitals. Failure to submit required information may result in civil monetary penalties of up to an aggregate of $150,000 per year and up to an aggregate of $1 million per year for "knowing failures," for all payments, transfers of value or ownership or investment interests that are not timely, accurately, and completely reported in an annual submission. The period between August 1, 2013 and December 31, 2013 was the first reporting period, and manufacturers were required to report aggregate payment data by March 31, 2014, and were required to report detailed payment data and submit legal attestation to the accuracy of such data by June 30, 2014. Thereafter, manufacturers must submit reports by the 90th day of each subsequent calendar year; and 

•
state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws that may apply to items or services reimbursed by any third-party payor, including commercial insurers; state laws that require device companies to comply with the industry's voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government or otherwise restrict payments that may be provided to healthcare providers and entities; state laws that require device manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers and entities or marketing expenditures; and state laws governing the privacy and security of certain health information, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Because of the breadth of these laws, it is possible that some of our business activities, including our relationships with physicians and other health care providers and entities, some of whom recommend, purchase and/or prescribe our products, could be subject to challenge under one or more of such laws. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our management's attention from the operation of our business. If our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties, including, without limitation, administrative, civil and/or criminal penalties, damages, fines, disgorgement, contractual
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damages, reputational harm, exclusion from governmental health care programs, and the curtailment or restructuring of our operations, any of which could adversely affect our ability to operate our business and our financial results.
Our medical device products and operations are subject to extensive governmental regulation both in the United States and abroad, and our failure to comply with applicable requirements could cause our business to suffer.
Our medical device products and operations are subject to extensive regulation by the FDA and various other federal, state and foreign governmental authorities, such as Health Canada. Government regulation of medical devices is meant to assure their safety and effectiveness, and includes regulation of, among other things:
•
design, development and manufacturing; 

•
testing, labeling, content and language of instructions for use and storage; 

•
clinical trials; 

•
product safety; 

•
marketing, sales and distribution; 

•
regulatory clearances and approvals including pre-market clearance and approval; 

•
conformity assessment procedures; 

•
product traceability and record keeping procedures; 

•
advertising and promotion; 

•
product complaints, complaint reporting, recalls and field safety corrective actions; 

•
post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury; 

•
post-market studies; and 

•
product import and export.
The regulations to which we are subject are complex and have tended to become more stringent over time. Regulatory changes could result in restrictions on our ability to carry on or expand our operations, higher than anticipated costs or lower than anticipated sales.
Before we can market or sell a new regulated product or a significant modification to an existing product in the United States, we must obtain either clearance under Section 510(k) of the Federal Food, Drug and Cosmetic Act, or FDCA, or an approval of a pre-market approval, or PMA, application unless the device is specifically exempt from pre-market review. In the 510(k) clearance process, the FDA must determine that a proposed device is "substantially equivalent" to a device legally on the market, known as a "predicate" device, with respect to intended use, technology and safety and effectiveness, in order to clear the proposed device for marketing. Clinical data is sometimes required to support substantial equivalence. In the PMA approval process, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but not limited to, technical, pre-clinical, clinical trial, manufacturing and labeling data. The PMA process is typically required for devices for which the 510(k) process cannot be used and that are deemed to pose the greatest risk, such as life-sustaining, life-supporting or implantable devices. Modifications to products that are approved through a PMA application generally need FDA approval. Similarly, some modifications made to products cleared through a 510(k) may require a new 510(k). The FDA's 510(k) clearance process usually takes from three to 12 months, but may last longer. The process of obtaining a PMA is much more costly and uncertain than the 510(k) clearance process and
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generally takes from one to three years, or even longer, from the time the application is submitted to the FDA until an approval is obtained.
In the United States, our silicone gel breast implants are marketed pursuant to a PMA order issued by the FDA in March 2012, and our tissue expanders are marketed pursuant to pre-market clearance under Section 510(k) of the FDCA. If the FDA requires us to go through a lengthier, more rigorous examination for future products or modifications to existing products than we had expected, our product introductions or modifications could be delayed or canceled, which could cause our sales to decline. The FDA may demand that we obtain a PMA prior to marketing certain of our future products. In addition, if the FDA disagrees with our determination that a product we market is subject to an exemption from pre-market review, the FDA may require us to submit a 510(k) or PMA in order to continue marketing the product. Further, even with respect to those future products where a PMA is not required, we cannot assure you that we will be able to obtain the 510(k) clearances with respect to those products.
The FDA can delay, limit or deny clearance or approval of a device for many reasons, including:
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we may not be able to demonstrate to the FDA's satisfaction that our products are safe and effective for their intended uses; 

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the data from our pre-clinical studies and clinical trials may be insufficient to support clearance or approval, where required; and 

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the manufacturing process or facilities we use may not meet applicable requirements.
In addition, the FDA may change its clearance and approval policies, adopt additional regulations or revise existing regulations, or take other actions that may prevent or delay approval or clearance of our products under development or impact our ability to modify our currently approved or cleared products on a timely basis. For example, in 2011, the FDA announced a Plan of Action to modernize and improve the FDA's pre-market review of medical devices, and has implemented, and continues to implement, reforms intended to streamline the pre-market review process. In addition, as part of the Food and Drug Administration Safety and Innovation Act of 2012, or FDASIA, Congress enacted several reforms entitled the Medical Device Regulatory Improvements and additional miscellaneous provisions which will further affect medical device regulation both pre- and post-approval. Any change in the laws or regulations that govern the clearance and approval processes relating to our current and future products could make it more difficult and costly to obtain clearance or approval for new products, or to produce, market and distribute existing products.
The FDA could also reclassify some or all of our products that are currently classified as Class II to Class III requiring additional controls, clinical studies and submission of a PMA for us to continue marketing and selling those products. Under new changes instituted by FDASIA, the FDA may now change the classification of a medical device by administrative order instead of by regulation. Although the revised process is simpler, the FDA must still publish a proposed order in the Federal Register, hold a device classification panel meeting and consider comments from affected stakeholders before issuing the reclassification order. We cannot guarantee that the FDA will not reclassify any of our Class II devices into Class III and require us to submit a PMA for FDA review and approval of the safety and effectiveness of our product. Any delay in, or failure to receive or maintain, clearance or approval for our products under development could prevent us from generating sales from these products or achieving profitability. Additionally, the FDA and other regulatory authorities have broad enforcement powers. Regulatory enforcement or inquiries, or other increased scrutiny on us, could dissuade some surgeons from using our products and adversely affect our reputation and the perceived safety and efficacy of our products.
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In addition, even after we have obtained the proper regulatory clearance or approval to market a product, the FDA has the power to require us to conduct postmarketing studies. For example, we are required to continue to study and report clinical results to the FDA on our silicone gel breast implants. Failure to conduct this or other required studies in a timely manner could result in the revocation of the PMA approval or 510(k) clearance for the product that is subject to such a requirement and could also result in the recall or withdrawal of the product, which would prevent us from generating sales from that product in the United States.
Failure to comply with applicable laws and regulations could jeopardize our ability to sell our products and result in enforcement actions such as:
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warning letters; 

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fines; 

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injunctions; 

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civil penalties; 

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termination of distribution; 

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recalls or seizures of products; 

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delays in the introduction of products into the market; 

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total or partial suspension of production; 

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refusal of the FDA or other regulator to grant future clearances or approvals; 

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withdrawals or suspensions of current clearances or approvals, resulting in prohibitions on sales of our products; and/or 

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in the most serious cases, criminal penalties.
Any of these sanctions could result in higher than anticipated costs or lower than anticipated sales and have a material adverse effect on our reputation, business, results of operations and financial condition.
If we or our third-party manufacturer fail to comply with the FDA's good manufacturing practice regulations, it could impair our ability to market our products in a cost-effective and timely manner.
We and our third-party manufacturer are required to comply with the FDA's Quality System Regulation, or QSR, which covers the methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of our products. The FDA audits compliance with the QSR through periodic announced and unannounced inspections of manufacturing and other facilities. The FDA may conduct inspections or audits at any time. If we or our manufacturer fail to adhere to QSR requirements, have significant non-compliance issues or fail to timely and adequately respond to any adverse inspectional observations or product safety issues, or if any corrective action plan that we or our manufacturer propose in response to observed deficiencies is not sufficient, the FDA could take enforcement action against us, which could delay production of our products and may include:
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untitled letters, warning letters, fines, injunctions, consent decrees and civil penalties; 

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unanticipated expenditures to address or defend such actions; 

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customer notifications or repair, replacement, refunds, recall, detention or seizure of our products; 

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operating restrictions or partial suspension or total shutdown of production;
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•
refusing or delaying our requests for 510(k) clearance or premarket approval of new products or modified products; 

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withdrawing 510(k) clearances or pre-market approvals that have already been granted; 

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refusal to grant export approval for our products; or 

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criminal prosecution.
Any of the foregoing actions could have a material adverse effect on our reputation, business, financial condition and operating results. Furthermore, our manufacturer may not currently be or may not continue to be in compliance with all applicable regulatory requirements, which could result in our failure to produce our products on a timely basis and in the required quantities, if at all.
There is no guarantee that the FDA will grant 510(k) clearance or PMA approval of our future products, and failure to obtain necessary clearances or approvals for our future products would adversely affect our ability to grow our business.
Some of our future products may require FDA clearance of a 510(k) or FDA approval of a PMA. The FDA may not approve or clear these products for the indications that are necessary or desirable for successful commercialization. Indeed, the FDA may refuse our requests for 510(k) clearance or pre-market approval of new products.
Significant delays in receiving clearance or approval, or the failure to receive clearance or approval for our new products would have an adverse effect on our ability to expand our business.
If we modify our FDA approved or cleared devices, we may need to seek additional clearances or approvals, which, if not granted, would prevent us from selling our modified products.
In the United States, our silicone gel breast implants are marketed pursuant to a PMA order issued by the FDA in March 2012, and our tissue expanders are marketed pursuant to pre-market clearance under Section 510(k) of the FDCA. Any modifications to a PMA-approved or 510(k)-cleared device that could significantly affect its safety or effectiveness, including significant design and manufacturing changes, or that would constitute a major change in its intended use, manufacture, design, components, or technology requires a new 510(k) clearance or, possibly, approval of a new PMA application or PMA supplement. However, certain changes to a PMA-approved device do not require submission and approval of a new PMA or PMA supplement and may only require notice to FDA in a PMA Annual Report. The FDA requires every manufacturer to make this determination in the first instance, but the FDA may review any manufacturer's decision. The FDA may not agree with our decisions regarding whether new clearances or approvals are necessary. We have modified some of our 510(k) cleared products, and have determined based on our review of the applicable FDA guidance that in certain instances the changes did not require new 510(k) clearances or PMA approvals. If the FDA disagrees with our determination and requires us to seek new 510(k) clearances or PMA approvals for modifications to our previously cleared or approved products for which we have concluded that new clearances or approvals are unnecessary, we may be required to cease marketing or to recall the modified product until we obtain clearance or approval, and we may be subject to significant regulatory fines or penalties. Furthermore, our products could be subject to recall if the FDA determines, for any reason, that our products are not safe or effective or that appropriate regulatory submissions were not made. Delays in receipt or failure to receive approvals, the loss of previously received approvals, or the failure to comply with any other existing or future regulatory requirements, could reduce our sales, profitability and future growth prospects.
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A recall of our products, either voluntarily or at the direction of the FDA or another governmental authority, or the discovery of serious safety issues with our products that leads to corrective actions, could have a significant adverse impact on us.
The FDA and similar foreign governmental authorities have the authority to require the recall of commercialized products in the event of material deficiencies or defects in design or manufacture of a product or in the event that a product poses an unacceptable risk to health. The FDA's authority to require a recall must be based on an FDA finding that there is reasonable probability that the device would cause serious injury or death. Manufacturers may also, under their own initiative, recall a product if any material deficiency in a device is found or withdraw a product to improve device performance or for other reasons. The FDA requires that certain classifications of recalls be reported to the FDA within 10 working days after the recall is initiated A government-mandated or voluntary recall by us or one of our distributors could occur as a result of an unacceptable risk to health, component failures, malfunctions, manufacturing errors, design or labeling defects or other deficiencies and issues. Similar regulatory agencies in other countries have similar authority to recall devices because of material deficiencies or defects in design or manufacture that could endanger health. Any recall would divert management attention and financial resources and could cause the price of our stock to decline, expose us to product liability or other claims and harm our reputation with customers. Such events could impair our ability to produce our products in a cost-effective and timely manner in order to meet our customers' demands. A recall involving our silicone gel breast implants could be particularly harmful to our business, financial and operating results. Companies are required to maintain certain records of recalls, even if they are not reportable to the FDA or similar foreign governmental authorities. We may initiate voluntary recalls involving our products in the future that we determine do not require notification of the FDA or foreign governmental authorities. If the FDA or foreign governmental authorities disagree with our determinations, they could require us to report those actions as recalls. A future recall announcement could harm our reputation with customers and negatively affect our sales. In addition, the FDA or a foreign governmental authority could take enforcement action for failing to report the recalls when they were conducted.
In addition, under the FDA's medical device reporting regulations, we are required to report to the FDA any incident in which our product may have caused or contributed to a death or serious injury or in which our product malfunctioned and, if the malfunction were to recur, would likely cause or contribute to death or serious injury. Repeated product malfunctions may result in a voluntary or involuntary product recall. We are also required to follow detailed recordkeeping requirements for all firm-initiated medical device corrections and removals, and to report such corrective and removal actions to FDA if they are carried out in response to a risk to health and have not otherwise been reported under the medical device reporting regulations. In addition, in December of 2012, the FDA issued a draft guidance intended to assist the FDA and industry in distinguishing medical device recalls from product enhancements. Per the guidance, if any change or group of changes to a device addresses a violation of the FDCA, that change would generally constitute a medical device recall and require submission of a recall report to the FDA. Depending on the corrective action we take to redress a product's deficiencies or defects, the FDA may require, or we may decide, that we will need to obtain new approvals or clearances for the device before we may market or distribute the corrected device. Seeking such approvals or clearances may delay our ability to replace the recalled devices in a timely manner. Moreover, if we do not adequately address problems associated with our devices, we may face additional regulatory enforcement action, including FDA warning letters, product seizure, injunctions, administrative penalties, or civil or criminal fines. We may also be required to bear other costs or take other actions that may have a negative impact on our sales as well as face significant adverse publicity or regulatory consequences, which could harm our business, including our ability to market our products in the future.
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Any adverse event involving our products, whether in the United States or abroad, could result in future voluntary corrective actions, such as recalls or customer notifications, or agency action, such as inspection, mandatory recall or other enforcement action. Any corrective action, whether voluntary or involuntary, as well as defending ourselves in a lawsuit, will require the dedication of our time and capital, distract management from operating our business and may harm our reputation and financial results.
If the third parties on which we rely to conduct our clinical trials and to assist us with pre-clinical development do not perform as contractually required or expected, we may not be able to obtain regulatory clearance or approval for or commercialize our products.
We often must rely on third parties, such as contract research organizations, medical institutions, clinical investigators and contract laboratories to conduct our clinical trials and prepare our regulatory submissions. If these third parties do not successfully carry out their contractual duties or regulatory obligations or meet expected deadlines, if these third parties need to be replaced, or if the quality or accuracy of the data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our pre-clinical development activities or clinical trials may be extended, delayed, suspended or terminated, and we may not be able to obtain regulatory clearance or approval for, or successfully commercialize, our products on a timely basis, if at all, and our business, operating results and prospects may be adversely affected. Furthermore, our third-party clinical trial investigators may be delayed in conducting our clinical trials for reasons outside of their control.
We may be subject to regulatory or enforcement actions if we engage in improper marketing or promotion of our products.
Our educational and promotional activities and training methods must comply with FDA and other applicable laws, including the prohibition of the promotion of a medical device for a use that has not been cleared or approved by the FDA. Use of a device outside of its cleared or approved indications is known as "off-label" use. Physicians may use our products off-label in their professional medical judgment, as the FDA does not restrict or regulate a physician's choice of treatment within the practice of medicine. However, if the FDA determines that our educational and promotional activities or training constitutes promotion of an off-label use, it could request that we modify our training or promotional materials or subject us to regulatory or enforcement actions, including the issuance of warning letters, untitled letters, fines, penalties, injunctions, or seizures, which could have an adverse impact on our reputation and financial results. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our educational and promotional activities or training methods to constitute promotion of an off-label use, which could result in significant fines or penalties under other statutory authorities, such as laws prohibiting false claims for reimbursement. In that event, our reputation could be damaged and adoption of the products could be impaired. Although our policy is to refrain from statements that could be considered off-label promotion of our products, the FDA or another regulatory agency could disagree and conclude that we have engaged in off-label promotion. It is also possible that other federal, state or foreign enforcement authorities might take action if they consider our business activities constitute promotion of an off-label use, which could result in significant penalties, including, but not limited to, criminal, civil and/or administrative penalties, damages, fines, disgorgement, exclusion from participation in government healthcare programs, and the curtailment or restructuring of our operations. In addition, the off-label use of our products may increase the risk of product liability claims. Product liability claims are expensive to defend and could divert our management's attention, result in substantial damage awards against us, and harm our reputation.
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Changes in existing third-party coverage and reimbursement may impact our ability to sell our products when used in breast reconstruction procedures.
Maintaining and growing sales of our products when used in breast reconstruction procedures depends, in part, on the availability of coverage and adequate reimbursement from third-party payors, including government programs such as Medicare and Medicaid, private insurance plans and managed care programs. Hospitals and other healthcare provider customers that purchase our products to use in breast reconstruction procedures typically bill various third-party payors to cover all or a portion of the costs and fees associated with the procedures in which our products are used, including the cost of the purchase of our products. Changes in the amount third-party payors are willing to reimburse our customers for breast reconstruction procedures using our products could create pricing pressures for us. We may be unable to sell our products on a profitable basis if third-party payors deny coverage or reduce their current levels of payment, or if our costs of production increase faster than increases in reimbursement levels.
Furthermore, the healthcare industry in the United States has experienced a trend toward cost containment as government and private insurers seek to control healthcare costs by imposing lower payment rates and negotiating reduced contract rates with service providers. Therefore, we cannot be certain that the breast reconstruction procedures using our products will be reimbursed at a cost-effective level. Nor can we be certain that third-party payors using a methodology that sets amounts based on the type of procedure performed, such as those utilized by government programs and in many privately managed care systems, will view the cost of our products to be justified so as to incorporate such costs into the overall cost of the procedure. Moreover, we are unable to predict what changes will be made to the reimbursement methodologies used by third-party payors in the future.
To the extent we sell our products internationally, market acceptance may depend, in part, upon the availability of coverage and reimbursement within prevailing healthcare payment systems. Reimbursement and healthcare payment systems in international markets vary significantly by country, and include both government-sponsored healthcare and private insurance. We may not obtain international coverage and reimbursement approvals in a timely manner, if at all. Our failure to receive such approvals would negatively impact market acceptance of our products in the international markets in which those approvals are sought.
Legislative or regulatory health care reforms may make it more difficult and costly to produce, market and distribute our products after clearance or approval is obtained.
Recent political, economic and regulatory influences are subjecting the health care industry to fundamental changes. The sales of our products depend, in part, on the availability of coverage and adequate reimbursement from third-party payors such as government health programs, private health insurers, health maintenance organizations and other health care-related organizations. Both the federal and state governments in the United States and foreign governments continue to propose and pass new legislation and regulations designed to contain or reduce the cost of health care. Such legislation and regulations may result in decreased reimbursement for medical devices and/or the procedures in which they are used, which may further exacerbate industry-wide pressure to reduce the prices charged for medical devices. This could harm our ability to market and generate sales from our products.
In addition, FDA regulations and guidance are often revised or reinterpreted by the FDA in ways that may significantly affect our business and our products. Any new regulations or revisions or reinterpretations of existing regulations may impose additional costs or lengthen review times of our products.
Federal and state governments in the United States have recently enacted legislation to overhaul the nation's health care system. In March 2010, the PPACA was signed into law. While the goal of health
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care reform is to expand coverage to more individuals, it also involves increased government price controls, additional regulatory mandates and other measures designed to constrain medical costs. The PPACA substantially changes the way healthcare is financed by both governmental and private insurers, encourages improvements in the quality of healthcare items and services and significantly impacts the medical device industry. Among other things, the PPACA:
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imposes an annual excise tax of 2.3% on any entity that manufactures or imports medical devices offered for sale in the United States, with limited exceptions; 

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establishes a new Patient-Centered Outcomes Research Institute to oversee and identify priorities in comparative clinical effectiveness research in an effort to coordinate and develop such research; 

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implements payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain health care services through bundled payment models; and 

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creates an independent payment advisory board that will submit recommendations to Congress to reduce Medicare spending if projected Medicare spending exceeds a specified growth rate.
In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. On August 2, 2011, the President signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation's automatic reduction to several government programs. This includes reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013 and will stay in effect through 2024 unless additional Congressional action is taken. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which, among other things, reduced Medicare payments to several providers, including hospitals, imaging centers and cancer treatment centers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.
In the future there may continue to be additional proposals relating to the reform of the U.S. healthcare system. Certain of these proposals could limit the prices we are able to charge for our products, or the amount of reimbursement available for our products, and could limit the acceptance and availability of our products, any of which could have a material adverse effect on our business, results of operations and financial condition.
If we fail to obtain and maintain regulatory approval in Canada, our market opportunities will be limited.
In order to market our products in Canada, we must obtain and maintain separate regulatory approvals and comply with numerous and varying regulatory requirements. We currently market our tissue expanders and facial implants in Canada, but are awaiting Health Canada's approval to market our breast implant products in Canada. Although we do not anticipate any additional nonclinical or clinical study requirements, we may be delayed in obtaining approval to sell our breast implants in Canada if we need to respond to requests for information from Health Canada during the review process, which remains ongoing. The time required to obtain regulatory approval in Canada may be longer than the time required to obtain FDA pre-market approval. The Canadian regulatory approval process includes many of the risks associated with obtaining FDA clearance and we may not obtain Canadian regulatory approval on a timely basis, if at all. FDA approval does not ensure approval by regulatory authorities in other countries, including Canada, and approval by one foreign regulatory
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authority does not ensure approval by regulatory authorities in other foreign countries. However, the failure to obtain clearance or approval in one jurisdiction may have a negative impact on our ability to obtain clearance or approval elsewhere. If we do not obtain or maintain necessary approvals to commercialize our products in Canada, it would negatively affect our overall market penetration.
Our customers and much of our industry are required to be compliant under the federal Health Insurance Portability and Accountability Act of 1996, the Health Information Technology for Economic and Clinical Health Act and implementing regulations (including the final Omnibus Rule published on January 25, 2013) affecting the transmission, security and privacy of health information, and failure to comply could result in significant penalties.
Numerous federal and state laws and regulations, including HIPAA, and the Health Information Technology for Economic and Clinical Health Act, or the HITECH Act, govern the collection, dissemination, security, use and confidentiality of health information that identifies specific patients. HIPAA and the HITECH Act require our surgeon and hospital customers to comply with certain standards for the use and disclosure of health information within their companies and with third parties. The Privacy Standards and Security Standards under HIPAA establish a set of standards for the protection of individually identifiable health information by health plans, health care clearinghouses and certain health care providers, referred to as Covered Entities, and the Business Associates with whom Covered Entities enter into service relationships pursuant to which individually identifiable health information may be exchanged. Notably, whereas HIPAA previously directly regulated only these Covered Entities, the HITECH Act, which was signed into law as part of the stimulus package in February 2009, makes certain of HIPAA's privacy and security standards also directly applicable to Covered Entities' Business Associates. As a result, both Covered Entities and Business Associates are now subject to significant civil and criminal penalties for failure to comply with Privacy Standards and Security Standards.
HIPAA requires Covered Entities (like our customers) and Business Associates to develop and maintain policies and procedures with respect to protected health information that is used or disclosed, including the adoption of administrative, physical and technical safeguards to protect such information. The HITECH Act expands the notification requirement for breaches of patient-identifiable health information, restricts certain disclosures and sales of patient-identifiable health information and provides for civil monetary penalties for HIPAA violations. The HITECH Act also increased the civil and criminal penalties that may be imposed against Covered Entities and Business Associates and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney fees and costs associated with pursuing federal civil actions. Additionally, certain states have adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA.
We are not currently required to comply with HIPAA or HITECH because we are neither a Covered Entity nor a Business Associate (as that term is defined by HIPAA). However, in administering our warranties and complying with FDA required device tracking, we do regularly handle confidential and personal information similar to that which these laws seek to protect. We also occasionally encounter hospital customers who pressure us to sign Business Associate Agreements, or BAAs, although, to date, we have refused, given that we do not believe we are business associates to such Covered Entities under HIPAA or HITECH. If the law or regulations were to change or if we were to agree to sign a BAA, the costs of complying with the HIPAA standards are burdensome and could have a material adverse effect on our business. In addition, under such situations there would be significant risks and financial penalties for us if we were then found to have violated the laws and regulations that pertain to Covered Entities and Business Associates.
We are unable to predict what changes to the HIPAA Privacy Standards and Security Standards might be made in the future or how those changes could affect our business. Any new legislation or
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regulation in the area of privacy and security of personal information, including personal health information, could also adversely affect our business operations. If we do not comply with existing or new applicable federal or state laws and regulations related to patient health information, we could be subject to criminal or civil sanctions and any resulting liability could adversely affect our financial condition.
An adverse outcome of a sales and use tax audit could have a material adverse effect on our results of operations and financial condition.
We sell our products in all 50 states and each state (and some local governments) has its own sales tax laws and regulations. We charge each of our customers sales tax on each order and report and pay that tax to the appropriate state authority, unless we believe there is an applicable exception. In some states, there are no available exceptions; in some states, we believe our products can be sold tax free. In other states, we believe we can sell our products tax free only for customers who request tax-exempt treatment due to the nature of the devices we sell or due to the nature of the customer's use of our device. We may be audited by the taxing authorities of one or more states and there can be no assurance, however, that an audit will be resolved in our favor. Such an audit could be expensive and time-consuming and result in substantial management distraction. If the matter were to be resolved in a manner adverse to us, it could have a material adverse effect on our results of operations and financial condition.
Risks Related to This Offering and Ownership of Our Common Stock
No public market for our common stock currently exists and an active trading market may not develop or be sustained following this offering.
Prior to this initial public offering, there has been no public market for our common stock. Although we intend to apply to list our common stock on The NASDAQ Global Select Market, or NASDAQ, an active trading market may not develop or be sustained following the completion of this offering. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair market value or the trading price of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.
Our stock price may be volatile, and you may not be able to resell shares of our common stock at or above the price you paid.
The initial public offering price for our common stock has been determined through our negotiations with the underwriters and may not be representative of the price that will prevail in the open market following the offering. Our stock price after the completion of this offering may be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control. These factors include those discussed in this "Risk Factors" section of this prospectus and others such as:
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a slowdown in the medical device industry, the aesthetics industry or the general economy; 

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actual or anticipated quarterly or annual variations in our results of operations or those of our competitors; 

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changes in accounting principles or changes in interpretations of existing principles, which could affect our financial results; 

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actual or anticipated changes in our growth rate relative to our competitors; 

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changes in earnings estimates or recommendations by securities analysts;
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fluctuations in the values of companies perceived by investors to be comparable to us; 

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announcements by us or our competitors of new products or services, significant contracts, commercial relationships, capital commitments or acquisitions; 

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competition from existing technologies and products or new technologies and products that may emerge; 

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the entry into, modification or termination of agreements with our sales representatives or distributors; 

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developments with respect to intellectual property rights; 

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sales, or the anticipation of sales, of our common stock by us, our insiders or our other stockholders, including upon the expiration of contractual lock-up agreements; 

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our ability to develop and market new and enhanced products on a timely basis; 

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our commencement of, or involvement in, litigation; 

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additions or departures of key management or technical personnel; and 

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changes in laws or governmental regulations applicable to us.
In recent years, the stock markets generally have experienced extreme price and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry factors may significantly affect the market price of our common stock, regardless of our actual operating performance. These fluctuations may be even more pronounced in the trading market for our common stock shortly following this offering. If the market price of shares of our common stock after this offering does not ever exceed the initial public offering price, you may not realize any return on your investment in us and may lose some or all of your investment.
We could be subject to securities class action litigation.
In the past, securities class action litigation has often been instituted against companies whose securities have experienced periods of volatility in market price. Securities litigation brought against us following volatility in our stock price, regardless of the merit or ultimate results of such litigation, could result in substantial costs, which would hurt our financial condition and operating results and divert management's attention and resources from our business.
We do not anticipate paying any cash dividends in the foreseeable future, and accordingly, stockholders must rely on stock appreciation for any return on their investment.
After the completion of this offering, we do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. In addition, our ability to pay cash dividends is currently prohibited by the terms of our existing loan agreement and may be prohibited by future loan agreements. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
Our executive officers, directors and principal stockholders own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.
Prior to this offering, as of October 1, 2014, our executive officers, directors and principal stockholders beneficially owned approximately 99.7% of our outstanding voting stock and, upon the closing of this offering, excluding any shares that may be purchased by our executive officers, directors and principal stockholders in this offering as described under "Underwriting," will hold approximately 64.5% of our outstanding voting stock (assuming no exercise of the underwriters' option to purchase additional shares), in each case based on the assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover page of this prospectus. Therefore, even after
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this offering, these stockholders have the ability to influence us through their ownership position and may be able to determine all matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.
Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.
The initial public offering price of our common stock is substantially higher than the net tangible book value per share of our common stock immediately prior to this offering. Therefore, if you purchase our common stock in this offering, you will incur an immediate dilution of $9.69 in pro forma as adjusted net tangible book value per share as of June 30, 2014 from the price you paid, based on an assumed initial public offering price of $15.00 per share, the mid-point of the range set forth on the cover page of this prospectus. New investors who purchase shares in this offering will contribute approximately 33.2% of the total amount of equity capital raised by us through the date of this offering, and will own approximately 35.3% of the outstanding share capital and approximately 35.3% of the voting rights. We have also issued options and warrants to acquire common stock at prices below the initial public offering price. To the extent outstanding options and warrants are ultimately exercised, there will be further dilution to investors who purchase shares in this offering. In addition, if the underwriters exercise their option to purchase additional shares or if we issue additional equity securities, investors purchasing shares in this offering will experience additional dilution. As a result of the dilution to investors purchasing shares in this offering, investors may receive significantly less than the purchase price paid in this offering, if anything, in the event of our liquidation. For a further description of the dilution that you will experience immediately after this offering, see "Dilution."
We are an "emerging growth company" and intend to take advantage of reduced disclosure requirements applicable to emerging growth companies, which could make our common stock less attractive to investors.
We are an "emerging growth company," as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that apply to other public companies that are not "emerging growth companies." As an emerging growth company:
•
we are permitted to present only two years of audited financial statements and only two years of related Management's Discussion and Analysis of Financial Condition and Results of Operations in this prospectus; 

•
we are exempt from the requirement to obtain an attestation and report from our auditors on the assessment of our internal control over financial reporting pursuant to the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; 

•
we are permitted to provide less extensive disclosure about our executive compensation arrangements in our periodic reports, proxy statements and registration statements; and 

•
we are not required to give our stockholders non-binding advisory votes on executive compensation or golden parachute arrangements.
In addition, the JOBS Act provides that an emerging growth company may take advantage of an extended transition period for complying with new or revised accounting standards. We have irrevocably elected not to avail ourselves of this exemption and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.
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We may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenue equals or exceeds $1.0 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
We will incur increased costs as a result of operating as a public company and our management will be required to devote substantial time to new compliance initiatives and corporate governance practices.
As a public company, and increasingly after we are no longer an "emerging growth company," we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act and rules subsequently implemented by the SEC and NASDAQ impose numerous requirements on public companies, including establishment and maintenance of effective disclosure and financial controls and corporate governance practices. Also, the Securities Exchange Act of 1934, as amended, or the Exchange Act, requires, among other things, that we file annual, quarterly and current reports with respect to our business and operating results. Our management and other personnel will need to devote a substantial amount of time to compliance with these laws and regulations. These requirements have increased and will continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time consuming and costly. For example, we expect these rules and regulations to make it more difficult and more expensive for us to obtain director and officer liability insurance, and we may be required to incur substantial costs to maintain the same or similar coverage. These rules and regulations could also make it more difficult for us to attract and retain qualified persons to serve on our board of directors or our board committees or as executive officers.
Overall, we estimate that our incremental costs resulting from operating as a public company, including compliance with these rules and regulations, may be between $1.5 million and $3.0 million per year. However, these rules and regulations are often subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices.
Our internal control over financial reporting does not currently meet the standards required by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could result in material misstatements of our annual or interim financial statements and have a material adverse effect on our business and share price.
We are not currently required to comply with Section 404 of the Sarbanes-Oxley Act, and are therefore not yet required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will however be required to comply with certain of these rules, which will require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report. This assessment will need to include the disclosure of any material weaknesses in our internal control over financial reporting identified by our management or our independent registered public accounting firm. 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 annual or interim financial statements will not be prevented or detected on a timely basis.
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Our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting until the later of our second annual report or the first annual report required to be filed with the SEC following the date we are no longer an "emerging growth company" as defined in the JOBS Act. However, in connection with our audit as of and for the year ended December 31, 2013, our independent registered public accounting firm identified two material weaknesses in our internal control over financial reporting.
One material weakness related to our not having properly designed controls in place to account for complex debt and equity transactions, including preferred stock and warrants associated with debt issuances. We plan to increase the size and expertise of our internal accounting team to assist in remediating this weakness. The second material weakness related to our not having properly designed controls in place to record the bonus accrual and related expense in the appropriate period, which we believe we will have remediated as of December 31, 2014.
We cannot assure you that our plans will sufficiently address the identified weaknesses, nor can we assure you that there will not be material weaknesses or significant deficiencies in our internal controls in the future. Additionally, in the event that our internal control over financial reporting is perceived as inadequate, or that we are unable to produce timely or accurate financial statements, investors may lose confidence in our operating results and the trading price of our common stock could decline.
Future sales of shares of our common stock by existing stockholders could cause our stock price to decline.
Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that our officers, directors or the holders of a large number of shares of common stock intend to sell shares, could reduce the market price of our common stock. Based on shares outstanding as of June 30, 2014, upon completion of this offering, we will have outstanding a total of 14,152,275 shares of common stock, assuming no exercise of the underwriters' option to purchase additional shares. Of these shares, only the 5,000,000 shares of common stock sold in this offering by us, plus any shares sold upon exercise of the underwriters' option to purchase additional shares, will be freely tradable, without restriction, in the public market immediately after the offering, unless purchased by our affiliates or our existing stockholders subject to lock-up agreements. Each of our directors and officers, and certain of our stockholders, have entered into lock-up agreements with the underwriters that restrict their ability to sell or transfer their shares (including any shares purchased through the directed share program). The lock-up agreements pertaining to this offering will expire 180 days from the date of this prospectus. Piper Jaffray & Co. and Stifel, Nicolaus & Company, Incorporated, however, may, in their sole discretion, permit our officers, directors and other existing stockholders who are subject to the contractual lock-up to sell shares prior to the expiration of the lock-up agreements. After the lock-up agreements expire, based on shares outstanding as of June 30, 2014, up to an additional 9,152,275 shares of common stock will be eligible for sale in the public market, approximately 90,909 of which are held by our directors and executive officers and will be subject to volume limitations under Rule 144 under the Securities Act. In addition, 1,566,670 shares of our common stock that are subject to outstanding options as of June 30, 2014 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.
After this offering, holders of an aggregate of approximately 8,942,930 shares of our common stock will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders.
In addition, as of June 30, 2014, there were 1,566,670 shares subject to outstanding options granted under the 2007 Plan. We intend to register the shares of common stock issuable upon exercise of these
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options. We also intend to register all 1,027,500 shares of common stock that we may issue under the 2014 Plan that we intend to adopt concurrently with the completion of this offering. Once we register these shares, they can be freely sold in the public market upon issuance and once vested, subject to the 180-day lock-up period under the lock-up agreements described above and in the "Underwriting" section of this prospectus.
We cannot predict what effect, if any, sales of our shares in the public market or the availability of shares for sale will have on the market price of our common stock. Future sales of substantial amounts of our common stock in the public market, including shares issued upon exercise of outstanding options, or the perception that such sales may occur, however, could adversely affect the market price of our common stock and also could adversely affect our future ability to raise capital through the sale of our common stock or other equity-related securities of ours at times and prices we believe appropriate.
Our management team may invest or spend the proceeds of this offering in ways with which you may not agree or in ways which may not yield a return.
Our management will have considerable discretion in the application of the net proceeds that we receive from this offering, including for any of the purposes described in the section entitled "Use of Proceeds," and you will not have the opportunity as part of your investment decision to assess whether the net proceeds are being used appropriately. Because of the number and variability of factors that will determine our use of the net proceeds from this offering, their ultimate use may vary substantially from their currently intended use. Our management might not apply our net proceeds in ways that ultimately increase the value of your investment. We expect to use the net proceeds from this offering primarily for the continued expansion of our sales force and marketing programs, our ongoing research and development activities, and the acquisition of new product lines. We intend to use the remaining proceeds for working capital and general corporate purposes. The failure by our management to apply these funds effectively could harm our business. Pending their use, we may invest the net proceeds from this offering in short-term, investment-grade, interest-bearing securities. These investments may not yield a favorable return to our stockholders. If we do not invest or apply the net proceeds from this offering in ways that enhance stockholder value, we may fail to achieve expected financial results, which could cause our stock price to decline.
Anti-takeover provisions in our organizational documents and under Delaware law may discourage or prevent a change of control, even if an acquisition would be beneficial to our stockholders, which could reduce our stock price and prevent our stockholders from replacing or removing our current management.
Our amended and restated certificate of incorporation and amended and restated bylaws, which are to become effective upon the closing of this offering, contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions include:
•
a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time; 

•
a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders; 

•
a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief executive officer, or by a majority of the total number of authorized directors; 

•
advance notice requirements for stockholder proposals and nominations for election to our board of directors;
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•
a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of our voting stock then entitled to vote in the election of directors; 

•
a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to amend specific provisions of our certificate of incorporation; and 

•
the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.
We are subject to the provisions of Section 203 of the General Corporation Law of the State of Delaware, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These and other provisions in our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by our then-current board of directors, including a merger, tender offer or proxy contest involving our Company. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.
If securities or industry analysts do not publish research or reports about our business, or if they issue an adverse or misleading opinion regarding our stock, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no or few securities or industry analysts commence coverage of us, the trading price for our stock would be negatively impacted. In the event we obtain securities or industry analyst coverage, if any of the analysts who cover us issue an adverse or misleading opinion regarding us, our business model, our intellectual property or our stock performance, or if our clinical trials and operating results fail to meet the expectations of analysts, our stock price would likely decline. If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline.
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 SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus, including in the sections entitled "Prospectus Summary," "Risk Factors," "Use of Proceeds," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Business," contains estimates, projections and other forward-looking statements. Our estimates, projections and other forward-looking statements are based on our management's current assumptions and expectations of future events and trends, which affect or may affect our business, strategy, operations or financial performance. Although we believe that these estimates, projections and other forward-looking statements are based upon reasonable assumptions, they are subject to numerous known and unknown risks and uncertainties and are made in light of information currently available to us. Many important factors, in addition to the factors described in this prospectus, may adversely and materially affect our results as indicated in forward-looking statements. You should read this prospectus and the documents that we have filed as exhibits to the registration statement of which this prospectus is a part completely and with the understanding that our actual future results may be materially different from those anticipated or implied in the forward-looking statements.
All statements other than statements of historical fact are forward-looking statements. The words "believe," "may," "might," "could," "will," "aim," "estimate," "continue," "anticipate," "intend," "expect," "plan," or the negative of those terms, and similar expressions that convey uncertainly of future events or outcomes are intended to identify estimates, projections and other forward-looking statements.
Our estimates, projections and other forward-looking statements may be influenced by one or more of the factors set forth under "Risk Factors" and one or more of the following factors:
•
our history of net operating losses and uncertainty regarding our ability to achieve profitability; 

•
our dependence on sales of silicone gel breast implants to generate a significant amount of our net sales; 

•
our reliance on a foreign, sole source, third-party to manufacture and supply our silicone gel breast implants, tissue expanders and other products; 

•
our limited operating history and any difficulties encountered by us as a result of being a company early in its commercialization; 

•
our inability to operate in a competitive industry and compete successfully against competitors that have greater resources than we do; 

•
pricing pressure from customers and our competitors; 

•
concern about the safety and efficacy of our products, which is based on limited long-term clinical data; 

•
the failure of our products to achieve and maintain market acceptance; 

•
our inability to expand our sales force and marketing programs; 

•
our inability to retain a high percentage of our customer base; 

•
any inaccuracies in our assumptions about the breast implant market; 

•
our inability to protect our intellectual property; 

•
our failure to comply with the applicable governmental regulations to which our products and operations are subject;
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•
the accuracy of our estimates regarding expenses, net sales, capital requirements and needs for additional financing; 

•
our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act; and 

•
our use of the proceeds from this offering.
Other sections of this prospectus include additional factors that could adversely impact our business, strategy, operations or financial performance. Moreover, we operate in an evolving environment. New risk factors and uncertainties emerge from time to time and it is not possible for our management to predict all risk factors and uncertainties, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We qualify all of our forward-looking statements by these cautionary statements.
Estimates, projections and other forward-looking statements speak only as of the date they were made, and, except to the extent required by law, we undertake no obligation to update or review any estimate, projection or forward-looking statement because of new information, future events or other factors. You should, however, review the factors and risks we describe in the reports we will file from time to time with the SEC, after the date of this prospectus. See the information included under the heading "Where You Can Find More Information." Estimates, projections and other forward-looking statements involve risks and uncertainties and are not guarantees of future performance. As a result of the risks and uncertainties described above, the estimates, projections and other forward-looking statements discussed in this prospectus might not occur and our future results and our performance may differ materially from those expressed in these forward-looking statements due to, but not limited to, the factors mentioned above. Because of these uncertainties, you should not place undue reliance on these forward-looking statements when making an investment decision.
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 USE OF PROCEEDS
We estimate that our net proceeds from the sale of 5,000,000 shares of our common stock in this offering will be approximately $66.8 million, or $77.2 million if the underwriters exercise in full their option to purchase additional shares, based on an assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover page of this prospectus, and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us.
A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share would increase (decrease) our expected net proceeds from this offering by approximately $4.7 million, assuming 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 discount and commissions and estimated offering expenses payable by us.
Similarly, a 1,000,000 share increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) the net proceeds to us by approximately $14.0 million, at the assumed initial public offering price of $15.00 per share, and after deducting estimated underwriting discount and commissions and estimated offering expenses payable by us.
We currently anticipate that we will use the net proceeds received by us for the following purposes: (i) approximately $13.8 million to expand our sales force and marketing programs, (ii) approximately $5.7 million to fund research and development activities and (iii) the balance for working capital and other general corporate purposes. We may also use a portion of the net proceeds to acquire or invest in complementary products, technologies or businesses; however, we currently have no agreements or commitments to complete any such transaction.
Our expected use of the net proceeds from this offering is based upon our present plans and business condition. As of the date of this prospectus, we cannot predict with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering or the amounts that we will actually spend on the uses set forth above. The amounts and timing of our actual use of proceeds will vary depending on numerous factors, including the factors described under the heading "Risk Factors" beginning on page 14 of this prospectus. As a result, management will retain broad discretion over the allocation of the net proceeds from this offering, and investors will be relying on the judgment of our management regarding the application of the net proceeds.
Pending the use of the net proceeds of this offering, we intend to invest the net proceeds in high-quality, short-term interest-bearing obligations, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.
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 DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock. At the present time, we have no plans to declare or pay any cash dividends and intend to retain all of our future earnings, if any, generated by our operations for the development and growth of our business. Any future determination related to our dividend policy will be made by our board of directors and will depend upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors that our board of directors may deem relevant. Investors should not purchase our common stock with the expectation of receiving cash dividends. In addition, the terms of our term loan agreement restrict our ability to pay dividends. See "Management's Discussion and Analysis of Financial Condition and Results of Operations — Indebtedness" for a description of the restrictions on our ability to pay dividends.
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 CAPITALIZATION
The following table sets forth our capitalization as of June 30, 2014:
•
on an actual basis; 

•
on a pro forma basis to give effect to the following: 

•
the conversion of all our outstanding preferred stock as of June 30, 2014 into an aggregate of 8,942,930 shares of our common stock in connection with the closing of this offering; 

•
the filing and effectiveness of our amended and restated certificate of incorporation, which will occur upon the closing of this offering; and 

•
on a pro forma as adjusted basis to further adjust the pro forma amounts to give effect to the sale of shares of common stock by us at an assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover of this prospectus, and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us.
The following table also reflects a 1 for 2.75 reverse stock split of our common stock effected on October 17, 2014.
The pro forma 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 this offering determined at pricing. You should read this table in conjunction with the information included under the headings "Use of Proceeds," "Selected Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our financial statements and the related notes included elsewhere in this prospectus.

											
 	 	Actual	 	Pro Forma	 	Pro Forma
As Adjusted	 	
 	 	 	 	(Unaudited)	 	 	 	
 	 	(In thousands, except share amounts)	 	
Long-term debt	 	 $	25,177	 	 $	25,177	 	 $	25,177	 	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
Convertible preferred stock, $0.01 par value — 24,593,087 shares authorized, issued and outstanding, actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted	 	 	150,456	 	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
Stockholders' deficit:	 	 	 	 	 	 	 	 	 	 	
Common stock, $0.01 par value — 30,200,000 shares authorized, 282,072 shares issued and 209,345 shares outstanding, actual; 200,000,000 shares authorized, 9,225,002 shares issued and 9,152,275 shares outstanding, pro forma; 200,000,000 shares authorized, 14,225,002 shares issued and 14,152,275 shares outstanding, pro forma as adjusted	 	 	3	 	 	92	 	 	142	 	
Preferred stock, $0.01 par value — no shares authorized, issued or outstanding, actual; 10,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted              	 	 	—	 	 	—	 	 	—	 	
Additional paid-in capital	 	 	2,027	 	 	152,394	 	 	219,094	 	
Treasury stock, at cost (72,727 shares)	 	 	(260	)	 	(260	)	 	(260	)	
Accumulated deficit	 	 	(129,397	)	 	(129,397	)	 	(129,397	)	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
Total stockholders' (deficit) equity	 	 	(127,627	)	 	22,829	 	 	89,579	 	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
Total capitalization	 	 $	48,006	 	 $	48,006	 	 $	114,756	 	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	
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A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover page of this prospectus would increase (decrease) our pro forma as adjusted additional paid-in capital, total stockholders' equity and total capitalization by approximately $4.7 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 discount and commissions and estimated offering expenses payable by us. Similarly, a 1,000,000 share increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) our pro forma as adjusted additional paid-in capital, total stockholders' equity and total capitalization by approximately $14.0 million, at the assumed initial public offering price of $15.00 per share, and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us.
The table set forth above is based on the number of shares of our common stock and preferred stock outstanding as of June 30, 2014, and excludes:
•
47,710 shares of common stock issuable upon exercise of outstanding warrants as of June 30, 2014, at a weighted average exercise price of $14.671 per share; 

•
1,566,670 shares of common stock issuable upon exercise of outstanding options to purchase shares of common stock under the 2007 Plan at a weighted average exercise price of $3.49 per share; 

•
69,266 shares of common stock issuable upon exercise of outstanding options granted on July 22, 2014 to purchase shares of common stock under the 2007 Plan at an exercise price of $13.26 per share; 

•
1,027,500 shares of common stock reserved for future grant or issuance under the 2014 Plan, which will become effective upon the execution and delivery of the underwriting agreement for this offering; and 

•
255,500 shares of common stock reserved for future grant or issuance under the ESPP, which will become effective upon the execution and delivery of the underwriting agreement for this offering.
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 DILUTION
If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock upon completion of this offering. Net tangible book value (deficit) per share represents our total tangible assets (total assets less intangible assets) less total liabilities, less preferred stock, divided by the number of our outstanding shares of common stock.
Our historical net tangible book value (deficit) as of June 30, 2014 was $(142.1) million, or $(678.62) per share of our common stock.
Our pro forma net tangible book value as of June 30, 2014 and immediately prior to this offering would have been $8.4 million, or $0.92 per share of our common stock, after giving effect to the conversion of all outstanding shares of our preferred stock into 8,942,930 shares of our common stock.
After giving effect to the sale of 5,000,000 shares of our common stock offered in this offering at the assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover of this prospectus, and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2014 would have been approximately $75.1 million, or approximately $5.31 per share of our common stock. This represents an immediate increase in pro forma net tangible book value of approximately $4.39 per share to existing stockholders, and an immediate dilution in pro forma as adjusted net tangible book value of approximately $9.69 per share to new investors purchasing in this offering. We determine dilution by subtracting the pro forma net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of common stock.
The following table illustrates this per share dilution:

								
Assumed initial public offering price per share	 	 	 	 	 $	15.00	 	
Historical net tangible book value per share as of June 30, 2014	 	 $	(678.62	)	 	 	 	
Increase in net tangible book value per share attributable to conversion of preferred stock          	 	 $	679.54	 	 	 	 	
Pro forma net tangible book value per share as of June 30, 2014 before giving effect to this offering	 	 $	0.92	 	 	 	 	
Increase in pro forma net tangible book value per share attributable to this offering          	 	 $	4.39	 	 	 	 	
 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	
Pro forma as adjusted net tangible book value per share after this offering	 	 	 	 	 $	5.31	 	
 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	
Dilution in pro forma as adjusted net tangible book value per share to new investors participating in this offering	 	 	 	 	 $	9.69	 	
 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	
A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by approximately $0.33 and the dilution per share to new investors participating in this offering would increase (decrease) by approximately $0.67, assuming the number of shares of common stock offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us.
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We may also increase or decrease the number of shares we are offering. A 1,000,000 share increase in the number of shares offered by us, as set forth on the cover of this prospectus, would increase our pro forma as adjusted net tangible book value per share after this offering by approximately $0.57 and the dilution per share to new investors in this offering would decrease by approximately $0.57, at the assumed initial public offering price of $15.00 per share, and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us. Similarly, a 1,000,000 share decrease in the number of shares offered by us would decrease our pro forma as adjusted net tangible book value per share after this offering by approximately $0.66 and the dilution per share to new investors in this offering would increase by approximately $0.66, at the assumed initial public offering price of $15.00 per share, and after deducting the estimated underwriting discount and commissions and estimated offering expenses payable by us.
If the underwriters exercise in full their option to purchase 750,000 additional shares of our common stock in this offering, the pro forma as adjusted net tangible book value will increase to $5.74 per share, representing an immediate increase in pro forma as adjusted net tangible book value to existing stockholders of $0.43 per share and an immediate decrease of dilution of $0.43 per share to new investors in this offering, in each case at the assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover page of this prospectus.
The following table summarizes, on the pro forma as adjusted basis described above as of June 30, 2014, the total number of shares of common stock purchased from us, the total consideration paid (in millions) and the average price per share paid by existing stockholders and by new investors participating in this offering.

																	
 	 	 	 	 	 	Total
Consideration	 	 	 	
 	 	Shares Purchased			 	 	 	
 					 	Average Price
Per Share	 	
 	 	Number	 	Percent	 	Amount	 	Percent			 	
Existing stockholders	 	 	 9,152,275	 	 	 64.7	%	 $	151.0	 	 	66.8	%	 $	16.50	 	
New investors participating in this offering	 	 	5,000,000	 	 	35.3	%	 	75.0	 	 	33.2	%	$	15.00	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total	 	 	14,152,275	 	 	100.0	%	 $	226.0	 	 	100.0	%	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	 	 	
A $1.00 increase (decrease) in the assumed initial public offering price of $15.00 per share, the mid-point of the price range set forth on the cover page of this prospectus, would increase (decrease) the total consideration paid by investors participating in this offering, total consideration paid by all stockholders and the average price per share paid by all stockholders by approximately $5.0 million, $5.0 million and $0.35, respectively, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same.
Similarly, a 1,000,000 share increase (decrease) in the number of shares offered by us, as set forth on the cover of this prospectus, would increase (decrease) the total consideration paid by investors participating in this offering and the total consideration paid by all stockholders by approximately $15.0 million and $15.0 million, respectively, and would decrease (increase) the average price per share paid by all stockholders by approximately $0.06 ($0.07), at the assumed initial public offering price of $15.00 per share.
If the underwriters exercise in full their option to purchase 750,000 additional shares of our common stock in this offering, the number of shares of common stock held by existing stockholders will be reduced to 61.4% of the total number of shares of common stock to be outstanding after this offering, and the number of shares of common stock held by investors participating in this offering will be
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further increased to 5,750,000, or 38.6% of the total number of shares of common stock to be outstanding after this offering.
The tables above exclude the following shares:
•
47,710 shares of common stock issuable upon exercise of outstanding warrants as of June 30, 2014, at a weighted average exercise price of $14.671 per share; 

•
1,566,670 shares of common stock issuable upon exercise of outstanding options to purchase shares of common stock under the 2007 Plan at a weighted average exercise price of $3.49 per share; 

•
69,266 shares of common stock issuable upon exercise of outstanding options granted on July 22, 2014 to purchase shares of common stock under the 2007 Plan at an exercise price of $13.26 per share; 

•
1,027,500 shares of common stock reserved for future grant or issuance under the 2014 Plan, which will become effective upon the execution and delivery of the underwriting agreement for this offering; and 

•
255,500 shares of common stock reserved for future grant or issuance under the ESPP, which will become effective upon the execution and delivery of the underwriting agreement for this offering.
If all of our options and warrants outstanding as of July 31, 2014 had been exercised as of June 30, 2014, the total number of shares of common stock on a pro forma as adjusted basis purchased from us, the total consideration paid (in millions) and the average price per share paid by existing stockholders and by new investors participating in this offering would be:

																	
 	 	 	 	 	 	Total
Consideration	 	 	 	
 	 	Shares Purchased			 	 	 	
 					 	Average Price
Per Share	 	
 	 	Number	 	Percent	 	Amount	 	Percent			 	
Existing stockholders	 	 	 10,835,921	 	 	 68.4	%	 $	158.1	 	 	67.8	%	 $	14.59	 	
New investors participating in this offering	 	 	5,000,000	 	 	31.6	%	 	75.0	 	 	32.2	%	$	15.00	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total	 	 	15,835,921	 	 	100.0	%	 $	233.1	 	 	100.0	%	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	 	 	
The foregoing discussion and tables do not reflect any potential purchases by existing stockholders. See "Underwriting."
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 SELECTED FINANCIAL DATA
The statement of operations data for the years ended December 31, 2012 and 2013 and the balance sheet data as of December 31, 2012 and 2013 have been derived from our audited financial statements included elsewhere in this prospectus. The statement of operations data for the six months ended June 30, 2013 and 2014 and the balance sheet data as of June 30, 2014 have been derived from our unaudited financial statements included elsewhere in this prospectus. In the opinion of management, the unaudited financial statements reflect all adjustments, consisting of normal recurring adjustments, necessary for a fair statement of our results for those periods. Our historical results for any prior period are not necessarily indicative of results to be expected in any future period and our interim results are not necessarily indicative of results for a full year or any future period.
You should read the selected financial data presented below in conjunction with the information included under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the financial statements and the related notes included elsewhere in this prospectus.

														
 	 	Year Ended
December 31,	 	Six Months Ended
June 30,	 	
 	 	2012	 	2013	 	2013	 	2014	 	
 	 	 	 	 	 	(Unaudited)	 	
 	 	(In thousands, except per share and share amounts)	 	
Statement of operations data:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	 $	10,447	 	 $	35,171	 	 $	17,940	 	 $	21,947	 	
Cost of goods sold	 	 	2,352	 	 	8,592	 	 	4,384	 	 	5,455	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Gross profit	 	 	8,095	 	 	26,579	 	 	13,556	 	 	16,492	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales and marketing	 	 	17,919	 	 	22,229	 	 	10,797	 	 	11,863	 	
Research and development	 	 	3,670	 	 	4,479	 	 	2,166	 	 	2,305	 	
General and administrative	 	 	9,938	 	 	18,078	 	 	9,768	 	 	4,908	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total operating expenses	 	 	31,527	 	 	44,786	 	 	22,731	 	 	19,076	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Loss from operations	 	 	(23,432	)	 	(18,207	)	 	(9,175	)	 	(2,584	)	
Other (expense) income, net:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	—	 	 	(872	)	 	(380	)	 	(842	)	
Other (expense) income, net	 	 	(1	)	 	(46	)	 	(20	)	 	2,264	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total other (expense) income, net           	 	 	(1	)	 	(918	)	 	(400	)	 	1,422	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Loss before income taxes	 	 	(23,433	)	 	(19,125	)	 	(9,575	)	 	(1,162	)	
Income taxes	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Net loss	 	 $	(23,433	)	 $	(19,125	)	 $	(9,575	)	 $	(1,162	)	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Per share data:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted net loss per share attributable to common stockholders (1)	 	 $	(85.01	)	 $	(82.25	)	 $	(36.98	)	 $	(5.58	)	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Weighted average outstanding common shares used for net loss per share attributable to common stockholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted (1)	 	 	275,642	 	 	232,512	 	 	258,928	 	 	208,294	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Pro forma net loss per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted (unaudited) (1)	 	 	 	 	 $	(2.08	)	 	 	 	 $	(0.13	)	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average outstanding common shares used in computing pro forma net loss per share attributable to common stockholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted (unaudited) (1)	 	 	 	 	 	9,175,442	 	 	 	 	 	9,151,224	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	

(1)
See Notes 3(d) and 3(u) to our financial statements appearing elsewhere in this prospectus for an explanation of the method used to calculate the basic and diluted net loss per share and pro forma net loss per share and the number of shares used in the computation of the per share amounts.
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 	 	As of December 31,	 	As of June 30,	 	
 	 	2012	 	2013	 	2014	 	
 	 	 	 	 	 	(Unaudited)	 	
 	 	(In thousands)	 	
Balance sheet data (at end of period):	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 $	39,208	 	 $	9,722	 	 $	21,637	 	
Working capital	 	 	27,718	 	 	24,509	 	 	33,773	 	
Total assets	 	 	69,358	 	 	53,166	 	 	63,397	 	
Long-term debt	 	 	—	 	 	15,092	 	 	25,177	 	
Convertible preferred stock	 	 	150,456	 	 	150,456	 	 	150,456	 	
Total stockholders' (deficit) equity	 	 	(107,640	)	 	(126,673	)	 	(127,627	)	
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 MANAGEMENT'S DISCUSSION AND ANALYSIS 
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our financial condition and results of operations should be read together with our financial statements and related notes included elsewhere in this prospectus. This discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. You should review the sections entitled "Special Note Regarding Forward-Looking Statements" and "Risk Factors" for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements.
Overview
We are a medical aesthetics company committed to making a difference in patients' lives by enhancing their body image, growing their self-esteem and restoring their confidence. We were founded to provide greater choice to board-certified plastic surgeons and patients in need of medical aesthetics products. We have developed a broad portfolio of products with technologically differentiated characteristics, supported by independent laboratory testing and strong clinical trial outcomes.
Our primary products are silicone gel breast implants for use in breast augmentation and breast reconstruction procedures, which we offer in over 120 variations of shapes, sizes and textures. Our breast implants are primarily used in elective procedures which are generally performed on a cash-pay basis. Many of our breast implants incorporate one or more differentiated technologies, including a proprietary high-strength, cohesive silicone gel and proprietary texturing branded TRUE Texture. We also offer breast tissue expanders and a range of other aesthetic and specialty products. We do not have any patents or patent applications, but rely on trade secrets, proprietary know-how and regulatory barriers to protect our products and technologies.
Our breast implants were approved by the U.S. Food and Drug Administration, or FDA, in 2012, based on data we collected from our ongoing, long-term clinical trial of our breast implants in 1,788 women across 36 investigational sites in the United States. Our clinical trial is the largest prospective, long-term safety and effectiveness pivotal study of breast implant patients in the United States.
We commenced sales of our breast implants in the United States in May 2012. We sell our breast implants and breast tissue expanders, or Breast Products, exclusively to board-certified and board-admissible plastic surgeons, who we refer to as Plastic Surgeons, and tailor our customer service offerings to their specific needs, which we believe helps secure their loyalty and confidence. According to the American Society of Plastic Surgeons, or ASPS, there are approximately 6,400 board-certified plastic surgeons in the United States. We currently sell our products in the United States where we sell our products through a direct sales organization consisting of 42 employees, including sales representatives and sales management, as of September 30, 2014.
Our net sales were $35.2 million for the year ended December 31, 2013, as compared to $10.4 million for the year ended December 31, 2012. Our net sales were $21.9 million for the six months ended June 30, 2014, as compared to $17.9 million for the six months ended June 30, 2013. Our net loss was $19.1 million for the year ended December 31, 2013, as compared to $23.4 million for the year ended December 31, 2012. Our net loss was $1.2 million for the six months ended June 30, 2014, as compared to $9.6 million for the six months ended June 30, 2013. Our accumulated deficit as of June 30, 2014 was $129.4 million. To date, we have funded our operations primarily with proceeds from the sales of preferred stock, borrowings under our term loans and, since 2012, sales of our products.
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2007 Acquisition of Grader Street
On April 4, 2007, we acquired substantially all of the assets of Grader Street Medical Products, Inc., or Grader Street (formerly, Silimed, Inc.), a privately held Texas-based company engaged in the development and sale of medical devices, including breast implants, under the terms of an Asset Purchase Agreement, or APA. The consideration paid by us to Grader Street was $29.9 million in cash, 90,909 shares of our common stock and a series of future contingent payments with a potential total value of $70.0 million.
In March 2012, we initiated an arbitration proceeding against Grader Street, which we refer to as the Grader Street arbitration, to seek a decision that, under the terms of the APA, we were entitled to a substantial reduction in the purchase price reducing contingent payments owed to Grader Street. On May 16, 2013, we, Grader Street and Grader Street's founder reached an agreement in which we agreed to pay Grader Street a gross amount of $18.0 million and release all claims that we had against Grader Street and its founder. Grader Street and its founder also released all claims against us, including all future contingent payments, under the APA. In addition, under the terms of the agreement, we paid $0.3 million to repurchase 72,727 shares (of the original 90,909 shares issued) held by Grader Street's founder.
Components of Results of Operations
Net Sales
We commenced sales of our breast implants in the United States in the second quarter of 2012 and our Breast Products have historically accounted for substantially all of our net sales. Sales of our Breast Products accounted for 98% and 97% of our net sales for the year ended December 31, 2013 and for the six months ended June 30, 2014, respectively.
We recognize revenue, net of sales discounts and returns, as the customer has a standard six-month window to return purchased products. We anticipate our net sales will increase as we expand our sales force and marketing programs, increase awareness of our products and increase the comfort of Plastic Surgeons using anatomically-shaped breast implants. We also expect that, in the future, our net sales will fluctuate on a quarterly basis due to a variety of factors, including seasonality of breast augmentation procedures. We believe that breast implant sales are subject to seasonal fluctuation due to breast augmentation patients' planning their surgery leading up to the summer season and in the period around the winter holiday season.
Cost of Goods Sold and Gross Margin
Cost of goods sold consists primarily of costs of finished products purchased from our third-party manufacturer, reserve for product warranties and warehouse and other related costs.
Our silicone gel breast implants, tissue expanders and other products are manufactured under an exclusive contract with Silimed. Under our contract with Silimed, each particular style of implant has a fixed unit cost. In addition to product costs, we provide a commercial warranty on our silicone gel filled breast implants. The warranty covers device ruptures in certain circumstances. Estimated warranty costs are recorded at the time of sale. Our warehouse and other related costs include labor, rent, product shipments from Silimed and other related costs.
We expect our overall gross margin, which is calculated as net sales less cost of goods sold for a given period divided by net sales, to fluctuate in future periods primarily as a result of targeted pricing programs, manufacturing price increases and the changing mix of products sold with different gross margins.
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Sales and Marketing Expenses
Our sales and marketing expenses primarily consist of salaries, bonuses, benefits, incentive compensation and travel for our sales, marketing and customer support personnel. Our sales and marketing expenses also include expenses for trade shows, our no-charge customer shipping program and product evaluation, as well as educational, promotional and marketing activities, including direct and online marketing. We expect our sales and marketing expenses to increase in absolute dollars as we increase our headcount and expand our Plastic Surgeon and consumer marketing programs.
Research and Development Expenses
Our research and development, or R&D, expenses, primarily consist of clinical expenses, regulatory expenses, product development, consulting services, outside research activities, quality control and other costs associated with the development of our products and compliance with Good Clinical Practices, or cGCP, requirements. R&D expenses also include related personnel and consultant compensation and stock-based compensation expense. We expense R&D costs as they are incurred.
We expect our R&D expenses to vary as different development projects are initiated and completed, including improvements to our existing products, expansions of our existing product lines, new product acquisitions and our FDA-required PMA and post-approval studies of our breast implants. However, we generally expect these costs will increase in absolute terms over time as we continue to expand our product portfolio and add related personnel.
General and Administrative Expenses
Our general and administrative, or G&A, expenses primarily consist of salaries, bonuses, benefits and stock-based compensation for our executive, financial, legal, business development and administrative functions. Other G&A expenses include outside legal counsel and litigation expenses, independent auditors and other outside consultants, insurance, benefits, facilities and information technologies expenses. Beginning in 2013, G&A expenses also include the federal excise tax on the sale of medical devices in the United States.
In 2012, Mentor filed one lawsuit against us and one of our employees, in addition to thirteen lawsuits against fifteen of our employees who were all former Mentor employees, which we refer to as the Mentor litigation. In general, these lawsuits alleged that the former employees of Mentor breached their confidentiality and non-compete agreements when they resigned in favor of employment with us, misappropriated confidential Mentor information and trade secrets, and breached their respective duties of loyalty. Although not a party to thirteen of the lawsuits, we provided for the defense of our employees. In those lawsuits, all of Mentor's claims for preliminary injunctive relief were denied and, following that, each of those lawsuits was dismissed. In the sole lawsuit against us and our employee, we prevailed at trial with verdicts of "no liability" rendered by the jury and judge on all claims. Final judgment in this case was entered on October 3, 2013 with Mentor ordered to reimburse us for certain court costs, and in 2014, Mentor waived its right to appeal. For the six months ended June 30, 2014 and 2013 and the years ended December 31, 2013 and 2012, we incurred $0.0 million, $5.5 million, $10.2 million and $3.0 million, respectively, of G&A expenses related to the Mentor litigation, net of Mentor's reimbursement for certain court costs and preliminary insurance recoveries.
In addition, for the six months ended June 30, 2014 and 2013 and the years ended December 31, 2013 and 2012, we incurred $0.0 million, $1.1 million, $1.2 million and $0.3 million, respectively, of G&A expenses related to the Grader Street arbitration.
Excluding the historic litigation and arbitration expenses described above, we expect future G&A expenses to increase as we build our finance, legal, information technology, human resources and other general administration resources to continue to advance the commercialization of our products. In
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addition, we expect to incur increased G&A expenses in connection with becoming a public company, which may increase further when we are no longer able to rely on the "emerging growth company" exemption we are afforded under the JOBS Act.
Other Income and Expenses
Our other income and expenses primarily consist of interest expense and amortization of debt discount associated with our term loans and insurance recoveries.
Results of Operations
The following table sets forth our results of operations for the six months ended June 30, 2014 and 2013 and our audited financial data for the years ended December 31, 2013 and 2012. This data should be read together with our financial statements and related notes included elsewhere in this prospectus.

														
 	 	Year Ended
December 31,	 	Six Months
Ended June 30,	 	
 	 	2012	 	2013	 	2013	 	2014	 	
 	 	 	 	 	 	(Unaudited)	 	
 	 	(In thousands, except percentages)	 	
Statement of operations data:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net sales	 	 $	10,447	 	 $	35,171	 	 $	17,940	 	 $	21,947	 	
Cost of goods sold	 	 	2,352	 	 	8,592	 	 	4,384	 	 	5,455	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Gross profit	 	 	8,095	 	 	26,579	 	 	13,556	 	 	16,492	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Gross Margin	 	 	77	%	 	76	%	 	76	%	 	75	%	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales and marketing	 	 	17,919	 	 	22,229	 	 	10,797	 	 	11,863	 	
Research and development	 	 	3,670	 	 	4,479	 	 	2,166	 	 	2,305	 	
General and administrative	 	 	9,938	 	 	18,078	 	 	9,768	 	 	4,908	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total operating expenses	 	 	31,527	 	 	44,786	 	 	22,731	 	 	19,076	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Loss from operations	 	 	(23,432	)	 	(18,207	)	 	(9,175	)	 	(2,584	)	
Other (expense) income, net:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	—	 	 	(872	)	 	(380	)	 	(842	)	
Other (expense) income, net	 	 	(1	)	 	(46	)	 	(20	)	 	2,264	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total other (expense) income, net	 	 	(1	)	 	(918	)	 	(400	)	 	1,422	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Net loss	 	 $	(23,433	)	 $	(19,125	)	 $	(9,575	)	 $	(1,162	)	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Comparison of Six Months Ended June 30, 2014 and 2013
Net Sales
Net sales increased $4.0 million, or 22%, to $21.9 million for the six months ended June 30, 2014, as compared to $17.9 million for the six months ended June 30, 2013. This increase was primarily driven by sales of our Breast Products in the United States resulting from increased commercialization activities, including the expansion of our sales organization, increased marketing activities and greater familiarity with our products and customer service offerings by Plastic Surgeons. As of June 30, 2014, our sales organization included 44 employees, as compared to 36 employees as of June 30, 2013.
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Cost of Goods Sold and Gross Margin
Cost of goods sold increased $1.1 million, or 24%, to $5.5 million for the six months ended June 30, 2014, as compared to $4.4 million for the six months ended June 30, 2013. This increase was primarily due to an increase in sales volume.
The gross margins for the six months ended June 30, 2013 and 2014 were 76% and 75%, respectively. This decrease was primarily due to manufacturing price increases and targeted pricing programs.
Sales and Marketing Expenses
Sales and marketing expenses increased $1.1 million, or 10%, to $11.9 million for the six months ended June 30, 2014, as compared to $10.8 million for the six months ended June 30, 2013. This increase was primarily due to a $0.4 million increase in employee related expense for the sales department and a $0.6 million increase in marketing costs.
Research and Development Expenses
R&D expenses increased $0.1 million, or 6%, to $2.3 million for the six months ended June 30, 2014, as compared to $2.2 million for the six months ended June 30, 2013. This increase was primarily due to an increase in employee-related expenses and costs associated with our post-approval study.
General and Administrative Expenses
G&A expenses decreased $4.9 million, or 50%, to $4.9 million for the six months ended June 30, 2014, as compared to $9.8 million for the six months ended June 30, 2013. This decrease was primarily due to the $5.5 million decrease in litigation expenses related to the Mentor litigation and $1.1 million decrease in arbitration expenses related to the Grader Street arbitration partially offset by an increase in expenses related to the federal excise tax and accounting costs.
Other (Expense) Income, net
Other (expense) income, net for the six months ended June 30, 2014 was primarily associated with interest expense on our term loans of $0.8 million and income from recovery of costs associated with the Mentor litigation of $2.4 million. Other (expense) income, net for the six months ended June 30, 2013 was primarily associated with interest expense on our term loans of $0.4 million.
Comparison of Year Ended December 31, 2013 and 2012
Net Sales
We commenced sales of our breast implants in the United States in May 2012. Our net sales increased $24.7 million, or 237%, to $35.2 million in 2013, as compared to $10.4 million in 2012. As there was no material change in pricing, this increase was primarily due to having a full year of sales in 2013, as compared to less than eight months of sales in 2012. We also began commercialization activities in May 2012 and continued to increase these activities, resulting in greater familiarity with our products and customer service offerings by Plastic Surgeons, in 2013 as compared to 2012. When our commercialization activities began in May 2012, our sales organization included 29 employees. Our sales organization included 37 employees as of December 31, 2013.
Cost of Goods Sold and Gross Margins
Cost of goods sold increased $6.2 million, or 265%, to $8.6 million in 2013, as compared to $2.4 million in 2012. This increase was primarily due to an increase in sales volume resulting from having a full year of sales in 2013, as compared to less than eight months of sales in 2012.
The gross margins in 2013 and 2012 remained relatively constant at 76% and 77%, respectively.
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Sales and Marketing Expenses
Sales and marketing expenses increased $4.3 million, or 24%, to $22.2 million in 2013, as compared to $17.9 million in 2012. This increase was primarily a result of a $2.2 million increase related to expanding our headcount following commercialization in May 2012 and a $1.4 million increase in marketing costs.
Research and Development Expenses
R&D expenses increased $0.8 million, or 22%, to $4.5 million in 2013, as compared to $3.7 million in 2012. This increase was primarily due to an increase in employee related costs and post-approval study costs.
General and Administrative Expenses
G&A expenses increased $8.1 million, or 82%, to $18.1 million in 2013, as compared to $9.9 million in 2012. This increase was primarily due to the $7.2 million increase in expenses related to the Mentor litigation and $0.9 million increase in expenses related to the Grader Street arbitration. This increase was partially offset by a reduction in certain administrative expenses.
Other (Expense) Income, net
Other (expense) income, net in 2013 was primarily associated with interest expense on our term loans of $0.9 million.
Liquidity and Capital Resources
Since our inception, we have incurred significant net operating losses and anticipate that our losses will continue in the near term. We expect our operating expenses will continue to grow as we expand our operations. We will need to generate significant net sales to achieve profitability. To date, we have funded our operations primarily with proceeds from the sales of preferred stock, borrowings under our term loans and, since 2012, sales of our products. To date, we have received gross proceeds from the sales of preferred stock totaling $151.0 million. We issued and sold preferred stock for aggregate gross proceeds of $65.0 million in March 2012, which was our most recent issuance and sale of preferred stock. All of our preferred stock is convertible to common stock at the option of the holder and will automatically convert upon the closing this offering. As of June 30, 2014, we had $25.2 million outstanding on our term loans.
At June 30, 2014, we had $21.6 million in cash and cash equivalents. We believe that our available cash on hand and proceeds from this offering will be sufficient to satisfy our liquidity requirements for at least the next 18 months. However, the continued growth of our business, including the expansion of our sales force and marketing programs, and research and development activities, will significantly increase our expenses. In addition, the amount of our future product sales is difficult to predict, especially in light of the recent commercialization of our silicone gel breast implants, and actual sales may be not be in line with our forecasts. As a result, we may be required to seek additional funds in the future from public or private offerings of our capital stock, borrowings under term loans or other sources, subject to the restrictions under our term loan agreement.
Our historical cash outflows have primarily been associated with R&D related to obtaining FDA approval for our breast implant portfolio and complying with the FDA's post-approval requirements, the Mentor litigation, activities relating to commercialization and increases in working capital, including the purchase of inventory.
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The following table shows a summary of our cash flows provided by (used in) operating, investing and financing activities for the periods indicated:

														
 	 	Year Ended
December 31,	 	Six Months
Ended June 30,	 	
 	 	2012	 	2013	 	2013	 	2014	 	
 	 	 	 	 	 	(Unaudited)	 	
 	 	(In thousands)	 	
Net cash provided by (used in) operating activities	 	 $	(29,846	)	 $	(25,877	)	 $	(11,634	)	 $	2,203	 	
Net cash used in investing activities	 	 	(394	)	 	(18,071	)	 	(18,023	)	 	(149	)	
Net cash provided by financing activities	 	 	64,556	 	 	14,462	 	 	7,159	 	 	9,861	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Net increase (decrease) in cash and cash equivalents	 	 $	34,316	 	 $	(29,486	)	 $	(22,498	)	 $	11,915	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Cash provided by (used in) operating activities
The net cash provided by operating activities for the six months ended June 30, 2014 was $2.2 million as compared to net cash used in operating activities of $11.6 million for the six months ended June 30, 2013. The change in cash used was primarily associated with the decrease in net loss of $8.4 million and a decrease in cash outflows from operating assets and liabilities resulting from a decrease in inventory purchases, an increase in customer deposits and improved collections of accounts receivable, offset by a reduction in accounts payable.
The decrease in net cash used in operating activities from 2012 to 2013 was primarily associated with the decrease in net loss of $4.3 million.
Cash used in investing activities
The net cash used in investing activities for the six months ended June 30, 2014 was $0.1 million as compared to net cash used in investing activities of $18.0 million for the six months ended June 30, 2013. The change in net cash used was primarily due to an $18.0 million payment made to Grader Street in May 2013 in connection with the obligations relating to our 2007 acquisition of Grader Street.
Net cash used in investing activities in 2013 represents capital expenditures and the $18.0 million payment made to Grader Street in May 2013.
Cash provided by financing activities
Net cash provided by financing activities of $7.2 million and $9.9 million for the six months ended June 30, 2013 and June 30, 2014, respectively, was primarily attributable to funds borrowed under our term loans.
Net cash provided by financing activities of $14.5 million for the year ended December 31, 2013 was attributable to funds borrowed under our term loans, offset by $0.3 million for the repurchase of 72,727 shares of our common stock.
Net cash provided by financing activities of $64.6 million for the year ended December 31, 2012 was attributable to the issuance of Series C preferred stock issued in March of that year.
Our liquidity position and capital requirements are subject to a number of factors. For example, our cash inflow and outflow may be impacted by the following:
•
the net sales generated by our silicone gel breast implants and tissue expanders and any other future products that we may develop and commercialize; 

•
the costs associated with expanding our sales force and marketing programs;
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•
the cost associated with developing and commercializing our proposed products or technologies; 

•
the cost of obtaining and maintaining regulatory clearance or approval for our current or future products; 

•
the cost of ongoing compliance with regulatory requirements; 

•
expenses we incur in connection with potential litigation or governmental investigations; 

•
anticipated or unanticipated capital expenditures; and 

•
unanticipated G&A expenses.
Our primary short-term capital needs, which are subject to change, include expenditures related to:
•
support of our commercialization efforts related to our current and future products; 

•
new product acquisition and development efforts; 

•
payment of monthly interest due under our term loans; and 

•
facilities expansion needs.
Although we believe the foregoing items reflect our most likely uses of cash in the short-term, we cannot predict with certainty all of our particular short-term cash uses or the timing or amount of cash used. If cash generated from operations is insufficient to satisfy our working capital and capital expenditure requirements, we may be required to sell additional equity or debt securities or obtain additional credit facilities. Additional capital, if needed, may not be available on satisfactory terms, if at all. Our term loans restrict our ability to incur additional pari passu debt. Furthermore, any additional equity financing may be dilutive to stockholders, and debt financing, if available, may include restrictive covenants. For a discussion of other factors that may impact our future liquidity and capital funding requirements, see "Risk Factors — Risks Related to Our Financial Results and Need for Financing."
Indebtedness
Term Loan Agreement
On January 17, 2013, we entered into a loan and security agreement with Oxford, which was amended and restated on June 30, 2014, or the term loan agreement. Under the term loan agreement, we have (i) a $7.5 million tranche A term loan, (ii) a $2.5 million tranche B term loan, (iii) a $5.0 million tranche C term loan and (iv) a $10.0 million tranche D term loan. The tranche A, B and C term loans mature on February 1, 2017 and the tranche D term loan matures on January 1, 2019. The term loans are collateralized by a first-priority security interest in substantially all of our assets. The term loans bear interest at a rate equal to 8.4% per annum. The interest-only period for the tranche A, B and C term loans ends on August 1, 2015 and the interest-only period for the tranche D term loan ends on the same date, but with a possible extension of another year if we raise at least $50.0 million in gross proceeds as part of an initial public offering before June 30, 2015.
We may voluntarily repay amounts outstanding under the term loan at any time, subject to paying the final payment. Upon making the final payment of each term loan, whether on prepayment or at maturity, we are required to pay a 6.5% fee on the aggregate principal amount of the term loan being paid. In connection with the term loan agreement, we issued to Oxford (i) seven-year warrants in January 2013 to purchase shares of our common stock with a value equal to 3.0% of the tranche A, B and C term loans amount and (ii) seven-year warrants in June 2014 to purchase shares of our
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common stock with a value equal to 2.5% of the tranche D term loan amount. The warrants have an exercise price per share equal to the lesser of (i) the Series C preferred stock conversion price of $14.671 per share or (ii) the price per share in a subsequent qualified round of financing where gross proceeds are greater than $10.0 million.
The term loan agreement contains various negative and affirmative covenants, including certain restrictive covenants that limit our ability to transfer or dispose of certain assets, engage in new lines of business, change the composition of our management, merge with or acquire other companies, incur additional debt, create new liens and encumbrances, pay dividends or subordinated debt and enter into material transactions with affiliates, among others. The amended term loan agreement also contains financial reporting requirements.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations and commitments as of December 31, 2013:

																	
 	 	Payments Due by Period	 	
 	 	Total	 	Less than 1 year	 	1 - 3 years	 	3 - 5 years	 	More than 5
years	 	
 	 	(In thousands)	 	
Long-term debt obligations (1)	 	 $	15,000	 	 $	0	 	 $	13,326	 	 $	1,674	 	 $	0	 	
Interest and other payments related to long-term debt (1)	 	 	4,007	 	 	1,225	 	 	1,789	 	 	993	 	 	0	 	
Operating lease obligations (2)	 	 	330	 	 	229	 	 	101	 	 	0	 	 	0	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total contractual obligations	 	 $	19,337	 	 $	1,454	 	 $	15,216	 	 $	2,667	 	 $	0	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	

(1)
On June 30, 2014, $10.0 million was drawn under our tranche D term loan with Oxford. Unless repaid sooner, the aggregate amount that will become due under the tranche D term loan, inclusive of interest, is $13.1 million, with $0.4 million due in less than 1 year, $5.2 million due in 1-3 years, $6.6 million due in 3-5 years and $0.9 million due in more than 5 years.

(2)
On March 28, 2014, we entered into a new lease agreement for our headquarters in Santa Barbara, California such that our operating lease obligations reflected in the table above will increase by $0.1 million for less than 1 year, $0.8 million for 1-3 years following December 31, 2013, $0.8 million for 3-5 years following December 31, 2013 and $0.5 million for more than 5 years following December 31, 2013.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements.
Quantitative and Qualitative Disclosure About Market Risk
We are exposed to market risks in the ordinary course of our business. Our cash and cash equivalents include cash in readily available checking accounts. Additionally, the interest rate on our term loans is fixed and not subject to changes in market interest rates.
Related Parties
For a description of our related party transactions, see "Certain Relationships and Related Party Transactions."
Critical Accounting Policies and Estimates
Our discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with accounting principles generally
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accepted in the United States. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, net sales and expenses and the disclosure of contingent assets and liabilities in our financial statements. We evaluate our estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about our financial condition and results of operations that are not readily apparent from other sources. Actual results may differ from these estimates.
While our significant accounting policies are more fully described in Note 3 to our financial statements included in this prospectus, we believe that the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
We sell our products directly to customers in markets where we have regulatory approval. We offer a six-month return policy; and we recognize revenue, net of sales discounts and returns, in accordance with FASB Accounting Standards Codification 605, Revenue Recognition (ASC 605). ASC 605 requires that six basic criteria must be met before revenue can be recognized when a right of return exists:
•
the seller's price to the buyer is substantially fixed or determinable at the date of sale; 

•
the buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product; 

•
the buyer's obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product; 

•
the buyer acquiring the product for resale has economic substance apart from that provided by the seller; 

•
the seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer; and 

•
the amount of future returns can be reasonably estimated.
Appropriate reserves are established for anticipated sales returns based on historical experience, recent gross sales and any notification of pending returns. We recognize revenue when title to the product and risk of loss transfer to customers, provided there are no remaining performance obligations required of us or any written matters requiring customer acceptance. We allow for the return of product from doctors, hospitals and clinics within six months after the original sale, and record estimated sales returns as a reduction of net sales in the same period revenue is recognized. Sales provisions are calculated based upon historical experience with actual returns. Actual sales returns in any future period are inherently uncertain and thus may differ from the estimates. If actual sales returns differ significantly from the estimates, an adjustment to revenue in the current or subsequent period would be recorded. We have established an allowance for sales returns of $10.2 million, $8.3 million and $4.3 million as of June 30, 2014, December 31, 2013 and December 31, 2012, respectively, recorded net against accounts receivable in the balance sheet.
A portion of our revenue is generated from consigned inventory of breast implants maintained at doctor, hospital and clinic locations. The customer is contractually obligated to maintain a specific level of inventory and to notify us upon use. For these products, revenue is recognized at the time we are notified by the customer that the product has been implanted. Notification is usually through the replenishing of the inventory and we periodically review consignment inventories to confirm accuracy of customer reporting. FDA regulations require tracking the sales of all implanted products.
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Warranty Reserve
We offer a limited warranty and a lifetime product replacement program for our silicone gel breast implants. Under the limited warranty program, we will reimburse patients for certain out-of-pocket costs related to revision surgeries performed within ten years from the date of implantation in a covered event. Under the lifetime product replacement program, we provide no-charge replacement breast implants under a covered event. The programs are available to all patients implanted with our silicone breast implants after April 1, 2012 and are subject to the terms, conditions, claim procedures, limitations and exclusions. Timely completion of a device tracking and warranty enrollment form by the patient's Plastic Surgeon is required to activate the programs and for the patient to be able to receive benefits under either program.
We accrued for warranties issued in 2013 and 2012 in the amounts of $0.4 million and $0.1 million, respectively, and accrued for warranties issued during the six month periods ended June 30, 2014 and 2013 in the amounts of $0.2 million and $0.2 million, respectively. As of June 30, 2014, December 31, 2013, and December 31, 2012, we held total warranty liabilities of $0.8 million, $0.5 million and $0.1 million, respectively. To date, we have not made settlement payments for registered participants in either program.
Stock-Based Compensation
Stock-based compensation cost is measured at the date of grant based on the estimated fair value of the award, net of estimated forfeitures. We estimate the fair value of our stock-based awards to employees and directors using the Black-Scholes option pricing model. The grant date fair value of a stock-based award is recognized as an expense over the requisite service period of the award on a straight-line basis.
The intrinsic value of all outstanding options as of June 30, 2014 was approximately $18.0 million based on an assumed initial public offering price of $15.00 per share, which is the mid-point of the initial public offering price range set forth on the cover of this prospectus, of which approximately $14.8 million related to vested options and the remainder related to unvested options.
We recorded total non-cash stock-based compensation expense of $0.3 million and $0.4 million for the years ended December 31, 2013 and 2012, respectively, and $0.2 million for each of the six months ended June 30, 2014 and 2013. At December 31, 2013 and June 30, 2014, we had $0.7 million and $1.5 million of total unrecognized employee stock-based compensation expense, related to stock option grants, respectively. As of December 31, 2013, these costs will be recognized as expense over a weighted-average period of 2.29 years.
We granted options for 69,266 shares of our common stock on July 22, 2014. At the grant date, our board of directors determined that the fair value of our common stock was $13.26 per share based on a valuation analysis described below. We expect to continue to grant stock options in the future, and, to the extent that we do, our actual stock-based compensation expense recognized in future periods will increase.
The Black-Scholes model requires the input of subjective assumptions, including the risk-free interest rate, expected dividend yield, expected volatility, expected term and the fair value of the underlying common stock on the date of grant, among other inputs. These estimates involve inherent uncertainties and the application of management's judgment. If factors change and different assumptions are used,
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our stock-based compensation expense could be materially different in the future. These assumptions are estimated as follows:
•
Risk-free interest rate  — The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group. 

•
Dividend yield  — We have never declared or paid any cash dividends and do not presently plan to pay cash dividends in the foreseeable future. Consequently, we used an expected dividend yield of zero. 

•
Expected volatility  — As we do not have a significant trading history for our common stock, the expected stock price volatility for our common stock was estimated by taking the average of (i) the highest historic price volatility and (ii) the median of the implied volatility averages, with a three-month lookback from the valuation date, for any trading options of industry peers based on daily price observations over a period equivalent to the expected term of the time to a liquidity event. 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. 

•
Expected term  — The expected term represents the period that our stock-based awards are expected to be outstanding. 

•
Fair value of our common stock  — Because our stock was not publicly traded prior to this offering, we estimated the fair value of our common stock, as discussed below. Upon the completion of this offering, our common stock will be valued by reference to the publicly-traded price of our common stock.
The following table presents the weighted-average assumptions used to estimate the fair value of options granted during the periods presented:

														
 	 	Year Ended
December 31,	 	Six Months Ended
June 30,	 	
 	 	2012	 	2013	 	2013	 	2014	 	
 	 	 	 	 	 	(Unaudited)	 	
Expected term (in years)	 	 	6.02 to 6.08	 	 	6.08	 	 	6.08	 	 	6.08	 	
Expected volatility	 	 	62% to 64	%	 	56	%	 	56	%	 	57	%	
Risk-free interest rate	 	 	0.85% to 1.15	%	 	1.00% to 1.76	%	 	1.00% to 1.04	%	 	2.00	%	
Dividend yield	 	 	—	 	 	—	 	 	 	 	 	—	 	
We will continue to use judgment in evaluating the assumptions utilized for our stock-based compensation expense calculations on a prospective basis.
In addition to the assumptions used in the Black-Scholes option pricing model, the amount of stock-based compensation expense we recognize in our financial statements includes an estimate of stock option forfeitures. We estimate our forfeiture rate based on an analysis of our actual forfeitures and will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture experience, analysis of employee turnover and other factors. Changes in the estimated forfeiture rate can have a significant impact on our stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in the financial statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the stock-based compensation expense recognized in our financial statements.
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The fair value of our common stock is determined on each grant date by our board of directors, with input from management. Options to purchase shares of our common stock are intended to be granted with an exercise price per share no less than the fair value per share of our common stock underlying those options on the date of grant, based on the information known to us on the date of grant. Our assessments of the fair value of our common stock were performed using methodologies, approaches and assumptions consistent with the American Institute of Certified Public Accountants, or AICPA, Audit and Accounting Practice Aid Series: Valuation of Privately Held Company Equity Securities Issued as Compensation.
Because there has been no public market for our common stock, our board of directors, with the assistance of management, has historically developed these valuations using significant judgment and taking into account numerous factors, including:
•
the conclusions of contemporaneous valuations of our common stock by an independent third-party valuation specialist; 

•
external market conditions affecting the medical device industry; 

•
trends within the medical device industry; 

•
the superior rights and preferences of our preferred stock relative to our common stock at the time of each grant; 

•
our results of operations and financial position; 

•
our stage of development and business strategy; 

•
our ability to commercialize our product; 

•
the lack of an active public market for our common and our preferred stock; and 

•
the likelihood of achieving a liquidity event such as an initial public offering or sale of our company in light of prevailing market conditions.
There is inherent uncertainty in these estimates and if we had made different assumptions than those used, the amount of our stock-based compensation expense, net loss and net loss per share amounts could have been significantly different. Following the closing of this offering, the fair value per share of our common stock for purposes of determining stock-based compensation expense will be the closing price of our common stock as reported on NASDAQ on the applicable grant date.
The following table summarizes by grant date the number of shares of common stock underlying stock options granted from June 30, 2013 through the date of this prospectus, as well as the associated per share exercise price and the estimated fair value per share of our common stock on the grant date:

											
Grant Date 	 	Number of
Common
Shares
Underlying
Options
Granted	 	Exercise Price	 	Estimated Fair Value Per
Share of Common Stock	 	
October 8, 2013	 	 	 12,907	 	 $	3.58	 	 $	3.58	 	
April 24, 2014	 	 	 155,441	 	 $	11.00	 	 $	11.00	 	
July 22, 2014	 	 	 69,266	 	 $	13.26	 	 $	13.26	 	
For the October 8, 2013 option grants, the valuation of our common stock was based on the Option Pricing Method, or OPM. OPM treats the rights of the holders of preferred and common shares as equivalent to call options on any value of the enterprise above certain break points of value based
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upon the liquidation preferences of the holders of preferred shares, 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.
For the April 24, 2014 and July 22, 2014 option grants, the valuations of our common stock were based on the Probability-Weighted Expected Return Method, or PWERM. PWERM considers various potential discrete future outcomes, which, in our case consisted of initial public offering scenarios, a merger and acquisition scenario and a dissolution scenario. Each scenario is assigned probabilities, based on discussions with management, to arrive at the weighted equity value.
Warrant Liabilities
We have issued warrants to Oxford to purchase shares of common stock in connection with our term loan agreement. The warrants are recorded at fair value using either the Black-Scholes option pricing model, other binomial valuation model or lattice model, depending on the characteristics of the warrants at the time of the valuation. The fair value of these warrants is re-measured at each financial reporting period with any changes in fair value being recognized as a component of other (expense) income in the accompanying statements of operations. We will continue to re-measure the warrants to fair value until exercise or expiration of the related warrant.
Recent Accounting Pronouncements
In July 2012, the Financial Accounting Standards Board, or FASB, issued an accounting standard update intended to simplify how an entity tests indefinite lived intangible assets other than goodwill for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. This accounting standard update was effective for us beginning in fiscal year 2013. There was no material impact on our financial statements upon the adoption of this guidance.
In May 2014, the FASB issued accounting standard update 2014-09, Revenue from Contracts with Customers. The standard was issued to provide a single framework that replaces existing industry and transaction specific U.S. GAAP with a five step analysis of transactions to determine when and how revenue is recognized. This accounting standard update will be effective for us beginning in fiscal year 2018. We are currently assessing the impact that the standard will have on our financial statements upon adoption of this guidance.
Jumpstart Our Business Startups Act of 2012 (JOBS Act)
In April 2012, the JOBS Act was signed into law. The JOBS Act contains provisions that, among other things, reduce certain reporting requirements for an "emerging growth company." As an "emerging growth company," we are electing not to take advantage of the extended transition period afforded by the JOBS Act for the implementation of new or revised accounting standards, and as a result, we will comply with new or revised accounting standards on the relevant dates on which adoption of such standards is required for non-emerging growth public companies. Section 107 of the JOBS Act provides that our decision not to take advantage of the extended transition period is irrevocable. In addition, we are in the process of evaluating the benefits of relying on the other exemptions and reduced reporting requirements provided by the JOBS Act. Subject to certain conditions set forth in the JOBS Act, if as an "emerging growth company" we choose to rely on such exemptions, we may not be required to, among other things, (i) provide an auditor's attestation report on our system of internal controls over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (ii) provide all of the compensation disclosure that may be required of non-emerging growth public companies under the Dodd-Frank Act, (iii) comply with any requirement that may be adopted by the Public Company
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Accounting Oversight Board 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) and (iv) disclose certain executive compensation-related items, such as the correlation between executive compensation and performance and comparisons of the chief executive officer's compensation to median employee compensation. We may remain an emerging growth company until the last day of the fiscal year following the fifth anniversary of the completion of this offering. However, if certain events occur prior to the end of such five-year period, including if we become a "large accelerated filer," our annual gross revenue equals or exceeds $1.0 billion or we issue more than $1.0 billion of non-convertible debt in any three-year period, we will cease to be an emerging growth company prior to the end of such five-year period.
The above listing is not intended to be a comprehensive list of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP. There are also areas in which our management's judgment in selecting any available alternative would not produce a materially different result. Please see our audited financial statements and notes thereto included elsewhere in this prospectus, which contain accounting policies and other disclosures required by GAAP.
Controls and Procedures
Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S. GAAP. We have not performed an evaluation of our internal control over financial reporting, such as required by Section 404 of the Sarbanes-Oxley Act, nor have we engaged an independent registered public accounting firm to perform an audit of our internal control over financial reporting as of any balance sheet date or for any period reported in our financial statements. Presently, we are not an accelerated filer, as such term is defined by Rule 12b-2 of the Exchange Act, and therefore, our management is not presently required to perform an annual assessment of the effectiveness of our internal control over financial reporting. This requirement will first apply to our Annual Report on Form 10-K for the year ended December 31, 2014. Our independent registered public accounting firm will first be required to attest to the effectiveness of our internal control over financial reporting for our Annual Report on Form 10-K for the first year we are no longer an "emerging growth company" under the JOBS Act. However, in connection with our audit as of and for the year ended December 31, 2013, our independent registered public accounting firm identified two material weaknesses in our internal control over financial reporting. See "Risk Factors — Risks Related to This Offering and Ownership of Our Common Stock — Our internal control over financial reporting does not currently meet the standards required by Section 404 of the Sarbanes-Oxley Act, and failure to achieve and maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act could result in material misstatements of our annual or interim financial statements and have a material adverse effect on our business and share price," for a discussion of these matters.
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 BUSINESS
Overview
We are a medical aesthetics company committed to making a difference in patients' lives by enhancing their body image, growing their self-esteem and restoring their confidence. We were founded to provide greater choice to board-certified plastic surgeons and patients in need of medical aesthetics products. We have developed a broad portfolio of products with technologically differentiated characteristics, supported by independent laboratory testing and strong clinical trial outcomes. We sell our breast implants and breast tissue expanders, or Breast Products, exclusively to board-certified and board-admissible plastic surgeons and tailor our customer service offerings to their specific needs, which we believe helps secure their loyalty and confidence. These advantages have allowed us to increase our market share each year since we entered the market in 2012.
Our primary products are silicone gel breast implants for use in breast augmentation and breast reconstruction procedures, which we offer in over 120 variations of shapes, sizes and textures. Our breast implants are primarily used in elective procedures which are generally performed on a cash-pay basis. Many of our breast implants incorporate one or more differentiated technologies, including a proprietary high-strength, cohesive silicone gel and proprietary texturing branded TRUE Texture. Our breast implants offer a desired balance between strength, shape retention and softness due to the high-strength, cohesive silicone gel used in our manufacturing process. TRUE Texture provides texturing on the implant shell that is designed to reduce the incidence of malposition, rotation and capsular contracture. We also offer breast tissue expanders and a range of other aesthetic and specialty products. We do not have any patents or patent applications, but rely on trade secrets, proprietary know-how and regulatory barriers to protect our products and technologies.
Our breast implants were approved by the U.S. Food and Drug Administration, or FDA, in 2012, based on data we collected from our ongoing, long-term clinical trial of our breast implants in 1,788 women across 36 investigational sites in the United States. Our clinical trial is the largest prospective, long-term safety and effectiveness pivotal study of breast implant patients in the United States. The clinical data we collected over a five-year follow-up period demonstrated rupture rates, capsular contracture rates and reoperation rates that were comparable to or better than those of our competitors, based on our competitors' published six-year data. In addition to our pivotal study, our clinical data is supported by our Continued Access Study of 2,497 women in the United States. We have also commissioned a number of bench trials run by independent laboratories that we believe further demonstrate the advantages of our breast implants over those of our competitors.
We sell our Breast Products exclusively to board-certified and board-admissible plastic surgeons, as determined by the American Board of Plastic Surgery, who we refer to as Plastic Surgeons. These surgeons have completed the extensive multi-year plastic surgery residency training required by the American Board of Plastic Surgery. While aesthetic procedures are performed by a wide range of medical professionals, including dermatologists, otolaryngologists, obstetricians, gynecologists, dentists and other specialists, the majority of aesthetic surgical procedures are performed by Plastic Surgeons. Plastic Surgeons are thought leaders in the medical aesthetics industry. According to the American Society of Plastic Surgeons, or ASPS, there are approximately 6,400 board-certified plastic surgeons in the United States. We seek to provide Plastic Surgeons with differentiated services, including enhanced customer service offerings, a ten-year limited warranty that is the best-in-the-industry based on providing patients with the largest cash reimbursement for certain out-of-pocket costs related to revision surgeries in a covered event; a lifetime no-charge implant replacement program for covered ruptures; and our industry-first CapCon Care Program, or C3 Program, through which we offer no-charge replacement implants to breast augmentation patients who experience capsular contracture within the first five years after implantation with our smooth or textured breast implants.
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Breast augmentation surgery remains the leading aesthetic surgical procedure by dollars and number of procedures in the United States. Based on the number of procedures reported by either the American Society for Aesthetic Plastic Surgery, or ASAPS, or by ASPS, and our estimates of average selling price, implant mix and implants per procedure, we estimate that the U.S. market for breast implants and breast tissue expanders exceeded $600 million in 2013. Based on data from ASAPS and ASPS, between 1997 and 2013, the number of breast augmentation and breast reconstruction procedures has grown at a compound annual growth rate of approximately 7.3% and 4.4%, respectively.
We commenced sales of our breast implants in the United States in the second quarter of 2012. Our net sales were $35.2 million for the year ended December 31, 2013, as compared to $10.4 million for the year ended December 31, 2012. Our net sales were $21.9 million for the six months ended June 30, 2014, as compared to $17.9 million for the six months ended June 30, 2013. Our net loss was $19.1 million for the year ended December 31, 2013, as compared to $23.4 million for the year ended December 31, 2012. Our net loss was $1.2 million for the six months ended June 30, 2014, as compared to $9.6 million for the six months ended June 30, 2013. Our accumulated deficit as of June 30, 2014 was $129.4 million.
Our Market
The overall market for medical aesthetic procedures is significant, and awareness and acceptance of these procedures is growing in the United States. According to ASAPS, in 2013, consumers in the United States spent approximately $12.4 billion on aesthetic procedures overall, including both surgical and non-invasive cosmetic treatments. Of this amount, more than $7.2 billion was spent on aesthetic surgical procedures.
Breast augmentation surgery remains the leading aesthetic surgical procedure by dollars and number of procedures in the United States. According to ASAPS, over 313,000 primary breast augmentation procedures and 55,000 revision augmentation procedures were performed in the United States in 2013. These procedures provide cosmetic solutions generally to enhance breast size and shape, correct breast asymmetries or help restore fullness after breastfeeding. For breast reconstruction, ASPS estimates that approximately 96,000 procedures were performed in the United States in 2013. These procedures are a surgical solution generally used to restore a breast to near normal shape and appearance following a mastectomy and typically utilize a breast tissue expander prior to implantation of a breast implant. Based on the number of procedures reported by ASAPS and by ASPS, and our estimates of average selling price, implant mix and implants per procedure, we estimate that the U.S. market for breast implants and breast tissue expanders exceeded $600 million in 2013. Based on data from ASAPS and ASPS, between 1997 and 2013, the number of breast augmentation and breast reconstruction procedures has grown at a compound annual growth rate of approximately 7.3% and 4.4%, respectively. We believe several factors are contributing to the ongoing growth of these procedures, including:
•
the introduction of new technologies and products to the market, such as anatomically-shaped implants; 

•
medical professionals increasingly promoting aesthetic procedures; 

•
a growing number of patients proactively seeking to have aesthetic procedures performed to enhance their body image, grow their self-esteem and restore their confidence; 

•
a greater awareness among patients who have undergone mastectomies in recent years about the breast reconstruction options available to them;
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•
changes in laws now requiring insurance coverage for some post-mastectomy breast reconstruction; and 

•
an increasing number of patients who are at high risk of developing breast cancer seeking prophylactic mastectomies and breast reconstruction.
Our Opportunity
We believe a significant opportunity exists in the U.S. marketplace due to the high barriers to entry in the U.S. breast implant market and the historical lack of product and service innovation for Plastic Surgeons.
For more than 20 years prior to the FDA approval of our breast implants in 2012, only two companies manufactured and distributed breast implants in the United States. We believe that this market concentration is largely a result of the considerable costs and risks associated with the lengthy regulatory approval process required by the FDA, which has created a significant barrier to entry in the U.S. breast implant market. All new breast implants require pre-market approval, or PMA, from the FDA before they may be marketed in the United States. The PMA application process is lengthy and uncertain, and the PMA application must be supported by valid scientific evidence, which typically requires long-term follow-up of a large number of enrolled patients, as well as extensive technical, pre-clinical, clinical and manufacturing data to demonstrate safety and effectiveness. At present, we are not aware of any ongoing clinical studies in the United States for silicone breast implants other than those post-approval studies being performed by us and our two U.S. competitors. We believe that in the near term, it is likely that the companies currently providing silicone breast implants in the United States will continue to be the only companies servicing the U.S. silicone breast implant market.
We believe the rigorous FDA approval process and the existence of only two competitors in the U.S. market have historically contributed to a lack of technological innovation in the U.S. breast implant industry resulting in limited product choices. Until recently, surgeons in the United States were only able to purchase basic round breast implants from our two U.S. competitors, while surgeons outside of the United States were able to purchase technologically-advanced round and anatomically-shaped breast implants.
Our Competitive Strengths
We believe that we are well positioned to take advantage of opportunities afforded by current market dynamics. By focusing on products with technologically differentiated characteristics, demonstrating strong clinical data, offering more product choice and providing services tailored specifically to the needs of Plastic Surgeons, we believe we can continue to enhance our position in the breast implant market. Our competitive strengths include:
Differentiated silicone gel and texturing technologies.     We incorporate differentiated technologies into our breast implants, including a proprietary high-strength, cohesive silicone gel and proprietary texturing branded TRUE Texture. Our breast implants offer a desired balance between strength, shape retention and softness due to the gel used in our manufacturing process. We believe the beneficial properties of our breast implants using high-strength, cohesive silicone gel arise both from the characteristics of the gel itself, as well as the unique integration of the gel with our implant shell. Inside each of our breast implants, the unique way that the gel adheres to the shell creates additional strength and shape retention. This allows us to deliver implants that have strength and shaping capability without sacrificing the desired softness. In addition, TRUE Texture technology provides texturing on the implant shell that is designed to reduce the incidence of malposition, rotation and
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capsular contracture. We do not have any patents or patent applications, but rely on trade secrets, proprietary know-how and regulatory barriers to protect our products and technologies.
Strong clinical trial outcomes.     Our clinical trial results demonstrate the safety and effectiveness of our breast implants. Our breast implants were approved by the FDA based on data we collected from our ongoing, long-term clinical trial of our breast implants in 1,788 women across 36 investigational sites in the United States. Our clinical trial is the largest prospective, long-term pivotal study of breast implant patients in the United States and we have published the safety and effectiveness data that we collected over a five-year follow-up period. Our clinical data demonstrated rupture rates, capsular contracture rates and reoperation rates that were comparable to or better than those of our competitors, based on our competitors' published six-year data.
Innovative services that deliver an improved customer experience.     Our customer service offerings are intended to accommodate and anticipate the needs of Plastic Surgeons so that they can focus on providing better services to their patients. For example, we provide Plastic Surgeons with three warranty programs. Our ten-year limited warranty is the best-in-the-industry based on providing patients with the largest cash reimbursement for certain out-of-pocket costs related to revision surgeries in a covered event. Our lifetime no-charge implant replacement program provides patients replacement devices in the event of a covered rupture. Our C3 program is an industry-first, no-charge implant replacement program for breast augmentation patients who experience capsular contracture within the first five years after implantation with our smooth or textured breast implants. We also provide specialized educational initiatives for both Plastic Surgeons and patients to educate them about our technology, products and services and provide greater security and confidence in choosing our breast implants. In addition, we provide a streamlined ordering, shipping and billing process that is tailored for Plastic Surgeons to help enhance their practices.
Board-certified plastic surgeon focus.     We sell our Breast Products exclusively to board-certified and board-admissible plastic surgeons who are thought leaders in the medical aesthetics industry. This helps ensure that our products are implanted by the most highly-skilled surgeons in the field. We address the specific needs of Plastic Surgeons through continued product innovation, expansion of our product portfolio and enhanced customer service offerings. We believe that securing the loyalty and confidence of Plastic Surgeons is essential to our success and that our association with Plastic Surgeons enhances our credibility and aligns with our focus on making a difference in patients' lives.
Proven and experienced leadership team.     We have a highly experienced management team at both the corporate and operational levels with significant experience in the medical aesthetics industry. Members of our senior management team, which consists of ten executives, including our founder and chief executive officer, Hani Zeini, collectively have more than 125 years of medical aesthetics industry experience. Plastic Surgeons value working with a team comprised of highly skilled professionals who have in-depth knowledge of the industry and an understanding of their needs.
Our Strategy
Our objective is to become a leading provider of differentiated medical aesthetic products and services tailored to meet the needs of Plastic Surgeons, allowing us to deliver on our commitment to enhance and make a difference in patients' lives. We are currently focused on growing the breast implant and breast tissue expander markets and our share of them in the United States, and intend to leverage our
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capabilities into new or complementary aesthetic products or technologies and new geographic markets or market segments. To achieve our objective, we are pursuing the following business strategies:
Create awareness of our differentiated technologies, products and services with Plastic Surgeons and consumers.     To date, we have focused most of our marketing efforts on Plastic Surgeons to promote and create awareness of the benefits of our products. We believe that investing in expanded marketing initiatives will have a positive impact on our business. We offer educational initiatives exclusively to Plastic Surgeons through our Sientra Education Forum. We provide this education through iBook applications, webinars and online forums, at national, regional and local plastic-surgery meetings, as well as through preceptorships. We plan to expand our recent initiative to educate consumers considering breast augmentation or breast reconstruction about our technologies, products and services to drive adoption of our products. We have also partnered with entities such as RealSelf to help Plastic Surgeons reach a broader audience of potential patients and allow them to offer increased education, confidence and comfort to patients seeking an aesthetic procedure.
Enhance our sales capabilities and marketing programs to drive adoption of our products.     We intend to increase our direct sales capabilities through the hiring of additional, experienced sales representatives and support staff. We believe that continued expansion of our sales team will allow us to broaden our market reach and educate a broader group of Plastic Surgeons on the benefits of our products.
Invest in clinical studies and peer reviewed articles with key opinion leaders.     We intend to continue to invest in clinical studies in order to provide published peer reviewed articles that support the clinical benefits of our products and technologies over those of our competitors. We believe our relationship with Plastic Surgeons and our continued focus on providing differentiated products and services will allow us to leverage our existing capabilities to increase our share of the breast implant market specifically and the medical aesthetics market generally.
Broaden our product portfolio and launch new products and services.     We plan to continue to develop products that address the unmet needs of Plastic Surgeons and patients by leveraging our innovative technologies in combination with our regulatory and product development expertise. We have a number of new Breast Products under development with different characteristics and configurations. We believe these expanded product choices will allow Plastic Surgeons to potentially achieve better outcomes for their patients.
Expand to new markets.     We are pursuing regulatory approval for our breast implants in Canada and intend to expand into the Canadian market upon receipt of such approval. We regularly evaluate additional expansion opportunities and in the future may also expand our business to cover new markets and geographic territories.
Selectively pursue acquisitions.     We may selectively pursue domestic and international acquisitions of businesses or technologies that may allow us to leverage our relationships with Plastic Surgeons and our existing commercial infrastructure to provide us with new or complementary products or technologies, and allow us to compete in new geographic markets or market segments or to increase our market share.
Our Products
Our portfolio of products has been specifically tailored to the needs of the Plastic Surgeons we serve. We believe that our broad portfolio of products with technologically differentiated characteristics enable Plastic Surgeons to deliver better outcomes for their patients.
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Breast Augmentation and Breast Reconstruction Products
Breast Implants.     We offer the following breast implants:
•
Anatomically-shaped textured.   A full line of textured, anatomically-shaped HSC+ breast implants, all of which incorporate our high-strength, cohesive silicone gel and TRUE Texture technology. Our anatomically-shaped implants are engineered for shape retention and feature a gradual upper-pole slope and distributed volume that mimics the characteristics of a natural breast. They also provide a desired balance between strength, shape retention and softness and are designed to enhance tissue adherence to reduce malposition and capsular contracture. Due to the unique relationship between our implant gel and our implant shells, our anatomically-shaped implants have enhanced ability to retain their shape without sacrificing the desired softness. We offer these anatomically-shaped implants in three configurations: round-base, classic-base and oval-base. Our round-base implants are available in eight volumes, our classic-base implants are available in eight volumes and our oval-base implants are available in three projection profiles and 25 volumes. 

•
Round textured.   A full line of textured, round HSC breast implants, all of which incorporate our high-strength, cohesive silicone gel and TRUE Texture technology. Our textured, round implants maintain softness and are designed to enhance tissue adherence that reduces malposition and capsular contracture. We offer these textured, round implants in three projection profiles: low, moderate and high. Our low projection implants are available in 15 volumes, our moderate projection implants are available in 16 volumes and our high projection implants are available in 14 volumes. 

•
Round smooth.   A full line of smooth, round HSC breast implants, all of which incorporate our high-strength, cohesive silicone gel. Our smooth, round implants are designed to deliver full upper-pole aesthetic results without compromising softness. We offer these smooth, round implants in 17 volumes with moderate projection and 18 volumes with high projection. Additionally, in the fourth quarter of 2014, we introduced implants available in two new projections and 30 new volumes.
Breast Tissue Expanders.     We offer a full line of breast tissue expanders, most of which are marketed as ACX, in 25 different shapes and sizes that include single and double chamber tissue expanders. Our double chamber tissue expanders are unique to the marketplace and feature technology that was designed to allow controlled and differentiated expansion of breast tissue. Our breast tissue expanders are used in breast reconstruction and implanted during or after the completion of a mastectomy and before the patient has enough tissue to adequately cover a breast implant. Our breast tissue expanders are temporary devices intended to aid in the process of recreating tissue coverage to allow for the placement of the final implant to reconstruct the breast.
Other Products
We also offer a range of other aesthetic products that have received 510(k) clearance from the FDA, including:
•
body contouring and other implants, including gluteal, pectoral, calf, facial and nasal implants, and nasal stents, all made from single pieces of silicone elastomer; 

•
silicone elastomer oval carving blocks that can be shaped and sized by surgeons to address deformity caused by trauma, congenital and other deformities or cancer therapy;
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•
scar management specialty products under the brand Medgel that use a compound of biocompatible, medical-grade silicone gel or sheeting specifically formulated to treat or prevent various types of scars; 

•
temporary, single-use, saline-filled breast sizers that can be used to help identify the correct style and size implant for an individual patient; and 

•
non-breast tissue expanders, which are temporary devices intended to aid in the process of expanding tissue and skin surface area for burn care and other reconstructive use.
Our Technology
Our current portfolio of breast implants utilizes what we believe are the most advanced technologies currently available on the market. These technologies are supported by rigorous product testing, analytics and clinical data. The advanced technologies in our products include:
High-strength, cohesive silicone gel.     Our HSC and HSC+ breast implants offer a desired balance between strength, shape retention and softness due to the high-strength, cohesive silicone gel used in our manufacturing process. The use of high-strength, cohesive silicone gel in our HSC and HSC+ breast implants allows the breast implants to hold a controlled shape while maintaining a soft feel.
The raw silicone stock used in our breast implants has been designed to provide the characteristics desired by Plastic Surgeons for breast implants. At present, we are the only company in the United States that has received FDA approval to use this special raw material in our products.
We have completed a number of studies conducted by independent laboratories to demonstrate the competitive advantages of using high-strength, cohesive silicone gel in our breast implants. We believe this technology differentiates our breast implants for the following reasons:
•
our implant gel is stronger, which is evidenced by its resistance to gel fracture; 

•
due to the unique relationship between our implant gel and our implant shells, our implants have an enhanced ability to retain their shape while preserving the shape of anatomically-shaped implants without sacrificing the desired softness; and 

•
our shaped implants are softer and more elastic than our competitors' shaped implants.
We believe the beneficial properties of our implants arise from the characteristics of the gel, as well as the unique integration of the gel with our implant shell. Inside each of our implants, the gel adheres to the shell, creating additional structural strength and shape retention in the implant. This results in the ability to deliver strength and shaping capability without a stiffer gel or implant and without sacrificing the desired softness. We typically evaluate these characteristics using the following metrics:
•
Peel-force.   Peel-force is measured by the amount of force, measured in pound-force, or lbf, necessary to separate the outer shell of the implant from the internal gel filling. A greater peel-force measurement indicates greater gel-shell integration. In the case of anatomically-shaped implants, greater peel-force can also be an indication of the ability of the implant to retain its shape, particularly the upper portions of the implant, also referred to as the upper pole. Upper pole stability is of particular importance in preserving the desired anatomical shape of an implant over time. 

•
Gel strength.   Gel strength is measured by the amount of force, measured in lbf, required to cause permanent fractures in the gel. A larger value indicates greater strength.
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•
Gel elasticity and implant elasticity.   Gel elasticity and implant elasticity can be measured by the level of resistance, measured in millimeters, or mm, to an applied constant force. A higher value represents greater softness and a lower deformation value represents greater firmness.
The following table provides a comparison of certain properties of one of our moderate projection, HSC round breast implants containing high-strength, cohesive silicone gel, and the corresponding competitive implants offered by Allergan and Mentor. All tests were performed by an independent laboratory and measured peel-force, gel strength, gel elasticity and implant elasticity.

														
 	 	Peel-Force	 	Gel Strength	 	Gel Elasticity	 	Implant Elasticity	 	
 	 	(lbf)	 	(lbf)	 	(mm)	 	(mm)	 	
Mentor Moderate Plus	 	 	0.52	 	 	23.57	 	 	6.402	 	 	0.895	 	
Allergan Style 15	 	 	0.54	 	 	22.02	 	 	7.465	 	 	0.894	 	
Sientra HSC Moderate Projection	 	 	0.72	 	 	32.51	 	 	5.805	 	 	0.925	 	
The test results showed that our HSC round breast implant needed the greatest amount of force in the peel-force test to separate the outer shell from the internal gel filling, displayed over 35% greater resistance to applied force in the gel strength test as compared to the implants of our competitors, and though our HSC round implant gel proved to be the firmest in the gel elasticity test, the entire implant remained as soft.
The following table provides a comparison of certain properties of one of our oval base, moderate projection, HSC+ shaped breast implants containing high-strength, cohesive silicone gel, and the corresponding competitive implants offered by Allergan and Mentor. All tests were performed by an independent laboratory and measured peel-force, gel strength and gel elasticity.

											
 	 	Peel-Force	 	Gel Strength	 	Gel Elasticity	 	
 	 	(lbf)	 	(lbf)	 	(mm)	 	
Mentor MemoryShape	 	 	0.38	 	 	30.10	 	 	3.343	 	
Allergan Style 410	 	 	0.37	 	 	33.01	 	 	3.242	 	
Sientra HSC+ Oval Moderate Projection	 	 	0.84	 	 	45.96	 	 	4.270	 	
The test results showed that our HSC+ shaped breast implant needed over two times the peel-force to separate the outer shell from the internal gel filling as compared to the implants of our competitors, displayed the strongest resistance to force in the gel strength test and proved to have the softest gel.
We have also measured upper pole stability of our HSC+ shaped breast implants by using a morphological analysis that quantifies the change in shape of the implant's upper pole caused by rotating the implant from a horizontal to vertical orientation. In performing such a comparison between our HSC+ shaped breast implants and Allergan's Style 410 shaped breast implant, our implant demonstrated only a 3.57% decrease in upper-pole volume when the implant was rotated to an upright position; this is approximately half of the 7.15% change in upper-pole volume demonstrated in Allergan's Style 410 implants.
Based on the test results described above, we believe that our HSC and HSC+ breast implants utilizing high-strength, cohesive silicone gel are differentiated from the corresponding competitive products and provide a desired balance between strength, shape retention and softness that Plastic Surgeons and their patients desire.
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TRUE Texture.     We sell breast implants that are available with a smooth outer surface or with an outer surface that is textured using TRUE Texture technology. We believe our textured breast implants using TRUE Texture technology offer us clinical advantages over our competitors' textured products, including:
•
better tissue adherence to reduce the incidence of malposition and rotation; and 

•
reduction in the rate of capsular contracture, a complication in which the patient's body creates a scar-tissue capsule around the implant that can tighten and squeeze the implant potentially causing discomfort, pain and even dislocation of the implant. While we have neither sought nor obtained FDA approval to state that TRUE Texture technology reduces the incidence of capsular contracture, we believe it may significantly reduce this risk, as evidenced by the lower rates of capsular contraction reported over a five-year follow-up period in our ongoing clinical trial.
On a breast implant, the desired texture should have a proportionate amount of surface disruption, as overly aggressive texture can result in double-capsule formation while not enough texturing can result in a lack of adherence resulting in malposition or rotation. We believe that TRUE Texture technology has the right combination of surface disruption without overly aggressive texturing.
We use the competitive advantages demonstrated by the independent laboratory results above for our breast implants incorporating high-strength, cohesive silicone gel and TRUE Texture technology to market and differentiate our products to Plastic Surgeons.
Our Clinical Data
In 2012, our breast implants were approved by the FDA, based on data we collected from our ongoing, long-term clinical trial of our breast implants in 1,788 women across 36 investigational sites. Our clinical trial results demonstrate the safety and effectiveness of our breast implants and provide Plastic Surgeons and their patients the security and confidence to choose our products.
Our clinical trial is the largest prospective, long-term safety and effectiveness pivotal study of breast implant patients conducted in the United States. As shown in the tables below, the clinical data we collected over a five-year follow-up period demonstrates that our HSC round implants and HSC+ shaped implants have low rupture rates, as measured by the percent of implants suspected to have ruptured in the body following implantation, low capsular contracture rates, as measured by the percent of implants that result in moderate-to-severe capsular contracture, low rotation rates, as measured by the percent of implants that rotate in the pocket/body following implantation, and low reoperation rates, as measured by the percent of implant procedures that result in the need for at least one additional operation due to patient choice or undesirable clinical outcome.
We, Allergan and Mentor were required to run independent ten-year clinical studies to obtain PMA approval from the FDA. Even though these PMA studies were not designed to facilitate head-to-head comparisons, we believe that these studies, all of which were reviewed by the FDA, measured similar end points under similar protocols and are regularly provided to Plastic Surgeons for their interpretation. However, since Allergan and Mentor published six-year data in some cases, and our data is currently reported over a five-year period, our data and that of our competitors' may change as data from all three PMA studies continue to be analyzed.
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The following table summarizes the key complication rates associated with our HSC round implants and the corresponding competitive round implants offered by Allergan and Mentor as described in published data from PMA studies:

											
 	 	Sientra
5-Year	 	Allergan
6-Year	 	Mentor
6-Year	 	
All Cohorts	 	 	(N=1,574)	 	 	(N=715)	 	 	(N=1,008)	 	
Rupture (overall)	 	 	2.1%	 	 	3.5%	 	 	3.7%	 	
Rupture (MRI cohort) (1)	 	 	4.3%	 	 	5.5%	*	 	5.6%	 	
Capsular Contracture	 	 	9.8%	 	 	14.8%	*	 	13.4%	 	
Reoperation	 	 	24.0%	 	 	28.0%	*	 	26.1%	 	

N= Number of patients
*denotes primary augmentation
(1)
Represents rupture rates reported from a randomly selected subset of patients that underwent MRI evaluation for rupture as required by the FDA.
The following table summarizes the key complication rates associated with our HSC+ shaped implants and the corresponding competitive shaped implants offered by Allergan and Mentor as described in published data from PMA studies:

											
 	 	Sientra
5-Year	 	Allergan
5-Year	 	Mentor
6-Year	 	
Primary Augmentation	 	 	(N=321)	 	 	(N=492)	 	 	(N=572)	 	
Rupture (non-MRI cohort)	 	 	0.4%	 	 	6.2%	 	 	NR	 	
Rupture (MRI cohort) (1)	 	 	0.0%	 	 	6.3%	 	 	2.6%	 	
Capsular Contracture	 	 	3.9%	 	 	4.0%	 	 	2.4%	 	
Rotation	 	 	0.0%	 	 	2.9%	(2)	 	1.1%	 	

N= Number of patients
NR= Not reported
(1)
Represents rupture rates reported from a randomly selected subset of patients that underwent MRI evaluation for rupture as required by the FDA.

(2)
Represents 7-year data.
In addition, the five-year capsular contracture analysis of the results from our clinical studies in the United States was published in the peer-reviewed Plastic and Reconstructive Surgery Journal. The analysis included 2,560 augmentation patients with 5,109 implants, of which 62% were smooth and 38% were textured, at 36 investigative sites in the United States with a five year follow-up. The analysis demonstrated a statistically significant reduction in capsular contracture rates when using our textured implants versus smooth implants.
Our Services
Our services are designed to cater to the specific needs of Plastic Surgeons to enable them to maintain and grow their practices. We provide our Plastic Surgeons with superior warranty programs, enhanced customer service offerings and specialized educational initiatives. We believe that tailoring our customer service offerings to Plastic Surgeons helps secure their loyalty and confidence.
Industry-Leading Product Programs and Warranties.     Through our C3 Program, we are the only company that provides no-charge replacement implants to patients who experience capsular contracture in the first five years following primary breast augmentation. We provide this benefit to
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every patient implanted with our smooth or textured breast implants. We also provide a ten-year limited warranty that is the best-in-the-industry based on providing patients with the largest cash reimbursement for certain out-of-pocket costs related to revision surgeries in a covered event and a lifetime no-charge implant replacement program for covered ruptures.
Enhanced Customer Service.     As we focus exclusively on Plastic Surgeons and their patients, we believe we are able to tailor our customer service offerings to their specific needs. Our surgeon-facing customer service policies include:
•
simplified account setup through our sales representatives and with pre-qualification and pre-approved credit terms; 

•
no-charge shipping to and from accounts; 

•
six-month pre-approved returns of unused products with no-charge return shipping and no restocking fees; 

•
end-of-month statement billing, rather than one invoice per shipment, and 30-day payment terms; 

•
individualized consignment inventory; and 

•
order acceptance by phone, fax, email or through our sales representatives.
Educational and Marketing Initiatives.     We have implemented educational and marketing initiatives with a focus on both Plastic Surgeons and their patients considering breast augmentation or reconstruction.
Plastic Surgeons .    In order to educate Plastic Surgeons about our product lines and, in particular, about the proper use of our anatomically-shaped breast implants, we provide a variety of education programs for Plastic Surgeons under the banner of the Sientra Education Forum.
•
we have developed a tablet-based mobile marketing tool for our sales representatives to use while calling on accounts that includes access to our patient and surgeon labeling, published clinical studies, marketing literature, details on our warranty and C3 programs, our educational iBooks and more. 

•
we host symposia with one or more key-note speakers who speak on topics ranging from our corporate identity and customer service offerings to surgical tips and suggestions from thought-leading Plastic Surgeons. 

•
we produce comprehensive guides for Plastic Surgeons via the Internet, referred to as iBooks, to provide them training and expertise on the implantation of anatomically-shaped breast implants. 

•
we send a limited number of Plastic Surgeons to Europe to observe surgeries and train with world-renowned surgeons who have been implanting anatomically-shaped breast implants for decades and, upon return to the United States, we engage them as consultant-educators to conduct training sessions for other U.S.-based Plastic Surgeons. 

•
we periodically sponsor educational surgical preceptorships where a small group of Plastic Surgeons are able to observe a live surgery conducted by one of our trained preceptors and train with that preceptor.
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Patients .    We have recently begun to engage directly with consumers who are considering breast augmentation or reconstruction. We have initially focused our consumer educational and marketing activities on websites where consumers come to research their breast augmentation or reconstruction options, including:
•
our own consumer website, branded with our "Feel So Good" campaign, that provides resources for consumers considering breast augmentation or reconstruction, including referrals and commentaries, product descriptions, patient planning guides and educational brochures and information regarding our warranty and C3 programs; and 

•
a one-year exclusive relationship with RealSelf, the leading online community helping people make confident choices in elective cosmetic procedures. Together with RealSelf, we deliver fresh and meaningful content to the RealSelf community that answers common questions patients have regarding breast augmentation. This content is featured on a dedicated Sientra page on RealSelf's website designed to build consumer engagement with the brand and open up the online conversation around breast augmentation directly with Plastic Surgeons.
We believe that our innovative services, including industry-leading product programs and warranties, enhanced customer service offerings and educational and marketing initiatives, deliver an improved customer experience to Plastic Surgeons and their patients.
Sales and Marketing
As of September 30, 2014, we had a sales organization of 42 employees, including sales representatives and sales management. We assign sales territories based on the regions with the highest concentration of accounts. Our sales team is supported by customer and sales experience teams, which provides full-time telephonic and email customer support to our sales representatives and customers.
In addition, our marketing team leads our efforts in brand development, tradeshow attendance, educational forums, product messaging, website development and advertising, among others.
Research and Development
We have incurred, and expect to continue to incur, significant research and development expenses. Our research and development expenses were approximately $3.7 million for the year ended December 31, 2012, $4.5 million for the year ended December 31, 2013 and $2.3 million for the six months ended June 30, 2014. Our research and development expenses primarily consist of costs associated with our clinical and post-approval studies, regulatory activity and product development, including our efforts to seek approval for a range of breast implant line extensions that would allow us to sell breast products in additional styles, sizes and projections that we do not currently offer.
Manufacturing and Quality Assurance
We rely on Silimed to manufacture and package our silicone gel breast implants, tissue expanders and other products. Silimed has over 34 years of experience manufacturing silicone-based implants and distributes its products to over 60 countries worldwide. When we receive products from Silimed, we inspect the products prior to shipping them to our customers. We maintain strategic levels of inventory at our storage facilities located in Santa Barbara, California.
We and Silimed are subject to the FDA's Quality System Regulation, or QSR, reporting requirements and cGMP audits by the FDA. Under the QSR and cGMP requirements, manufacturers, including third party manufacturers, must follow stringent design, testing, production, control, supplier and contractor
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selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process. Both we and Silimed have been inspected by the FDA regularly, and no FDA Form 483 observations, which are issued when an FDA inspector believes that observed conditions or practices indicate the possibility that an FDA-regulated product may be in violation of FDA's requirements, have been made in connection with these inspections. Silimed has had three FDA inspections in seven years and is also audited periodically by our quality department to ensure conformity with the specifications, policies and procedures for our products.
At present, all of our products, including our silicone gel breast implants and breast tissue expanders, are manufactured by Silimed pursuant to an amended and restated exclusivity agreement with Silimed entered into in April 2007, and amended in May 2010 and November 2013. We refer to the amended and restated exclusivity agreement with Silimed, as amended, as the Silimed Agreement. Pursuant to the Silimed Agreement, Silimed manufactures and supplies products ordered by us for distribution in the United States and Canada, which we refer to as the Territory. We agreed to use commercially reasonable efforts to promote, sell and distribute the products in the Territory. In addition to Silimed's existing products, we have the exclusive right to sell and distribute any new products manufactured by Silimed during the term of the Silimed Agreement. Silimed sells the products to us at a fixed cost, which may be increased by no more than a low single-digit percentage per annum.
The Silimed Agreement provides that Silimed will not provide its products to any third party in the Territory, with the exception of the distribution of one of its gastric products pursuant to a pre-existing supply agreement that it has with a third-party distributor, and we have agreed not sell Silimed's products to any third party if we have reason to believe that such products have been or will be distributed outside of the Territory. We have also agreed not to distribute any product that directly competes with a product manufactured by Silimed in the Territory.
In the event Silimed fails to supply products ordered by us, we may, under certain circumstances, exercise manufacturing rights to manufacture the products directly or through a third party manufacturer. Pursuant to the Silimed Agreement, Silimed granted to us an exclusive, royalty-free, non-transferable license to use certain of its trademarks in the Territory, including in the event Silimed fails to supply the products to us and in connection with the marketing and sale of the products in the Territory. In addition, the Silimed Agreement allocates intellectual property rights between the parties, including that the parties will jointly own all developments, modifications, enhancements or alterations of products jointly created by the parties, subject to certain restrictions concerning the use of such improvements outside of the Territory. Each party is subject to certain limitations and other restrictions on the transfer of the other party's technology to third parties.
The Silimed Agreement can be terminated by either party under certain limited circumstances, including in connection with the other party's breach of any of its material obligations which such breaching party fails to cure within 60 days of receiving notice from the non-breaching party. If the breach relates only to single product, then the non-breaching party is entitled to terminate the agreement with respect to that specific product. The parties may also terminate the agreement at any time on a product-by-product basis upon mutual written agreement of the parties.
The term of the Silimed Agreement will continue until April 2017.
Competition
The medical device industry is intensely competitive, subject to rapid change and highly sensitive to the introduction of new products or other market activities of industry participants. We primarily compete
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with two companies that manufacture and sell breast implants in the United States: Johnson & Johnson through its wholly owned subsidiary, Mentor, and Allergan.
Both of our U.S. competitors are either publicly-traded companies or divisions or subsidiaries of publicly-traded companies with significantly more market share and resources than we have. These companies have greater financial resources for sales, marketing and product development, broader established relationships with healthcare providers and third-party payors, and larger and more established distribution networks. In some instances, our competitors also offer products that include features that we do not currently offer. For example, Allergan sells temporary gel sizers for silicone gel implants and we sell only temporary saline filled sizers. In addition, our competitors may offer pricing programs with discounts across their non-breast aesthetic product portfolios.
We also face potential future competition from a number of companies, medical researchers and existing medical device companies that may be pursuing new implant technologies, new material technologies and new methods of enhancing and reconstructing the breast.
We believe the primary competitive factors in our markets include:
•
breadth of portfolio; 

•
technological characteristics of products; 

•
clinical evidence; 

•
product price; 

•
customer service; and 

•
support by key opinion leaders.
Government Regulation
Our products are medical devices subject to extensive regulation by the FDA and other federal and state regulatory authorities, Health Canada and, if we commence international sales outside of the United States and Canada, other regulatory bodies in other countries. We currently market our tissue expanders and facial implants in Canada, and are awaiting Health Canada's approval to market our breast implant products in Canada. Although we do not anticipate any additional nonclinical or clinical study requirements, we may be delayed in obtaining approval to sell our breast implants in Canada if we need to respond to requests for information from Health Canada during the review process, which remains ongoing.
Regulation by the FDA.     The Federal Food, Drug and Cosmetic Act, or FDCA, and the FDA's implementing regulations govern, among other things:
•
product design and development; 

•
pre-clinical and clinical testing; 

•
establishment registration and product listing with the FDA; 

•
product manufacturing; 

•
product labeling and storage; 

•
pre-market clearance or approval; 

•
post-market studies;
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•
advertising and promotion; 

•
product sales and distribution; 

•
recordkeeping and device tracking; 

•
complaint handling; 

•
recalls and field safety corrective actions; and 

•
post-market surveillance and adverse event reporting, including reporting of deaths, serious injuries or device malfunctions.
Unless an exemption applies, each new or significantly modified medical device we seek to commercially distribute in the United States will require either a pre-market notification to the FDA requesting permission for commercial distribution under Section 510(k) of the FDCA, also referred to as a 510(k) clearance, or approval from the FDA of a pre-market approval, or PMA, application. Both the 510(k) clearance and PMA processes can be expensive, lengthy and require payment of significant user fees, unless an exemption is available.
The FDA classifies medical devices into one of three classes. Devices deemed to pose low to moderate risk are placed in Class I or II, which, absent an exemption, requires the manufacturer to obtain a 510(k) clearance. Class I devices are subject to general controls such as labeling, pre-market notification and adherence to the FDA's Quality System Regulation, or QSR, which cover manufacturers' methods and documentation of the design, testing, production, control, quality assurance, labeling, packaging, sterilization, storage and shipping of products. Class II devices are subject to special controls such as performance standards, post-market surveillance, FDA guidelines, or particularized labeling requirements, as well as general controls. Some low risk devices are exempted by regulation from the 510(k) clearance requirement, and the requirement of compliance with substantially all of the QSR. A PMA application is required for devices deemed by the FDA to pose the greatest risk, such as life-sustaining, life-supporting or certain implantable devices, including all breast implants, or devices that are "not substantially equivalent" either to a device previously cleared through the 510(k) process or to a "preamendment" Class III device in commercial distribution in the United states before May 28, 1976 for which a regulation requiring a PMA application has not been issued by the FDA.
Our tissue expanders and our body contouring, facial and nasal implants received FDA clearance as Class II devices at various dates prior to approval of our breast implants in March 2012. To obtain 510(k) clearance, we must submit a pre-market notification demonstrating that the proposed device is substantially equivalent to a previously cleared 510(k) device or a preamendment device. The FDA's 510(k) clearance pathway usually takes from three to 12 months from the date the application is completed, but it can take significantly longer and clearance is never assured. Although many 510(k) pre-market notifications are cleared without clinical data, in some cases, the FDA requires significant clinical data to support substantial equivalence. In reviewing a pre-market notification, the FDA may request additional information, including clinical data, which may significantly prolong the review process. After a device receives 510(k) clearance, any modification that could significantly affect its safety or effectiveness, or that would constitute a new or major change in its intended use, will require a new 510(k) clearance or, depending on the modification, could require a PMA application. The FDA requires each manufacturer to make this determination initially, but the FDA can review any such decision and can disagree with a manufacturer's determination. If the FDA disagrees with a manufacturer's determination regarding whether a new pre-market submission is required for the modification of an existing device, the FDA can require the manufacturer to cease marketing and/or recall the modified device until 510(k) clearance or approval of a PMA application is obtained. If the
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FDA requires us to seek 510(k) clearance or approval of a PMA application for any modifications to a previously cleared product, we may be required to cease marketing or recall the modified device until we obtain this clearance or approval. In addition, in these circumstances, we may be subject to significant regulatory fines or penalties for failure to submit the requisite PMA application(s). In addition, the FDA is currently evaluating the 510(k) process and may make substantial changes to industry requirements.
Silicone gel-filled breast implants are treated as Class III devices and a full PMA is required. A PMA for our breast implants was approved by the FDA in March 2012. The PMA application process is generally more costly and time consuming than the 510(k) process and requires proof of the safety and effectiveness of the device to the FDA's satisfaction. Accordingly, a PMA application must be supported by valid scientific evidence that typically includes, but is not limited to, extensive technical information regarding device design and development, pre-clinical and clinical trial data, and manufacturing and labeling information to demonstrate to the FDA's satisfaction the safety and effectiveness of the device for its intended use. After a PMA application is submitted and found to be sufficiently complete, the FDA begins an in-depth review of the submitted information. By statute, the FDA has 180 days to review the "accepted application," although, generally, review of the application takes between one and three years, but may take significantly longer. During this review period, the FDA may request additional information or clarification of information already provided. Also during the review period, an advisory panel of experts from outside the FDA may be convened to review and evaluate the application and provide recommendations to the FDA as to the approvability of the device. In addition, the FDA generally will conduct a pre-approval inspection of the manufacturing facility to evaluate compliance with QSR, which requires manufacturers to implement and follow elaborate design, testing, control, documentation and other quality assurance procedures in the device design and manufacturing process.
The FDA may approve a PMA application with post-approval conditions intended to ensure the safety and effectiveness of the device including, among other things, restrictions on labeling, promotion, sale and distribution and collection of long-term follow-up data from patients in the clinical study that supported approval. Failure to comply with the conditions of approval can result in materially adverse enforcement action, including the loss or withdrawal of the approval. New PMA applications or PMA application supplements are required for significant modifications to the manufacturing process, labeling and design of a device that is approved through the PMA modifications that affect the safety or effectiveness of the device, including, for example, certain types of modifications to the device's indication for use, manufacturing process, labeling and design. PMA supplements often require submission of the same type of information as a PMA application, except that the supplement is limited to information needed to support any changes from the device covered by the original PMA application, and may not require as extensive clinical data or the convening of an advisory panel, depending on the nature of the proposed change.
Clinical Trials.     A clinical trial is almost always required to support a PMA application and may be required for a 510(k) pre-market notification. In the United States, absent certain limited exceptions, human clinical trials intended to support product clearance or approval require an Investigational Device Exemption, or IDE, application. Some types of studies deemed to present "non-significant risk" are deemed to have an approved IDE once certain requirements are addressed and IRB approval is obtained. If the device presents a "significant risk" to human health, as defined by the FDA, the Sponsor must submit an IDE application to the FDA and obtain IDE approval prior to commencing the human clinical trials. The IDE application must be supported by appropriate data, such as animal and laboratory testing results, showing that it is safe to evaluate the device in humans and that the testing protocol is scientifically sound. The IDE application must be approved in advance by the FDA for a specified number of subjects, unless the product is deemed a non-significant risk device and
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eligible for more abbreviated IDE requirements. Clinical trials for a significant risk device may begin once the IDE application is approved by the FDA and the responsible institutional review boards at the clinical trial sites. There can be no assurance that submission of an IDE will result in the ability to commence clinical trials. Additionally, after a trial begins, the FDA may place it on hold or terminate it if, among other reasons, it concludes that the clinical subjects are exposed to unacceptable health risks that outweigh the benefits of participation in the study. During a study, we are required to comply with the FDA's IDE requirements for investigator selection, trial monitoring, reporting, record keeping and prohibitions on the promotion of investigational devices or making safety or efficacy claims for them. We are also responsible for the appropriate labeling and distribution of investigational devices. Our clinical trials must be conducted in accordance with FDA regulations and federal and state regulations concerning human subject protection, including informed consent and healthcare privacy. The investigators must also obtain patient informed consent, rigorously follow the investigational plan and study protocol, control the disposition of investigational devices and comply with all reporting and recordkeeping requirements. The FDA's grant of permission to proceed with clinical testing does not constitute a binding commitment that the FDA will consider the study design adequate to support clearance or approval. In addition, there can be no assurance that the data generated during a clinical study will meet chosen safety and effectiveness endpoints or otherwise produce results that will lead the FDA to grant marketing clearance or approval.
Other Regulatory Requirements.     Even though our breast implants have been approved and commercialized, numerous regulatory requirements apply after a device is placed on the market, regardless of its classification or pre-market pathway. These include, but are not limited to:
•
establishment registration and device listing with the FDA; 

•
QSR, which requires manufacturers, including third party manufacturers, to follow stringent design, testing, production, control, supplier and contractor selection, complaint handling, documentation and other quality assurance procedures during all aspects of the manufacturing process; 

•
labeling regulations that prohibit the promotion of products for uncleared or unapproved, or "off-label," uses, and impose other restrictions on labeling, advertising and promotion; 

•
medical Device Reporting, or MDR, regulations, which require that manufacturers report to the FDA if their device may have caused or contributed to a death or serious injury or malfunctioned in a way that would likely cause or contribute to a death or serious injury if the malfunction were to recur; and 

•
corrections and removals reporting regulations, which require that manufacturers report to the FDA field corrections and product recalls or removals if undertaken to reduce a risk to health posed by the device or to remedy a violation of the FDCA that may present a risk to health. In addition, the FDA may order a mandatory recall if there is a reasonable probability that the device would cause serious adverse health consequences or death.
Also, the FDA requires us to conduct post-market surveillance studies and to maintain a system for tracking our products through the chain of distribution to the patient level. The FDA and the Food and Drug Branch of the California Department of Health Services enforce regulatory requirements by conducting periodic, unannounced inspections and market surveillance. Inspections may include the manufacturing facilities of our subcontractors.
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Failure by us or our manufacturer to comply with applicable regulatory requirements can result in enforcement actions by the FDA and other regulatory agencies. These may include, but may not be limited to, any of the following sanctions or consequences:
•
warning letters or untitled letters that require corrective action; 

•
fines and civil penalties; 

•
unanticipated expenditures; 

•
delays in or refusal to grant requests for 510(k) clearance or pre-market approval of new products or modified products; 

•
FDA refusal to issue certificates to foreign governments needed to export products for sale in other countries; 

•
suspension or withdrawal of FDA clearance or approval; 

•
product recall, detention or seizure; 

•
operating restrictions, partial suspension or total shutdown of production; 

•
injunctions and consent decrees; and 

•
criminal prosecution.
We and our contract manufacturers and some suppliers of components or device accessories also are required to manufacture our products in compliance with cGMP requirements set forth in the QSR. The QSR requires a quality system for the design, manufacture, packaging, labeling, storage, installation and servicing of marketed devices, and it includes extensive requirements with respect to quality management and organization, device design, buildings, equipment, purchase and handling of components or services, production and process controls, packaging and labeling controls, device evaluation, distribution, installation, complaint handling, servicing, and record keeping. The FDA evaluates compliance with the QSR through periodic, unannounced inspections that may include the manufacturing facilities of our subcontractors. If the FDA believes that we or any of our contract manufacturers or regulated suppliers are not in compliance with these requirements, it can shut down our manufacturing operations, require recall of our products, refuse to approve new marketing applications, institute legal proceedings to detain or seize products, enjoin future violations or assess civil and criminal penalties against us or our officers or other employees.
Healthcare Regulatory Laws.     Our business activities, including but not limited to, research, sales, marketing, promotion, distribution, medical education and other activities are subject to regulation under additional laws by numerous regulatory and enforcement authorities in the United States, in addition to the FDA. These laws include, without limitation, state and federal anti-kickback, fraud and abuse, false claims, physician sunshine and privacy and security laws and regulations, including but not limited to those described below.
Additionally, our relationships with healthcare providers and other third parties are subject to scrutiny under these laws. Non-compliance with the laws described below may result in the imposition of civil, criminal and administrative penalties, damages, monetary fines, disgorgement, individual imprisonment, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings, and curtailment of our operations, any of which could adversely affect our ability to operate our business and our results of operations. Defending against any actions for non-compliance of such laws can be costly, time-consuming and may require significant financial and personnel resources. Therefore, even if we are
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successful in defending against any such actions that may be brought against us, our business may be impaired.
Federal Anti-Kickback Laws.     The federal Anti-Kickback Statute prohibits, among other things, knowingly or willfully soliciting, receiving, offering, or paying remuneration, directly or indirectly, to induce, or in return for, either the referral of an individual or the purchase, or recommendation, order or furnishing of an item or service reimbursable under a federal healthcare program, such as the Medicare and Medicaid programs. The definition of "remuneration" has been broadly interpreted to include anything of value, including such items as improper payments, gifts, discounts, the furnishing of supplies or equipment, credit arrangements, waiver of payments and providing anything at less than its fair market value. There are a number of statutory exceptions and regulatory safe harbors protecting certain common activities from prosecution. Failure to meet all of the requirements of a particular applicable statutory exception or regulatory safe harbor does not make the conduct per se illegal under the federal Anti-Kickback Statute. Instead, the legality of the arrangement will be evaluated on a case-by-case basis based on a cumulative review of all of its facts and circumstances.
The penalties for violating the federal Anti-Kickback Statute include imprisonment for up to five years, fines of up to $25,000 per violation and possible exclusion from federal healthcare programs such as Medicare and Medicaid. Further, a person or entity does not need to have actual knowledge of this statute or specific intent to violate it. In addition, a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the FCA.
We have entered into consulting, speaker and other financial arrangements with physicians, including some who prescribe or recommend our products to patients. We engage such physicians as consultants, advisors and to educate other physicians. Noncompliance with the federal Anti-Kickback Statute could result in significant administrative, civil and/or criminal penalties and fines, including our debarment or exclusion from Medicare, Medicaid or other governmental programs and restrictions on our ability to operate in certain jurisdictions.
Federal Civil False Claims Act.     The FCA, prohibits any person from knowingly presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, using or causing to be made or used, a false record or statement material to a false or fraudulent claim to the federal government. The FCA has been used to prosecute persons submitting claims for payment that are inaccurate or fraudulent, that are for services not provided as claimed, or for services that are not medically necessary. Manufacturers can be held liable under the FCA if they are deemed to "cause" the submission of false or fraudulent claims by, for example, providing inaccurate billing or coding information to customers or promoting a product off-label. Penalties for FCA violations include three times the actual damages sustained by the government, plus mandatory civil penalties of between $5,500 and $11,000 for each separate false claim, the potential for exclusion from participation in federal healthcare programs, and, although the federal FCA is a civil statute, FCA violations may also implicate various federal criminal statutes.
In addition to actions initiated by the government itself, the statute authorizes actions to be brought on behalf of the federal government by a private party having knowledge of the alleged fraud, known as "qui tam" whistleblower lawsuits. Because the complaint is initially filed under seal, the action may be pending for some time before the defendant is even aware of the action. If the government intervenes and is ultimately successful in obtaining redress in the matter, or if the plaintiff succeeds in obtaining redress without the government's involvement, then the plaintiff will receive a percentage of the recovery. Qui tam actions have increased significantly in recent years, causing greater numbers of healthcare companies to have to defend a false claim action, pay fines or be excluded from Medicare,
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Medicaid or other federal or state healthcare programs as a result of an investigation arising out of such action.
Federal Criminal False Claims Law.     The federal criminal false claims laws prohibit, among other things, knowingly and willfully making, or causing to be made, a false statement or representation of a material fact for use in determining the right to any benefit or payment under a federal health care program. A violation of this statute may constitute a felony or misdemeanor and may result in fines or imprisonment.
Civil Monetary Penalties Law.     The Federal Civil Monetary Penalties Law prohibits, among other things, the offering or transferring of remuneration to a Medicare or Medicaid beneficiary that the person knows or should know is likely to influence the beneficiary's selection of a particular supplier of Medicare or Medicaid payable items or services. Noncompliance can result in civil money penalties of up to $10,000 for each wrongful act, assessment of three times the amount claimed for each item or service and exclusion from the federal healthcare programs.
Health Insurance Portability and Accountability Act of 1996.     The Health Insurance Portability and Accountability Act of 1996, or HIPAA, created two new federal crimes: healthcare fraud and false statements relating to healthcare matters. The healthcare fraud statute prohibits knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program, including private payors. A violation of this statute is a felony and may result in fines, imprisonment or exclusion from governmental programs. The false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection with the delivery of or payment for healthcare benefits, items or services. A violation of this statute is a felony and may result in fines or imprisonment.
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, and their implementing regulations, including the final omnibus rule published on January 25, 2013, mandates, among other things, the adoption of uniform standards for the electronic exchange of information in common healthcare transactions, as well as standards relating to the privacy and security of individually identifiable health information, which require the adoption of administrative, physical and technical safeguards to protect such information. Among other things, HITECH makes certain of HIPAA's standards and requirements directly applicable to "business associates" — independent contractors or agents of covered entities that create, receive or obtain protected health information in connection with providing a service for or on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities and business associates, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney's fees and costs associated with pursuing federal civil actions. In addition, certain state laws govern the privacy and security of health information in certain circumstances, some of which are more stringent than HIPAA and many of which differ from each other in significant ways and may not have the same effect, thus complicating compliance efforts. Failure to comply with these laws, where applicable, can result in the imposition of significant civil and/or criminal penalties.
Physician Payments Sunshine Act.     The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively, PPACA, imposed, among other things, new annual reporting requirements for device manufacturers for certain payments and "transfers of value" provided to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members. Failure to submit timely, accurately, and completely the required information for all payments, transfers of value and ownership or investment interests may result in civil monetary penalties of up to an aggregate of $150,000 per
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year and up to an aggregate of $1 million per year for "knowing failures." Device manufacturers were required to begin collecting data on August 1, 2013 and submit reports on aggregate payment data to the government for the first reporting period (August 1, 2013 — December 31, 2013) by March 31, 2014, and were required to report detailed payment data for the first reporting period and submit legal attestation to the completeness and accuracy of such data by June 30, 2014. Thereafter, device manufacturers must submit reports by the 90 th  day of each subsequent calendar year. CMS will release the data on a public website by September 30, 2014.
In addition, there has been a recent trend of increased federal and state regulation of payments and other transfers of value provided to healthcare professionals and entities. Similar to the federal law, certain states also have adopted marketing and/or transparency laws relevant to device manufacturers, some of which are broader in scope. Certain states, such as California and Connecticut, mandate that device manufacturers implement compliance programs. Other states, such as Massachusetts and Vermont, impose restrictions on device manufacturer marketing practices and require tracking and reporting of gifts, compensation, and other remuneration to healthcare professionals and entities. The need to build and maintain a robust compliance program with different compliance and/or reporting requirements increases the possibility that a healthcare company may violate one or more of the requirements, resulting in fines and penalties
Additional State Healthcare Laws.     Many states have also adopted some form of each of the aforementioned laws, some of which may be broader in scope and may apply regardless of payor. Nevertheless, a determination of liability under such laws could result in fines and penalties and restrictions on our ability to operate in these jurisdictions.
Additionally, as some of these laws are still evolving, we lack definitive guidance as to the application of certain key aspects of these laws as they relate to our arrangements with providers with respect to patient training. We cannot predict the final form that these regulations will take or the effect that the final regulations will have on us. As a result, our provider and training arrangements may ultimately be found to be not in compliance with applicable laws.
United States Foreign Corrupt Practices Act.     The United States Foreign Corrupt Practices Act, or FCPA, prohibits United States corporations and their representatives from offering, promising, authorizing or making corrupt payments, gifts or transfers to any foreign government official, government staff member, political party or political candidate in an attempt to obtain or retain business abroad. The scope of the FCPA would include interactions with certain healthcare professionals in many countries.
International Regulation.     We may evaluate international expansion opportunities in the future. International sales of medical devices are subject to local government regulations, which may vary substantially from country to country. The time required to obtain approval in another country may be longer or shorter than that required for FDA approval, and the requirements may differ. There is a trend towards harmonization of quality system standards among the European Union, United States, Canada and various other industrialized countries.
The primary regulatory body in Europe is that of the European Union, which includes most of the major countries in Europe. Other countries, such as Switzerland, have voluntarily adopted laws and regulations that mirror those of the European Union with respect to medical devices. The European Union has adopted numerous directives and standards regulating the design, manufacture, clinical trials, labeling and adverse event reporting for medical devices. Devices that comply with the requirements of a relevant directive will be entitled to bear the CE conformity marking, indicating that the device conforms to the essential requirements of the applicable directives and, accordingly, can be
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commercially distributed throughout Europe. The method of assessing conformity varies depending on the class of the product, but normally involves a combination of self-assessment by the manufacturer and a third party assessment by a "Notified Body." This third-party assessment may consist of an audit of the manufacturer's quality system and specific testing of the manufacturer's product. An assessment by a Notified Body of one country within the European Union is required in order for a manufacturer to commercially distribute the product throughout the European Union. Additional local requirements may apply on a country-by-country basis. Outside of the European Union, regulatory approval would need to be sought on a country-by-country basis in order for us to market our products.
Coverage and Reimbursement; Healthcare Reform.     Sales of our products depend, in part, on the extent to which the procedures using our products will be covered by third-party payors, such as government health care programs, commercial insurance and managed healthcare organizations. Breast augmentation procedures are generally performed on a cash-pay basis and are not covered by third-party payors. In contrast, breast reconstruction procedures may be covered by third-party payors, but such third-party payors are increasingly limiting coverage and reducing reimbursements for medical products and services. In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-containment programs, including price controls, restrictions on coverage and reimbursement. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit our net sales and results.
By way of example, in the United States, the recent implementation of PPACA is an example that has the potential to substantially change healthcare financing and delivery by both governmental and private insurers, and significantly impact the pharmaceutical and medical device industries. The PPACA imposed, among other things, a new federal excise tax of 2.3% on certain entities that manufacture or import medical devices for sale in the United States, established an annual and implemented payment system reforms including a national pilot program on payment bundling to encourage hospitals, physicians and other providers to improve the coordination, quality and efficiency of certain healthcare services through bundled payment models.
In addition, other legislative changes have been proposed and adopted since the PPACA was enacted. On August 2, 2011, President Obama signed into law the Budget Control Act of 2011, which, among other things, created the Joint Select Committee on Deficit Reduction to recommend to Congress proposals in spending reductions. The Joint Select Committee did not achieve a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, triggering the legislation's automatic reduction to several government programs. This includes reductions to Medicare payments to providers of 2% per fiscal year, which went into effect on April 1, 2013, and will stay in effect through 2024 unless Congressional action is taken. On January 2, 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, which, among other things, further reduced Medicare payments to several providers, including hospitals.
We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our products or additional pricing pressure.
Intellectual Property
Our intellectual property portfolio consists primarily of trademarks and trade secrets and does not presently consist of any patents or patent applications. We do not currently intend to file any patent applications in the United States or elsewhere.
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Our trademark portfolio consists of five registered U.S. trademarks and six pending Canadian trademark applications. We maintain a program to protect our marks and will institute legal action where necessary to prevent others from using and registering confusingly similar marks.
In addition, to protect our trade secrets and other intellectual property rights, we have entered into confidentiality agreements with third parties, and confidential information and invention assignment agreements with employees, consultants and advisors. However, there can be no assurance that these measures will be successful in any given case and third parties may still obtain this information or we may be unable to protect our rights.
Employees
As of September 30, 2014, we had 93 full-time employees. None of our employees are represented by a collective bargaining agreement, and we have never experienced any work stoppage. We believe we have good relations with our employees.
Facilities
Our headquarters located in Santa Barbara, California is approximately 20,000 square feet. The term of the lease for our headquarters expires in February 2020. We also lease warehouse space located in Santa Barbara, California, which is approximately 10,000 square feet. The term of the lease for our warehouse expires in January 2016.
Legal Proceedings
From time to time, we may be involved in various disputes and litigation matters that arise in the ordinary course of business. We are currently not a party to any material legal proceedings.
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 MANAGEMENT
Executive Officers and Directors
The following table sets forth information concerning our executive officers and directors as of October 1, 2014:

					
Name 	 	Age	 	Position(s)	
Executive Officers	 	 	 	 	
Hani Zeini	 	50	 	Director, Founder, President and Chief Executive Officer	
Matthew Pigeon	 	46	 	Chief Financial Officer and Treasurer	
Charles Huiner	 	43	 	Chief Strategy and Corporate Development Officer	
Joel Smith	 	45	 	General Counsel, Secretary and Chief Compliance Officer	
Non-Employee Directors	 	 	 	 	
Nicholas Simon (1)	 	60	 	Chairman of the Board of Directors	
Rishi Gupta (2)	 	37	 	Director	
Timothy Haines (3)	 	57	 	Director	
R. Scott Greer (1)(2)	 	55	 	Director	
Kevin O'Boyle (2)(3)	 	58	 	Director	
Jeffrey Nugent (1)(3)	 	68	 	Director	

(1)
Member of the compensation committee.
(2)
Member of the nominating and corporate governance committee.
(3)
Member of the audit committee.
Executive Officers
Hani Zeini is our founder. He has been a director and our President and Chief Executive Officer since 2006. He previously served as Executive Vice President of Inamed Aesthetics from 2001 to 2006, as Chief Operating Officer at Acurian, Inc. in 2001 and as President and Chief Executive Officer at Pharmasmarket.com from 2000 to 2001. Prior to that, Mr. Zeini spent 12 years at Dupont Pharmaceuticals Company in various roles, including as Senior Vice President of Global Health Systems. Mr. Zeini holds a B.S. in electrical and computer engineering from the University of Miami and completed the Stanford Executive Program at Stanford University, Graduate School of Business. Mr. Zeini serves as a trustee on the Laguna Blanca School Board of Trustees. He also serves on the Advisory Board for the Image Reborn Foundation. We believe Mr. Zeini brings valuable expertise and perspective to our board in his capacity as the President and Chief Executive Officer of the Company, and his extensive experience and thorough knowledge of our industry qualifies him to serve as one of our directors.
Matthew Pigeon has served as our Chief Financial Officer and Treasurer since 2010. Prior to joining the Company, Mr. Pigeon served as an independent consultant in 2009 and Chief Financial Officer and Chief Strategy Officer for The FRS Company from 2006 to 2008. Before The FRS Company, Mr. Pigeon was a Principal at Banc of America Securities/Montgomery Securities and served in both the equity capital markets and investment banking groups from 1998 to 2004. Mr. Pigeon received his B.A. from the University of California at Santa Barbara and his M.B.A. from the University of Southern California. Mr. Pigeon currently serves on the board of directors for the non-profit Elings Park, Santa Barbara.
Charles Huiner has served as our Chief Strategy and Corporate Development Officer since February 2014. Prior to joining the Company, Mr. Huiner served as the Vice President of Business Development and Marketing for InTouch Health from 2007 to 2014. Before InTouch Health, Mr. Huiner held
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various positions in the medical aesthetics industry, including as Senior Director of Corporate Development and Strategy for Inamed Corporation from 2003 to 2006 and Vice President of Corporate Development for Isolagen, Inc. from 2006 to 2007. Mr. Huiner developed extensive transactional and strategy experience serving in corporate finance and M&A capacities at Security Capital Group (now GE Capital), Prologis Trust and NatWest Bancorp. Mr. Huiner holds a B.A. in history and American studies from Williams College and earned his M.B.A. in marketing and finance from Northwestern University's Kellogg School.
Joel Smith joined the Company in June 2007 and currently serves as our General Counsel, Secretary and Chief Compliance Officer. In addition to those roles, he was our Treasurer and interim Chief Financial Officer from 2007 to 2009 and served as our Vice President of Corporate Development from 2007 to 2013. Prior to joining the Company, Mr. Smith served as the Vice President of Tavistock Life Sciences from 2004 to 2007 where he had broad responsibilities across a portfolio of privately held drug discovery and medical-device development companies. Mr. Smith had senior business development roles at Triad Therapeutics where he worked from 2001 to 2004 and at BioQ where he was the General Counsel from 2000 and 2001. Mr. Smith's experience in private and public equity financing transactions began as an associate at Brobeck, Phleger and Harrison in its business and technology group from 1997 to 2000. Mr. Smith holds a B.S. in economics and cellular and molecular biology from the University of Michigan and earned his M.B.A. from the University of Michigan Business School and his J.D. from the University of Michigan Law School.
Non-Employee Directors
Nicholas Simon has served as Chairman of the board since March 2012. Mr. Simon has been a Managing Director of Clarus Ventures, LLC, a venture capital firm focused on life sciences companies, since the firm's inception in 2005. Mr. Simon has been a General Partner of MPM BioVentures III, a healthcare venture capital fund, since 2001. From 2000 to 2001, Mr. Simon was Chief Executive Officer and Founder of Collabra Pharma, Inc., a pharmaceutical company. Prior to that, Mr. Simon served in various management positions at Genentech, Inc., including as Vice President of Business and Corporate Development. Mr. Simon has served on the board of directors of Achillion Pharmaceuticals, Inc. and Avanir Pharmaceuticals, Inc. and numerous private companies. He is also on the foundation board of the Gladstone Institute, a private not-for-profit research institute affiliated with the University of California, San Francisco. Mr. Simon received a B.S. in microbiology from the University of Maryland and earned his M.B.A. in marketing from Loyola University. We believe Mr. Simon's experience as a director advising several companies, as well as his significant financial and investment experience qualifies him to serve as one of our directors.
Rishi Gupta has served as a director of the Company since April 2008. Mr. Gupta is a Private Equity Partner at OrbiMed Advisors LLC, a healthcare asset management company. He has been employed by OrbiMed since 2004. From 1999 to 2000, Mr. Gupta served as a corporate finance analyst in healthcare investment banking at Raymond James & Associates. From 2000 to 2001, he served as Manager of Corporate Development at Veritas Medicine. Mr. Gupta has served as a director of ChemoCentryx and numerous private companies. Mr. Gupta received his A.B. in biochemical sciences from Harvard College and holds a J.D. from the Yale Law School. We believe Mr. Gupta is qualified to serve as one of our directors because of his extensive experience in venture capital and financial services and investing in life sciences companies and his service as a board member on many healthcare company boards.
Timothy Haines has served as a director of the Company since October 2013. Mr. Haines has been a partner at Abingworth, a life science and healthcare private investment firm, since 2005. Prior to that, Mr. Haines was chief executive of Astex Therapeutics Limited. Mr. Haines was with Astex
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Therapeutics Limited for more than five years and was a director of the company at it sale to Otsuka in October 2013. Previously, he was chief executive of two divisions of the publicly listed medical technology company, Datascope Corp. Prior to Datascope, he held a number of senior management positions in the United States and Europe. Mr. Haines currently serves as a director of Lombard Medical Technologies Inc. and Pixium Vision. He has served as a director of Astex Pharmaceuticals and Xcounter AB and numerous private companies. He is a former director of the Biotechnology Industry Association and currently sits on the Venture Committee of the British Venture Capital Association. Mr. Haines has a B.Sc. from Exeter University and an M.B.A. from INSEAD. We believe Mr. Haines' valuable experience gained from the executive positions he held at biotechnology and healthcare companies, as well as his experience as a director advising several companies, qualifies him to serve as one of our directors.
R. Scott Greer has served as a director of the Company since July 2014. Mr. Greer founded Numenor Ventures, LLC, a venture capital firm focused on life sciences companies, and has served as its Managing Director since June 2002. Prior to that, in 1996, Mr. Greer co-founded Abgenix, Inc., a company that specialized in the discovery, development and manufacture of human therapeutic antibodies, and from June 1996 through May 2002, he served as its Chief Executive Officer. He also served as a director of Abgenix from 1996 and chairman of the board from 2000 until the acquisition of Abgenix by Amgen, Inc. in April 2006. Prior to Abgenix's formation, Mr. Greer held senior management positions at Cell Genesys, Inc., a biotechnology company, initially as Chief Financial Officer and Vice President of Corporate Development and later as Senior Vice President of Corporate Development. Mr. Greer currently serves as the chairman of the board of Ablexis LLC and is a director of Auspex, Inc., StemCells, Inc. and Nektar Therapeutics. He previously served as chairman of the board of Sirna Therapeutics and as a director of Illumina, Inc., CV Therapeutics, Inc. and Affymax, Inc. He has also previously served on the board of numerous private companies. Mr. Greer received his B.A. in economics from Whitman College, earned his M.B.A. in business administration from Harvard University and was a certified public accountant. We believe Mr. Greer's significant financial, business and management expertise, coupled with his extensive experience as a director of multiple life science companies, qualifies him to serve as one of our directors.
Kevin O'Boyle has served as a director of the Company since July 2014. From December 2010 to July 2011, Mr. O'Boyle served as Senior Vice President and Chief Financial Officer at Advanced BioHealing, Inc. until it was acquired by Shire Plc. From early 2003 to September 2009, Mr. O'Boyle served as Chief Financial Officer of NuVasive, Inc. Mr. O'Boyle currently serves as a director of GenMark Diagnostics, Inc., Durata Therapeutics, Inc., Tornier N.V. and Zeltiq Aesthetics, Inc. Mr. O'Boyle received a B.S. in accounting from Rochester Institute of Technology and completed the Executive Management Program at the University of California at Los Angeles, John E. Anderson Graduate Business School. We believe Mr. O'Boyle is qualified to serve as one of our directors based on his financial and accounting expertise and his significant experience and familiarity with companies in the medical device and aesthetics industries.
Jeffrey Nugent has served as a director of the Company since July 2014. Mr. Nugent has been the Interim Chief Executive Officer of Biolase, Inc. since June 2014. Prior to that, Mr. Nugent was Founder, President and Chief Executive Officer of Precision Dermatology, Inc., a multi-channel skin care company that was acquired by Valeant Pharmaceuticals in February 2014. From 1999 to 2002, he served as the President and Chief Executive Officer of Revlon, Inc. and as Worldwide President and Chief Executive Officer of Neutrogena Corporation from 1995 to 1999. Mr. Nugent currently serves as a director of Biolase, Inc. and has previously served as a director of Precision Dermatology, Inc., Myoscience, Inc. and Merz Aesthetics, Inc. Mr. Nugent holds a B.S. in mathematics from St. Joseph's College and earned his M.B.A. in finance and marketing from Loyola University in Chicago. He served as an Artillery Officer in the United States Army. We believe Mr. Nugent is qualified to serve as one of
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our directors based on his valuable business and management experience as the Chief Executive Officer of several companies in the medical device and aesthetics industries.
Board Composition
Structure
Our business and affairs are managed under the direction of our board of directors. Upon completion of this offering, our board of directors will consist of seven members, six of whom will be independent. In accordance with our amended and restated certificate of incorporation to be filed in connection with this offering, immediately after this offering, our board of directors will be divided into three classes with staggered three-year terms. At each annual general meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors will be divided among the three classes as follows:
•
the Class I directors will initially consist of Messrs. Gupta and Nugent, and their terms will expire at the annual general meeting of stockholders to be held in 2015; 

•
the Class II directors will initially consist of Messrs. Simon and Haines, and their terms will expire at the annual general meeting of stockholders to be held in 2016; and 

•
the Class III directors will initially consist of Messrs. Zeini, O'Boyle and Greer, and their terms will expire at the annual general meeting of stockholders to be held in 2017.
We expect that additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.
The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change of control. See "Description of Capital Stock — Anti-Takeover Effects of Delaware Law and Our Certificate of Incorporation and Bylaws" for a discussion of other anti-takeover provisions found in our amended and restated certificate of incorporation and bylaws.
Director Independence
Our board of directors has undertaken a review of its composition, the composition of its committees and the independence of each director. Our board of directors has determined that, other than Mr. Zeini, by virtue of his position as Chief Executive Officer, none of our directors has a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each is "independent" as that term is defined under the applicable rules and regulations of the SEC and the listing requirements and rules of NASDAQ. Accordingly, a majority of our directors are independent, as required under applicable NASDAQ rules. In making this determination, our board of directors considered the current and prior 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. Under NASDAQ corporate governance standards, we are not a "controlled company" of which more than 50% of the voting power for the election of directors is held by an individual, group or another company.
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Leadership Structure of the Board
Our corporate governance guidelines specify that the positions of Chairman of the Board and Chief Executive Officer shall remain separate. Currently, Mr. Simon serves as Chairman of the Board. In his role as Chairman, Mr. Simon presides over the executive sessions of the board of directors in which Mr. Zeini does not participate and serves as a liaison to Mr. Zeini and management on behalf of the other members of the board of directors. Our board of directors has concluded that our current leadership structure is appropriate at this time. However, our board of directors will continue to periodically review our leadership structure and may make such changes in the future as it deems appropriate.
Role of Board in Risk Oversight Process
One of the key functions of our board of directors is informed oversight of our risk management process. The board of directors does not have a standing risk management committee, but rather administers this oversight function directly through the board of directors as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure and our audit committee has the responsibility to consider and discuss our major financial risk exposures and the steps our management has taken to monitor and control these exposures, including guidelines and policies to govern the process by which risk assessment and management is undertaken. The audit committee also monitors compliance with legal and regulatory requirements. Our nominating and corporate governance committee monitors the effectiveness of our corporate governance practices, including whether they are successful in preventing illegal or improper liability-creating conduct. Our compensation committee assesses and monitors whether any of our compensation policies and programs has the potential to encourage excessive risk-taking.
Board Committees
Audit Committee
Our audit committee consists of Messrs. O'Boyle, Haines and Nugent, each of whom has been determined to satisfy the SEC and NASDAQ independence requirements. Mr. O'Boyle serves as the chairperson of the committee. All members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and NASDAQ. Our board of directors has determined that each of Messrs. O'Boyle and Nugent is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the applicable rules and regulations of NASDAQ. The functions of the audit committee include, among other things:
•
evaluating the performance, independence and qualifications of our independent auditors and determining whether to retain our existing independent auditors or engage new independent auditors; 

•
reviewing and approving the engagement of our independent auditors to perform audit services and any permissible non-audit services; 

•
monitoring the rotation of partners of our independent auditors on our engagement team as required by law; 

•
prior to engagement of any independent auditor, and at least annually thereafter, reviewing relationships that may reasonably be thought to bear on their independence, and assessing and otherwise taking the appropriate action to oversee the independence of our independent auditor;
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•
reviewing our annual and quarterly financial statements and reports, including the disclosures contained under the caption "Management's Discussion and Analysis of Financial Condition and Results of Operations," and discussing the statements and reports with our independent auditors and management; 

•
reviewing with our independent auditors and management significant issues that arise regarding accounting principles and financial statement presentation and matters concerning the scope, adequacy and effectiveness of our financial controls; 

•
reviewing with management and our auditors any earnings announcements and other public announcements regarding material developments; 

•
establishing procedures for the receipt, retention and treatment of complaints received by us regarding financial controls, accounting or auditing matters and other matters; 

•
preparing the report that the SEC requires in our annual proxy statement; 

•
reviewing and providing oversight of any related-person transactions in accordance with our related person transaction policy and reviewing and monitoring compliance with legal and regulatory responsibilities, including our code of business conduct and ethics; 

•
reviewing our major financial risk exposures, including the guidelines and policies to govern the process by which risk assessment and risk management is implemented; 

•
reviewing on a periodic basis our investment policy; and 

•
reviewing and evaluating on an annual basis the performance of the audit committee and the audit committee charter.
Compensation Committee
Our compensation committee consists of Messrs. Nugent, Simon and Greer. Our board of directors has determined that each of the members of our compensation committee is a non-employee director, as defined in Rule 16b-3 promulgated under the Exchange Act, is an outside director, as defined pursuant to Section 162(m) of the Internal Revenue Code of 1986, as amended, or the Code, and satisfies NASDAQ independence requirements. Mr. Nugent serves as the chairperson of the committee. The functions of the compensation committee include, among other things:
•
reviewing, modifying and approving (or if it deems appropriate, making recommendations to the board of directors regarding) our overall compensation strategy and policies; 

•
making recommendations to the board of directors regarding the compensation and other terms of employment of our executive officers; 

•
reviewing and making recommendations to the board of directors regarding performance goals and objectives relevant to the compensation of our executive officers and assessing their performance against these goals and objectives; 

•
reviewing and approving (or if it deems it appropriate, making recommendations to the board of directors regarding) the equity incentive plans, compensation plans and similar programs advisable for us, as well as modifying, amending or terminating existing plans and programs; 

•
evaluating risks associated with our compensation policies and practices and assessing whether risks arising from our compensation policies and practices for our employees are reasonably likely to have a material adverse effect on us;
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•
reviewing and making recommendations to the board of directors regarding the type and amount of compensation to be paid or awarded to our non-employee board members; 

•
establishing policies with respect to votes by our stockholders to approve executive compensation to the extent required by Section 14A of the Exchange Act and, if applicable, determining our recommendations regarding the frequency of advisory votes on executive compensation; 

•
reviewing and assessing the independence of compensation consultants, legal counsel and other advisors as required by Section 10C of the Exchange Act; 

•
administering our equity incentive plans; 

•
establishing policies with respect to equity compensation arrangements; 

•
reviewing the competitiveness of our executive compensation programs and evaluating the effectiveness of our compensation policy and strategy in achieving expected benefits to us; 

•
reviewing and making recommendations to the board of directors regarding the terms of any employment agreements, severance arrangements, change in control protections and any other compensatory arrangements for our executive officers; 

•
reviewing with management and approving our disclosures under the caption "Compensation Discussion and Analysis" in our periodic reports or proxy statements to be filed with the SEC, to the extent such caption is included in any such report or proxy statement; 

•
preparing the report that the SEC requires in our annual proxy statement; and 

•
reviewing and evaluating on an annual basis the performance of the compensation committee and the compensation committee charter.
Nominating and Corporate Governance Committee
Our nominating and corporate governance committee consists of Messrs. Greer, Gupta and O'Boyle. Our board of directors has determined that each of the members of the committee satisfies the SEC and NASDAQ independence requirements. Mr. Greer serves as the chairperson of the committee. The functions of the nominating and corporate governance committee include, among other things:
•
identifying, reviewing and evaluating candidates to serve on our board of directors; 

•
determining the minimum qualifications for service on our board of directors; 

•
evaluating director performance on the board and applicable committees of the board and determining whether continued service on our board is appropriate; 

•
evaluating, nominating and recommending individuals for membership on our board of directors; 

•
evaluating nominations by stockholders of candidates for election to our board of directors; 

•
considering and assessing the independence of members of our board of directors; 

•
developing a set of corporate governance policies and principles and recommending to our board of directors any changes to such policies and principles; 

•
considering questions of possible conflicts of interest of directors as such questions arise; and
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•
reviewing and evaluating on an annual basis the performance of the nominating and corporate governance committee and the nominating and corporate governance committee charter.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee has at any time been one of our officers or employees. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers on our board of directors or compensation committee.
Code of Business Conduct and Ethics
In connection with this offering, we will adopt a code of business conduct and ethics that applies to all of our employees, officers and directors, including those officers responsible for financial reporting. Upon the completion of this offering, our code of business conduct and ethics will be made available on our website at www.sientra.com . We expect that any amendments to the code, or any waivers of its requirements, will be disclosed on our website or in public filings to the extent required by applicable SEC rules or exchange requirements.
Limitation on Liability and Indemnification Matters
Our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective upon the closing of this offering, limit our directors' and officers' liability to the fullest extent permitted under Delaware corporate law. Delaware corporate law provides that directors will not be personally liable to corporations and their stockholders for monetary damages for breaches of their fiduciary duties as directors, except for liability:
•
for any transaction from which the director derives an improper personal benefit; 

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

•
under Section 174 of the General Corporation Law of the State of Delaware (unlawful payment of dividends or redemption of shares); or 

•
for any breach of a director's duty of loyalty to the corporation or its stockholders.
If the General Corporation Law of the State of Delaware is amended to authorize corporate action further eliminating or limiting the personal liability of directors or officers, then the liability of our directors or officers shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended.
Delaware law and our amended and restated bylaws provide that we will, in certain situations, indemnify any person made or threatened to be made a party to a proceeding by reason of that person's former or present official capacity with us against judgments, penalties, fines, settlements and reasonable expenses. Any person is also entitled, subject to certain limitations, to payment or reimbursement of reasonable expenses (including attorneys' fees and disbursements) in advance of the final disposition of the proceeding.
In addition, we have entered, and intend to continue to enter, into separate indemnification agreements with our directors and executive officers. These agreements, among other things, require us to indemnify our directors and executive officers for certain expenses, including attorneys' fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or
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proceeding arising out of their services as one of our directors or executive officers or any other company or enterprise to which the person provides services at our request.
We maintain a directors' and officers' insurance policy pursuant to which our directors and officers are insured against liability for actions taken in their capacities as directors and officers. We believe that these provisions in our amended and restated certificate of incorporation and amended bylaws and these indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or control persons, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.
There is currently no pending material litigation or proceeding involving any of our directors, officers or employees for which indemnification is sought.
Director Compensation
We did not pay any compensation to our directors in 2013. However, we did reimburse all non-employee directors for travel and out-of-pocket expenses incurred in connection with their service on the board of directors, including attending board and committee meetings.
In July 2014, we entered into offer letters with Messrs. Greer, O'Boyle and Nugent in connection with their proposed appointment to our board of directors, and they were subsequently appointed to the board effective as of July 22, 2014. Pursuant to the terms of each of their offer letters, they are each entitled to receive a $35,000 annual cash retainer, to be paid in equal quarterly installments in arrears, beginning from their date of appointment. In addition, in connection with their appointment to the board, each of Messrs. Greer, O'Boyle and Nugent were awarded an option to purchase 9,090 shares of our common stock, which will vest in equal monthly installments over three years subject to continued service as a director.
Our board of directors also approved a non-employee director compensation policy in                  2014. This policy will become effective upon the closing of this offering. Under this policy, we will pay our non-employee directors a cash retainer for service on the board of directors and for service on each committee on which the director is a member. The chairman of each committee will receive higher retainers for such service. The fees paid to non-employee directors for service on the board of directors and for service on each committee of the board of directors on which the director is a member are as follows:

								
 	 	Member
Annual
Retainer	 	Chairman
Annual
Retainer	 	
Board of Directors	 	 $	35,000	 	 $	55,000	 	
Audit Committee	 	 	10,000	 	 	20,000	 	
Compensation Committee	 	 	7,500	 	 	15,000	 	
Nominating and Corporate Governance Committee	 	 	5,000	 	 	10,000	 	
In addition, following the completion of this offering, each non-employee director elected to our board of directors will, upon the date of his or her initial election or appointment to be a non-employee director, be granted an option to purchase a number of shares of common stock having a grant date fair value of $120,000, which will vest in equal monthly installments over three years subject to continued service as a director. Further, at the close of business on the date of each annual stockholder
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meeting following the initial public offering, each person who is then a non-employee director will be granted an option to purchase a number of shares of common stock having a grant date fair value of $75,000, which will vest in equal monthly installments over the 12-month period measured from the date of grant. In the discretion of the board of directors, the initial and annual director equity grants in any given year may also be awarded as a combination of options and restricted stock unit awards. All stock option or other equity awards to non-employee directors following the completion of this offering are expected to be made pursuant to the 2014 Plan. For additional information, see "Executive Compensation — 2014 Equity Incentive Plan."
We will also continue to reimburse our non-employee directors for reasonable travel and out-of-pocket expenses incurred in connection with attending our board of director and committee meetings.
The non-employee director compensation program is intended to provide a total compensation package that enables us to attract and retain qualified and experienced individuals to serve as directors and to align our directors' interests with those of our stockholders.
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 EXECUTIVE COMPENSATION
This narrative discussion of the compensation arrangements that apply to our named executive officers is intended to assist your understanding of, and to be read together with, the Summary Compensation Table and related disclosures set forth below.
Named Executive Officers
Our "named executive officers" include our principal executive officer and our two other most highly compensated executive officers. For 2013, our named executive officers were:
•
Hani Zeini, who currently serves as our President and Chief Executive Officer, as well as a member of our board of directors, and is our principal executive officer; 

•
Matthew Pigeon, who currently serves as our Chief Financial Officer and Treasurer, and is our principal financial officer; and 

•
Joel Smith, who currently serves as our General Counsel, Secretary and Chief Compliance Officer.

 Summary Compensation Table

																										
Name and principal position 	 	Year	 	Salary	 	Bonus	 	Stock
awards	 	Options	 	Non-equity
incentive
plan
compensation (1)	 	All other
compensation	 	Total	 	
Hani Zeini
 President and Chief Executive Officer	 	 	2013	 	 $	450,000	 	 	—	 	 	—	 	 	—	 	 $	350,000	 	 	—	 	 $	800,000	 	
Matthew Pigeon
 Chief Financial Officer and Treasurer	 	 	
2013	 	 	
309,984	 	 	
—	 	 	
—	 	 	
—	 	 	
125,000	 	 	
—	 	 	
434,984	 	
Joel Smith
 General Counsel, Secretary and Chief Compliance Officer	 	 	
2013	 	 	
280,000	 	 	
—	 	 	
—	 	 	
—	 	 	
120,000	 	 	
—	 	 	
400,000	 	

(1)
Amounts shown represent annual performance-based bonuses earned for 2013. For more information, see below under "— Compensation Elements — Annual Performance Bonus."
Compensation Elements
The executive compensation program for our named executive officers generally consists of a base salary, an annual performance bonus, equity-based awards and other benefits.
Base Salary
We pay base salaries to attract and retain key executives with the necessary experience for our future growth and success. Base salaries provide certainty to our named executive officers as to a fixed amount of their compensation. Base salaries reflect each executive officer's responsibility level, tenure with us, individual performance and business experience.
Annual Performance Bonus
Each of our executives is eligible to earn an annual performance-based cash bonus. The target bonus opportunity for each executive is generally set as a percentage of the executive's base salary. In 2013, the compensation committee established target 2013 financial milestones and other company and individual performance objectives, and the actual bonus amounts were determined in January 2014 based upon actual achievement with respect to those objectives. Accordingly, bonus payments reflected in the "Non-Equity Incentive Plan Compensation" column of the Summary Compensation Table above
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represent annual bonus payments paid in 2014 for 2013 performance up to an executive's target amount.
Equity-Based Awards
Our equity-based incentive awards are designed to align our interests with those of our employees and consultants, including our named executive officers. Our board of directors is responsible for approving equity grants. As of December 31, 2013, stock options were the only form of equity awards we granted to our named executive officers. Vesting of equity awards is tied to continuous service with us and serves as an additional retention measure. Our executives generally are awarded an initial new hire grant upon commencement of employment. Additional grants may occur periodically in order to specifically incentivize executives with respect to achieving certain corporate goals or to reward executives for exceptional performance.
Prior to this offering, we have granted all equity awards pursuant to the 2007 Plan. All options are granted with a per share exercise price equal to no less than the fair market value of a share of our common stock on the date of the grant of such award. Generally our stock option awards vest over a four-year period subject to the holder's continuous service to us. We expect that future equity awards will be granted to our named executive officers and other employees pursuant to the 2014 Plan. For additional information about the terms of our equity incentive plans, see below under "— Equity Incentive Plans."
Benefits
In addition, we offer a standard benefits package that we believe is necessary to attract and retain key executives. Our named executive officers are eligible to participate in our health and dental insurance benefit plans and flexible spending accounts on the same terms and conditions as are available to all other employees.
Agreements with our Named Executive Officers
Offer letter with Mr. Zeini.     We entered into an initial offer letter with Mr. Zeini on June 15, 2007, which governed the terms of Mr. Zeini's employment with us through 2013 and provided for an annual base salary of $400,000 and an annual bonus of up to 50% of annual base salary based on his achievement of performance objectives and our achievement of certain pre-established corporate objectives. The offer letter also provided for an initial option grant and, contingent on our achievement of certain research and development milestones, an additional option grant, both of which were vested in full as of December 31, 2013. Additionally, we agreed to recommend to the compensation committee an increase in Mr. Zeini's base salary and to reconsider his severance benefits at such time as we achieve $150 million in sales based on a 12-month trailing average. Under the terms of Mr. Zeini's original offer letter, he was entitled to the following severance benefits in the event of a termination by us without "cause" (as defined in the offer letter): (i) continued payment of his annualized base salary plus the amount of Mr. Zeini's annual bonus for the year preceding the termination date, for twelve months, (ii) all unvested options granted under the 2007 Equity Incentive Plan would immediately vest and become exercisable and (iii) continued participation in medical or dental health plans provided by us for up to twelve months beginning on the termination date.
We entered into an employment agreement with Mr. Zeini on October 15, 2014 that governs the current terms of his employment with us. Pursuant to the agreement, Mr. Zeini is entitled to an annual base salary of $462,250, and is eligible to receive an annual target performance bonus of up to 50% of his base salary, as determined by our board of directors. Upon the completion of this offering, Mr. Zeini's annual performance bonus target will increase to 65%. Mr. Zeini is additionally entitled to
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certain severance benefits pursuant to his agreement, the terms of which are described below under "— Potential Payments Upon Termination or Change of Control."
Offer letter with Mr. Pigeon.     We entered into an initial offer letter with Mr. Pigeon on December 14, 2009, which governed his compensation during 2013 and provided for an initial annual base salary of $275,000 and an annual bonus of up to 30% of his annual base salary based on his achievement of performance objectives and our achievement of certain pre-established corporate objectives. The offer letter also provided for an initial option grant. Mr. Pigeon was not entitled to any severance benefits under the terms of his original offer letter.
We entered into an employment agreement with Mr. Pigeon on October 15, 2014 that governs the current terms of his employment with us. Pursuant to the agreement, Mr. Pigeon is entitled to an annual base salary of $313,733, and is eligible to receive an annual target performance bonus of up to 30% of his base salary, as determined by our board of directors. Upon the completion of this offering, Mr. Pigeon's annual performance bonus target will increase to 45%. Mr. Pigeon is additionally entitled to certain severance benefits pursuant to his agreement, the terms of which are described below under "— Potential Payments Upon Termination or Change of Control."
Offer letter with Mr. Smith.     We entered into an initial offer letter with Mr. Smith on May 25, 2007, which governed his compensation during 2013 and provided for an initial annual base salary of $250,000 and an annual bonus of up to 30% of his annual base salary based on his achievement of performance objectives and our achievement of certain pre-established corporate objectives. The offer letter also provided for an initial option grant. Mr. Smith was not entitled to any severance benefits under the terms of his original offer letter.
We entered into an employment agreement with Mr. Smith on October 15, 2014 that governs the current terms of his employment with us. Pursuant to the agreement, Mr. Smith is entitled to an annual base salary of $287,000, and is eligible to receive an annual target performance bonus of up to 30% of his base salary, as determined by our board of directors. Upon the completion of this offering, Mr. Smith's annual performance bonus target will increase to 45%. The employment agreement also provides for reimbursement of Mr. Smith's commuting costs. Mr. Smith is additionally entitled to certain severance benefits pursuant to his agreement, the terms of which are described below under "— Potential Payments Upon Termination or Change of Control."
Potential Payments Upon Termination or Change of Control
Our board of directors has approved severance arrangements with each of our named executive officers, as well as with all of our other executive officers, as documented in their employment agreements with us. The board of directors believes it is important to provide our named executive officers with severance benefits under limited circumstances in order to provide them with enhanced financial security and sufficient incentive and encouragement to remain employed by us. The receipt of any termination-based payments or benefits by our named executive officers summarized below is subject to the executive's execution and the effectiveness of a release of claims against us.
Mr. Zeini
In the event Mr. Zeini's employment is terminated by us without cause, he will be entitled to receive the following benefits:
•
a lump-sum severance payment equal to the sum of twelve months of his then-current base salary plus 100% of his target bonus paid in the prior year; 

•
up to twelve months of company-paid health insurance premiums; and
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•
vesting of his then-unvested equity awards to the extent of the number of shares that would have vested during the twelve months following termination of employment had his employment not terminated.
If Mr. Zeini's employment is terminated by us without cause or he resigns for good reason (as defined in his employment agreement) on or within twelve months following a change of control of Sientra, then all of his then-unvested equity awards held as of the termination date will immediately vest and, if applicable, become exercisable upon such termination or resignation. In addition, if unvested Sientra equity awards are not assumed by an acquiror in a change of control, then Mr. Zeini will be entitled to receive full acclerated vesting of such awards effective as of the consummation of such transaction.
Mr. Pigeon and Mr. Smith
In the event Mr. Pigeon or Mr. Smith's employment is terminated by us without cause, or such executive resigns for good reason (as defined in the applicable employment agreement) on or within twelve months following a change of control of Sientra, then such executive will be entitled to receive the following benefits:
•
cash severance in the form of continuation of his then-current base salary for nine months; 

•
up to nine months of company-paid health insurance premiums; and 

•
100% accelerated vesting of all unvested equity awards held as of the termination date.
Outstanding Equity Awards at Fiscal Year End
The following table sets forth information about the outstanding equity awards held by each of our named executive officers as of December 31, 2013.

																				
 	 	 	 	 	 	Number of Securities
Underlying
Unexercised Options	 	 	 	 	 	
 	 	 	 	Vesting
Commencement
Date			 	Exercise
Price ($)	 	Expiration
Date	 	
Name 	 	Grant Date			 	Exercisable	 	Unexercisable					 	
Hani Zeini	 	 	6/15/2007	 	 	4/4/2007	 	 	335,114	 	 	—	(1)(4)	 	1.65	 	 	6/14/2017	 	
	 	 	1/15/2009	 	 	4/4/2007	 	 	111,704	 	 	—	(2)(4)	 	2.34	 	 	1/14/2019	 	
	 	 	4/19/2012	 	 	3/9/2012	 	 	47,727	 	 	61,363	(1)(4)	 	3.99	 	 	4/18/2022	 	
Matthew Pigeon	 	 	
1/1/2010	 	 	
1/1/2010	 	 	
71,090	 	 	
—	
(3)(4)	 	
2.34	 	 	
1/1/2020	 	
	 	 	4/19/2012	 	 	3/9/2012	 	 	17,417	 	 	20,582	(3)(4)	 	3.99	 	 	4/18/2022	 	
Joel Smith	 	 	
6/19/2007	 	 	
6/1/2007	 	 	
38,545	 	 	
—	
(3)(4)	 	
1.65	 	 	
6/18/2017	 	
	 	 	1/15/2009	 	 	1/15/2009	 	 	16,000	 	 	—	(3)(4)	 	2.34	 	 	1/14/2019	 	
	 	 	4/19/2012	 	 	3/9/2012	 	 	12,727	 	 	16,363	(3)(4)	 	3.99	 	 	4/18/2022	 	

(1)
The shares subject to the option vest over a four year period, with approximately 1/48 th  of the shares vesting each month following the vesting commencement date, subject to continued service with us through each vesting date.

(2)
The shares subject to the option vested as follows: 48,870 were vested as of the grant date, and remainder vested in equal monthly installments over 28 months, subject to continued service with us through each vesting date.

(3)
The shares subject to the option vest over a four-year period as follows: 25% of the shares underlying the options vest on the one-year anniversary of the vesting commencement date and thereafter approximately 1/48 th  of the shares vest each month, subject to continued service with us through each vesting date.

(4)
Option is subject to accelerated vesting upon a qualifying termination of the executive's employment with us, as described under "— Potential Payments and Benefits upon Termination or Change in Control."
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Equity Incentive Plans
Our board of directors and stockholders previously adopted the 2007 Plan. Our board of directors and our stockholders have also approved the 2014 Plan and the ESPP.
As of July 31, 2014, the number of shares reserved for issuance, number of shares issued, number of shares underlying outstanding stock options and number of shares remaining available for future issuance under the 2007 Plan is set forth in the table below. The table below also reflects the shares associated with the 2014 Plan and the ESPP which will become effective upon the pricing of the offering. Our board of directors has determined not to make any further awards under the 2007 Plan following the closing of this offering.

														
Name of Plan 	 	Number of Shares
Reserved for
Issuance	 	Number of Shares
Issued	 	Number of
Shares
Underlying
Outstanding
Options	 	Number of Shares
Remaining
Available for
Future Issuance	 	
2007 Equity Incentive Plan	 	 	1,690,448	 	 	9,346	 	 	1,635,936	 	 	—	(1)	
2014 Equity Incentive Plan	 	 	1,027,500	 	 	—	 	 	—	 	 	1,027,500	 	
2014 Employee Stock Purchase Plan	 	 	255,500	 	 	—	 	 	—	 	 	255,500	 	

(1)
Effective as of the closing of this offering, our board of directors has determined that no further awards shall be issued from the 2007 Plan.
The following description of each of our stock incentive plans is qualified by reference to the full text of those plans, which are filed as exhibits to the registration statement of which this prospectus is a part.
2007 Equity Incentive Plan
The 2007 Plan was approved by our board of directors and our stockholders in April 2007, and was most recently amended in October 21, 2011.
Our 2014 Plan will become effective upon the date of this prospectus. As a result, we will not grant any additional options under the 2007 Plan following that date. However, any outstanding options granted under the 2007 Plan will remain outstanding, subject to the terms of our 2007 Plan and stock option agreements, until such outstanding options are exercised or until they terminate or expire by their terms.
Authorized Shares.     We have reserved an aggregate of 1,690,448 shares of our common stock for issuance under the 2007 Plan. This number is subject to adjustment in the event of a recapitalization, stock split, reclassification, stock dividend or other change in our capitalization. Shares of common stock underlying awards granted under the 2007 Plan that can no longer be exercised, as well as shares that are reacquired by us, are currently added back to the shares of common stock available for issuance under the 2007 Plan.
Types of Awards.     The 2007 Plan permits us to make grants of options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code, or ISOs, and options that do not so qualify, which are referred to as nonstatutory stock options, or NSOs. ISOs may be granted only to our employees. NSOs may be issued to employees, officers, directors, consultants and other service providers of us and our affiliates. The 2007 Plan also permits us to make grants of restricted stock, however to date we have only granted options under the 2007 Plan. Restricted stock awards may be issued to employees, officers, non-employee directors, consultants and other service providers of us and our affiliates.
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Plan Administration.     Our board of directors, or a duly authorized committee of our board of directors, administers our 2007 Plan. Our board of directors may also delegate to one or more of our officers the authority to designate employees (other than officers) and consultants to receive awards under the 2007 Plan, subject to guidelines approved by our board of directors. Subject to the terms of the 2007 Plan, our board of directors has the authority to make all determinations regarding awards granted under the 2007 Plan, to interpret the plan, to prescribe and amend rules relating to it, and make all determinations necessary or advisable relating to the 2007 Plan. Any determinations made in good faith will be binding on all persons.
Corporate Transactions.     Our 2007 Plan provides that in the event of a merger or consolidation of Sientra into another entity, or the sale of substantially all of our assets, collectively an acquisition, our board of directors has the authority to provide for accelerated vesting if an awardholder should subsequently terminate following such transaction. The 2007 Plan otherwise provides that options which are assumed in connection with an acquisition will be appropriately adjusted as to the number and class of securities and the exercise price.
Transferability.     A participant may not transfer options awarded under our 2007 Plan other than by will, the laws of descent and distribution, or as otherwise provided under our 2007 Plan.
Plan Amendment or Termination.     Our board of directors may amend, suspend or terminate the 2007 Plan at any time, subject to compliance with applicable law, provided that provided that such action does not impair the existing rights of any participant without such participant's consent. Our board of directors may also amend, modify or terminate any outstanding award, provided that no amendment to an award may substantially affect or impair the rights of a participant under any awards previously granted without his or her consent, subject to certain exceptions. No awards may be granted under the 2007 Plan after the date that is 10 years from the earlier of date the 2007 Plan was approved by our board of directors or our stockholders.
2014 Equity Incentive Plan
Our board of directors adopted our 2014 Equity Incentive Plan, or 2014 Plan, in July 2014, and our stockholders approved the 2014 Plan in October 2014. The 2014 Plan is the successor to our 2007 Plan. As of date of this prospectus, no further grants will be made under our 2007 Plan.
Authorized Shares.     The maximum number of shares of our common stock that may be issued under our 2014 Plan is 1,027,500. Additionally, the number of shares of our common stock reserved for issuance under our 2014 Plan will automatically increase on January 1 of each year for a period of up to 10 years, beginning on January 1, 2015 and ending on and including January 1, 2024, by 4% of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our board of directors. The maximum number of shares of our common stock that may be issued upon the exercise of ISOs under our 2014 Plan is 3,082,500.
Shares subject to stock awards granted under our 2014 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, do not reduce the number of shares available for issuance under our 2014 Plan. Additionally, shares issued pursuant to stock awards under our 2014 Plan that we repurchase or that are forfeited, as well as shares used to pay the exercise price of a stock award or to satisfy the tax withholding obligations related to a stock award, become available for future grant under our 2014 Plan.
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Types of Awards.     The 2014 Plan provides for the grant of ISO, NSOs, stock appreciation rights, restricted stock awards, restricted stock unit awards and other forms of stock awards, or collectively, stock awards, all of which may be granted to employees, including officers, non-employee directors and consultants of us and our affiliates. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to non-employee directors and consultants.
Plan Administration.     Our board of directors, or a duly authorized committee of our board of directors, will administer our 2014 Plan. Our board of directors may also delegate to one or more of our officers the authority to (i) designate employees (other than officers) and consultants to receive specified stock awards, and (ii) determine the number of shares subject to such stock awards. Subject to the terms of our 2014 Plan, the board of directors has the authority to determine the terms of awards, including recipients, the exercise, purchase or strike price of stock awards, if any, the number of shares subject to each stock award, the fair market value of a share of our common stock, the vesting schedule applicable to the awards, together with any vesting acceleration, and the form of consideration, if any, payable upon exercise or settlement of the award and the terms of the award agreements for use under our 2014 Plan.
The board of directors has the power to modify outstanding awards under our 2014 Plan. The board of directors has the authority to reprice any outstanding option or stock appreciation right, cancel any outstanding stock award in exchange for new stock awards, cash or other consideration, or take any other action that is treated as a repricing under generally accepted accounting principles, with the consent of any adversely affected participant.
Section 162(m) Limits.     At such time as necessary for compliance with Section 162(m) of the Code, no participant may be granted stock awards that are intended to comply with Section 162(m) of the Code covering more than 1,000,000 shares of our common stock under our 2014 Plan during any calendar year pursuant to stock options, stock appreciation rights and other stock awards whose value is determined by reference to an increase over an exercise price or strike price of at least 100% of the fair market value of our common stock on the date of grant. Additionally, no participant may be granted in a calendar year a performance stock award covering more than 1,000,000 shares of our common stock or a performance cash award having a maximum value in excess of $1,000,000 under our 2014 Plan. These limitations are intended to give us the flexibility to grant performance-based stock and cash awards under the 2014 Plan that will not be subject to the $1,000,000 annual limitation on the income tax deductibility imposed by Section 162(m) of the Code.
Changes to Capital Structure.     In the event that there is a specified type of change in our capital structure, such as a stock split or recapitalization, appropriate adjustments will be made to (a) the class and maximum number of shares reserved for issuance under the 2014 Plan, (b) the class and maximum number of shares that may be issued upon the exercise of ISOs and (c) the class and number of shares and exercise price, strike price, or purchase price, if applicable, of all outstanding stock awards.
Corporate Transactions.     Our 2014 Plan provides that in the event of certain specified significant corporate transactions, as defined under our 2014 Plan, each outstanding award will be treated as the board of directors determines. The board of directors may (i) arrange for the assumption, continuation or substitution of a stock award by a successor corporation; (ii) arrange for the assignment of any reacquisition or repurchase rights held by us to a successor corporation; (iii) accelerate the vesting, in whole or in part, of the stock award and provide for its termination prior to the transaction; (iv) arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by us; or (v) cancel or arrange for the cancellation of the stock award prior to the transaction in exchange for a
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cash payment, if any, determined by the board. The board of directors is not obligated to treat all stock awards or portions of stock awards, even those that are of the same type, in the same manner.
Transferability.     A participant may not transfer stock awards under our 2014 Plan other than by will, the laws of descent and distribution, or as otherwise provided under our 2014 Plan.
Plan Amendment or Termination.     Our board of directors may amend, suspend, or terminate our 2014 Plan, at any time, subject to compliance with applicable law. Our board of directors may also amend, modify or terminate any outstanding award, provided that no amendment to an award may substantially affect or impair the rights of a participant under any awards previously granted without his or her written consent, subject to certain exceptions. No awards may be granted after the tenth anniversary of the date our board of directors adopted our 2014 Plan. No stock awards may be granted under our 2014 Plan while it is suspended or after it is terminated.
2014 Employee Stock Purchase Plan
Our board of directors adopted our 2014 Employee Stock Purchase Plan, or our ESPP, in July 2014, and our stockholders approved the ESPP in October 2014. Our ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Code.
Authorized Shares.     The maximum aggregate number of shares of our common stock that may be issued under our ESPP is 255,500 shares. Additionally, the number of shares of our common stock reserved for issuance under our ESPP will increase automatically each year for a period of up to 10 years, beginning on January 1, 2015 and continuing through and including January 1, 2024, by the lesser of (i) 1.0% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year; (ii) 3,000,000 shares of common stock; or (iii) such lesser number as determined by our board of directors. The stock purchasable under the ESPP will be shares of authorized but unissued or required common stock, including shares repurchased by the Company in the open market. Shares subject to purchase rights granted under our ESPP that terminate without having been exercised in full will be available for grant under our ESPP.
Plan Administration.     Our board of directors will administer our ESPP. Our board of directors may delegate authority to administer our ESPP to our compensation committee. The administrator may approve offerings with a duration of not more than 27 months, and may specify one or more shorter purchase periods within each offering. Each offering will have one or more purchase dates on which shares of our common stock will be purchased for the employees who are participating in the offering. The administrator, in its discretion, will determine the terms of offerings under our ESPP including determining which of our designated affiliates will be eligible to participate in the 423 component of our ESPP and which of our designated affiliates will be eligible to participate in the non-423 component of our ESPP.
Eligibility.     Our employees, including executive officers, may have to satisfy one or more of the following service requirements before participating in our ESPP, as determined by the administrator: (i) customary employment for more than 20 hours per week and more than five months per calendar year, or (ii) continuous employment for a minimum period of time, not to exceed two years. An employee may not be granted rights to purchase stock under our ESPP if such employee (i) immediately after the grant would own stock possessing 5% or more of the total combined voting power or value of our common stock, or (ii) holds rights to purchase stock under our ESPP that would accrue at a rate that exceeds $25,000 worth of our stock for each calendar year that the rights remain outstanding.
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Purchase rights and purchase price.     Our ESPP permits participants to purchase shares of our common stock through payroll deductions or other methods with up to 15% of their earnings. The purchase price of the shares will be not less than 85% of the lower of the fair market value of our common stock on the first day of an offering or on the date of purchase.
Transferability.     A participant may not transfer purchase rights under our ESPP other than by will, the laws of descent and distribution, or as otherwise provided under our ESPP.
Corporate Transactions.     In the event of a specified corporate transaction, such as a merger or change in control, a successor corporation may assume, continue or substitute each outstanding purchase right. If the successor corporation does not assume, continue or substitute for the outstanding purchase rights, the offering in progress may be shortened and a new exercise date will be set, so that the participants' purchase rights can be exercised and terminate immediately thereafter.
Plan Amendment or Termination.     Our board of directors has the authority to amend, suspend or terminate our ESPP, at any time and for any reason. Any benefits, privileges, entitlements and obligations under any outstanding purchase rights granted before an amendment, suspension or termination of the ESPP will not be materially impaired except (i) with the participant's consent, (ii) to comply with any laws, listing requirements, or regulations, or (iii) to obtain or maintain favorable tax, listing, or regulatory treatment.
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 CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The following includes a summary of transactions since January 1, 2011 to which we have been a party, in which the amount involved in the transaction exceeded $120,000, and in which any of our directors, executive officers or, to our knowledge, beneficial owners of more than 5% of our capital stock or any member of the immediate family of any of the foregoing persons had or will have a direct or indirect material interest, other than equity and other compensation, termination, change of control and other arrangements, which are described elsewhere in this prospectus.
Series C Preferred Stock Financing
In March 2012, we entered into a Series C preferred stock purchase agreement, or the Series C purchase agreement, pursuant to which we issued and sold to investors an aggregate of 12,183,690 shares of our Series C preferred stock, at a purchase price of $5.335 per share, for an aggregate purchase price of approximately $65.0 million.
The participants in this preferred stock financing included the following holders of more than 5% of our capital stock or entities affiliated with them. The following table sets forth the aggregate number of shares of Series C preferred stock issued to these related parties in this preferred stock financing:

					
Participants 	 	Shares of Series C
Preferred Stock	 	
Greater than 5% stockholders	 	 	 	 	
Abingworth Bioventures V LP (1)	 	 	4,686,035	 	
OrbiMed Private Investments III, LP (2)	 	 	2,811,621	 	
Clarus Lifesciences I, L.P. 	 	 	2,811,621	 	
Goldman Sachs Private Equity Concentrated Healthcare Funds Offshore Holding, L.P. (3)	 	 	810,995	 	
Teachers Insurance and Annuity Association of America	 	 	1,063,418	 	

(1)
Includes 2,343,018 shares of Series C preferred stock issued to Abingworth Bioventures V Co-Invest Growth Equity Fund LP.

(2)
Includes 26,252 shares of Series C preferred stock issued to OrbiMed Associates III, LP.

(3)
Includes: (i) 133,075 shares of Series C preferred stock issued to Private Equity Partners 2000 Direct Investment Fund LP, (ii) 230,228 shares of Series C preferred stock issued to Private Equity Partners 2000 LP, (iii) 129,954 shares of Series C preferred stock issued to Private Equity Partners 2000 Offshore Holdings LP, (iv) 38,989 shares of Series C preferred stock issued to Private Equity Partners 2002 Direct Investment Fund LP and (v) 172,780 shares of Series C preferred stock issued to Private Equity Partners 2002 Offshore Holdings LP.
Certain of our directors and executive officers have affiliations with the investors that participated in the preferred stock financing described above, as indicated in the table below:

			
Directors 	 	Principal Stockholder	
Nicholas Simon	 	Clarus Lifesciences I, L.P.	

Rishi Gupta	
 	
OrbiMed Private Investments III, LP and affiliated entities	

Timothy Haines	
 	
Abingworth Bioventures V LP and affiliated entities	
Investor Agreements
In connection with our preferred stock financing, we entered into an amended and restated investor rights agreement with certain holders of our preferred stock and certain holders of our common stock, including all of the holders of more than 5% of our capital stock or entities affiliated with them,
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containing information rights, rights of first refusal and certain registration rights which are more fully described below in "Description of Capital Stock — Registration Rights." All registration rights will terminate at the earlier of (i) the date five years after our initial public offering, or (ii) as to any holder of registrable securities, the first date after our initial public offering on which such holder is able to dispose of all of its registrable securities without restriction under Rule 144 of the Securities Act. The rights of first refusal do not apply to, and will terminate upon, the closing of this offering.
In connection with our preferred stock financing, we also entered into an amended and restated voting agreement with certain holders of our preferred stock and certain holders of our common stock, including all of the holders of more than 5% of our capital stock or entities affiliated with them, containing voting rights with respect to elections of our board of directors and certain proposed sale transactions. This agreement will terminate in its entirety on the date of the closing of this offering.
Employment Arrangements
We have entered into written employment severance agreements with our executive officers. For additional information, refer to the section entitled "Executive Compensation — Employment Agreements."
Stock Options Granted to Executive Officers and Directors
We have granted stock options to our executive officers and directors, as more fully described in "Executive and Director Compensation Outstanding Equity Awards at Fiscal Year End."
Indemnification Agreements
We have entered, and intend to continue to enter, into separate indemnification agreements with our directors and executive officers, in addition to the indemnification provided for in our amended and restated bylaws. These agreements, among other things, require us to indemnify our directors and executive officers for certain expenses, including attorneys' fees, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of their services as one of our directors or executive officers or as a director or executive officer of any other company or enterprise to which the person provides services at our request. For more information regarding these indemnification arrangements, see "Management — Limitation on Liability and Indemnification of Directors and Officers." We believe that these bylaw provisions and indemnification agreements are necessary to attract and retain qualified persons as directors and officers.
The limitation of liability and indemnification provisions in our amended and restated certificate of incorporation and amended and restated bylaws may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may also reduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, might benefit us and our stockholders. A stockholder's investment may decline in value to the extent we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions.
Policies and Procedures for Transactions with Related Persons
We have adopted a written related-person transactions policy that sets forth our policies and procedures regarding the identification, review, consideration and oversight of "related-person transactions." For purposes of our policy only, a "related-person transaction" is a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which we and any "related person" are participants involving an amount that exceeds $120,000.
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Transactions involving compensation for services provided to us as an employee, consultant or director are not considered related-person transactions under this policy. A related person is any executive officer, director or a holder of more than five percent of our common stock, including any of their immediate family members and any entity owned or controlled by such persons.
Under the policy, where a transaction has been identified as a related-person transaction, management must present information regarding the proposed related-person transaction to our audit and finance committee (or, where review by our audit and finance committee would be inappropriate, to another independent body of our board of directors) for review. The presentation must include a description of, among other things, the material facts, the direct and indirect interests of the related persons, the benefits of the transaction to us and whether any alternative transactions are available. To identify related-person transactions in advance, we rely on information supplied by our executive officers, directors and certain significant stockholders. In considering related-person transactions, our audit and finance committee or another independent body of our board of directors takes into account the relevant available facts and circumstances including, but not limited to:
•
the risks, costs and benefits to us; 

•
the impact on a director's independence in the event the related person is a director, immediate family member of a director or an entity with which a director is affiliated; 

•
the terms of the transaction; 

•
the availability of other sources for comparable services or products; and 

•
the terms available to or from, as the case may be, unrelated third parties or to or from our employees generally.
In the event a director has an interest in the proposed transaction, the director must recuse himself or herself from the deliberations and approval.
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 DESCRIPTION OF CAPITAL STOCK
The following is a summary of the rights of our common and preferred stock and some of the provisions of our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective upon the closing of this offering, and of the General Corporation Law of the State of Delaware. This summary is not complete. For more detailed information, please see our amended and restated certificate of incorporation and amended and restated bylaws, which are filed as exhibits to the registration statement of which this prospectus is a part, as well as the relevant provisions of the General Corporation Law of the State of Delaware.
General
Upon the closing of this offering and the filing of our amended and restated certificate of incorporation, our authorized capital stock will consist of 200,000,000 shares of common stock, par value $0.01 per share and 10,000,000 shares of preferred stock, par value $0.01 per share. All of our authorized preferred stock upon the closing of this offering will be undesignated.
Common Stock
Outstanding Shares
As of June 30, 2014, there were 209,345 shares of our common stock outstanding and held of record by 15 stockholders. Based on such number of shares of common stock outstanding as of June 30, 2014, and assuming (i) the conversion of all outstanding shares of our preferred stock as of June 30, 2014 into 8,942,930 shares of common stock in connection with the closing of this offering and (ii) the issuance by us of 5,000,000 shares of common stock in this offering, there will be 14,152,275 shares of common stock outstanding upon the closing of this offering.
Dividend Rights
Subject to preferences that may apply to any shares of preferred stock outstanding at the time, the holders of outstanding shares of our common stock are entitled to receive dividends out of funds legally available at the times and in the amounts that our board of directors may determine.
Voting Rights
Holders of our common stock are entitled to one vote per share. We have not provided for cumulative voting for the election of directors in our amended and restated certificate of incorporation. The board of directors is divided into three classes, which are as nearly equal in number as possible, with each director elected at an annual stockholders' meeting following the date of this offering serving a three-year term and one class being elected at each year's annual stockholder meeting.
Rights and Preferences
Holders of our common stock have no preemptive, conversion or subscription rights, and there are no redemption or sinking fund provisions applicable to our common stock. The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of our preferred stock that we may designate and issue in the future.
Right to Receive Liquidation Distributions
Upon our liquidation, dissolution, distribution of assets 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, if any, after payment of
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liquidation preferences, if any, on any outstanding shares of preferred stock and payment of other claims of creditors.
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.
Preferred Stock
As of June 30, 2014, there were 24,593,087 shares of our preferred stock outstanding and held of record by 13 stockholders.
Upon the closing of this offering, all outstanding shares of preferred stock at June 30, 2014, will convert into 8,942,930 shares of our common stock.
Upon the closing of this offering, our certificate of incorporation will be amended and restated to delete all references to such shares of preferred stock. Under the amended and restated certificate of incorporation, our board of directors will have the authority, without further action by the stockholders, to issue up to 10,000,000 shares of preferred stock in one or more series, to establish from time to time the number of shares to be included in each such series, to fix the rights, preferences and privileges of the shares of each wholly unissued series and any qualifications, limitations or restrictions thereon and to increase or decrease the number of shares of any such series, but not below the number of shares of such series then outstanding.
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 the 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 that may otherwise benefit holders of our common stock and may adversely affect the market price of the common stock and the voting and other rights of the holders of common stock. We have no current plans to issue any shares of preferred stock.
Options
As of June 30, 2014, options to purchase a total of 1,566,670 shares of common stock were outstanding. As of June 30, 2014, 114,432 shares of common stock remain available for future issuance under our 2007 Plan. On July 22, 2014, we issued options to purchase a total of 69,266 shares of common stock. After this offering, we intend to cease granting awards under our 2007 Plan, and instead grant awards, including options, under our 2014 Plan, which was adopted by our board of directors in July 2014 in connection with this offering. We have reserved an aggregate of 1,027,500 shares of common stock for future issuance under our 2014 Plan, none of which will be subject to outstanding stock options effective upon the pricing of this offering.
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Warrants
As of June 30, 2014, we had outstanding warrants to purchase an aggregate of 47,710 shares of our common stock with an exercise price of $14.671 per share, as follows:

									
Class of Stock 	 	Number of
Shares of
Stock Subject
to Warrant	 	Exercise
Price per
Share	 	Expiration Date	
Common Stock	 	 	 7,156	 	 $	14.671	 	January 17, 2020	
Common Stock	 	 	 8,179	 	 $	14.671	 	January 17, 2020	
Common Stock	 	 	 3,067	 	 $	14.671	 	August 1, 2020	
Common Stock	 	 	 2,044	 	 $	14.671	 	August 1, 2020	
Common Stock	 	 	 5,112	 	 $	14.671	 	December 13, 2020	
Common Stock	 	 	 5,112	 	 $	14.671	 	December 13, 2020	
Common Stock	 	 	 8,520	 	 $	14.671	 	June 30, 2021	
Common Stock	 	 	 8,520	 	 $	14.671	 	June 30, 2021	
Exclusive Jurisdiction
Unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of us, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to Sientra or our stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware or our certificate of incorporation or bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine. The enforceability of similar choice of forum provisions in other companies' certificates of incorporation has been challenged in legal proceedings, and it is possible that, in connection with any action, a court could find the choice of forum provisions contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in such action.
Registration Rights
Following the closing of this offering, certain holders of our common stock, or their transferees, will be entitled to the registration rights set forth below with respect to registration of the resale of such shares under the Securities Act pursuant to the investor rights agreement, as amended, by and among us and certain of our stockholders.
Demand Registration Rights
At any time, upon the written request of certain of the holders of the registrable securities then outstanding that we file a registration statement under the Securities Act covering the registration of the registrable securities resulting in net offering proceeds of at least $35.0 million, we will be obligated to notify all holders of registrable securities of such request and to use our reasonable best efforts to register the sale of all registrable securities that holders may request to be registered. We are not required to effect more than three registration statements which are declared or ordered effective. We may postpone the filing of a registration statement for up to 90 days twice in any 12-month period if in the good faith judgment of our board of directors such registration would be detrimental to us, and we are not required to effect the filing of a registration statement during the period starting with the date of the filing of, and ending on a date 180 days following the effective date of the registration statement for this offering. We may also postpone the filing of a registration statement if we notify the holders of the registrable securities within 30 days of our intention to file a registration statement for our initial public offering within 90 days. The underwriters of any underwritten offering will have the
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right to limit the number of shares having registration rights to be included in the registration statement.
"Piggyback" Registration Rights
If we register any securities for public sale, holders of registration rights will have the right to include their shares in the registration statement. The underwriters of any underwritten offering will have the right to limit the number of shares having registration rights to be included in the registration statement, but not below 25% of the total number of shares included in the registration statement, except this offering, in which the holders may be entirely excluded.
Form S-3 Registration Rights
If we are eligible to file a registration statement on Form S-3, from any time after the one year anniversary of this offering, holders of registrable securities have the right to demand that we file a registration statement on Form S-3 so long as the aggregate price to the public of the securities to be sold under the registration statement on Form S-3 is at least $1.0 million. We may postpone the filing of a registration statement for up to 90 days twice in any 12-month period if in the good faith judgment of our board of directors such registration would be detrimental to us, and we are only obligated to effect up to two registrations on Form S-3 in any 12-month period. We may also postpone the filing of a registration statement if we notify the holders of the registrable securities within 30 days of our intention to make a public offering within 90 days.
Expenses of Registration
Generally, we are required to bear all registration and selling expenses incurred in connection with the demand, piggyback and Form S-3 registrations described above, other than underwriting discount and commissions.
Expiration of Registration Rights
The demand, piggyback and Form S-3 registration rights discussed above will terminate upon the earlier of (i) five years following the closing of this offering or (ii) as to any holder of registrable securities, the first date after our initial public offering on which such holder is able to dispose of all of its registrable securities without restriction under Rule 144 of the Securities Act.
Anti-Takeover Effects of Provisions of Our Amended and Restated Certificate of Incorporation, Our Amended and Restated Bylaws and Delaware Law
Delaware Anti-Takeover Law
We are subject to Section 203 of the General Corporation Law of the State of Delaware, or Section 203. Section 203 generally 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:
•
prior to the date of the transaction, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; 

•
the interested stockholder owned at least 85% of the voting stock of the corporation outstanding upon consummation of the transaction, excluding for purposes of determining the number of shares outstanding (a) shares owned by persons who are directors and also officers and (b) shares owned by employee stock plans in which employee participants do
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not have the right to determine confidentially whether shares held subject to the plan will be tendered in a tender or exchange offer; or
•
on or subsequent to the consummation of the transaction, the business combination is approved by the board and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2 / 3 % of the outstanding voting stock which is not owned by the interested stockholder. 

•
Section 203 defines a business combination to include: 

•
any merger or consolidation involving the corporation and the interested stockholder; 

•
any sale, transfer, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation; 

•
subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; 

•
subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder; and 

•
the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws
Provisions of our amended and restated certificate of incorporation and amended and restated bylaws, which will become effective upon the closing of this offering, may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our common stock. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws will:
•
permit our board of directors to issue up to 10,000,000 shares of preferred stock, with any rights, preferences and privileges as they may designate (including the right to approve an acquisition or other change in our control); 

•
provide that the authorized number of directors may be changed only by resolution adopted by a majority of the board of directors; 

•
provide that the board of directors or any individual director may be removed only for cause and only by the affirmative vote of the holders of at least 66 2 / 3 % of the voting power of all of our then outstanding common stock; 

•
provide that all vacancies, including newly created directorships, may, except as otherwise required by law or subject to the rights of holders of preferred stock as designated from time to time, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum; 

•
divide our board of directors into three classes;
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•
require that any action to be taken by our stockholders must be effected at a duly called annual or special meeting of stockholders and not be taken by written consent; 

•
provide that stockholders seeking to present proposals before a meeting of stockholders or to nominate candidates for election as directors at a meeting of stockholders must provide notice in writing in a timely manner and also specify requirements as to the form and content of a stockholder's notice; 

•
do not provide for cumulative voting rights (therefore allowing the holders of a majority of the shares of common stock entitled to vote in any election of directors to elect all of the directors standing for election, if they should so choose); 

•
provide that special meetings of our stockholders may be called only by the chairman of the board, our Chief Executive Officer or by the board of directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exists any vacancies); and 

•
provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed by any of our directors or officers to us or our stockholders, (iii) any action asserting a claim against the us arising pursuant to any provision of the DGCL or our certificate of incorporation or bylaws, or (iv) any action asserting a claim against us governed by the internal affairs doctrine.
The amendment of any of these provisions, with the exception of the ability of our board of directors to issue shares of preferred stock and designate any rights, preferences and privileges thereto, would require the affirmative vote of the holders of at least 66 2 / 3 % of the voting power of all of our then outstanding common stock.
Annual Stockholder Meetings
Our amended and restated bylaws will provide that annual stockholder meetings will be held at a date, time and place as exclusively selected by our board of directors.
Listing
We have applied to list our common stock on NASDAQ under the symbol "SIEN."
Transfer Agent and Registrar
The transfer agent and registrar for our common stock is Computershare Trust Company, N.A., or Computershare. The address of Computershare is 250 Royall Street, Canton, Massachusetts 02021 and the telephone number is (877) 373-6374.
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 PRINCIPAL STOCKHOLDERS
The following table and accompanying footnotes set forth certain information with respect to the beneficial ownership of our common stock, as of October 1, 2014 and as adjusted to reflect the shares of common stock to be issued and sold in this offering assuming no exercise of the underwriters' option to purchase additional shares by:
•
each person, or group of affiliated persons, known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock; 

•
each of our directors; 

•
each of our named executive officers; and 

•
all our current executive officers and directors as a group.
For purposes of the table below, the percentage ownership calculations for beneficial ownership prior to this offering are based on 9,152,275 shares of our common stock outstanding as of October 1, 2014, after giving effect to the automatic conversion of all outstanding shares of our preferred stock into an aggregate of 8,942,930 shares of common stock, as consented to by the requisite holders of our preferred stock. The table below assumes that there are 14,152,275 shares of our common stock outstanding immediately following the closing of this offering.
Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Shares of common stock that may be acquired by an individual or group within 60 days of October 1, 2014, pursuant to the exercise of options, warrants or other rights, are deemed to be outstanding for the purpose of computing the percentage ownership of such individual or group, but are not deemed to be outstanding for the purpose of computing the percentage ownership of any other person shown in the table. The table below excludes any shares of common stock that may be purchased in this offering pursuant to the directed share program or otherwise. See "Underwriting."
Except as indicated in footnotes to this table, we believe that the stockholders named in this table have sole voting and investment power with respect to all shares of common stock shown to be beneficially owned by them, based on information provided to us by such stockholders. The address for each director and executive officer listed below is: c/o Sientra, Inc., 420 South Fairview Avenue, Suite 200, Santa Barbara, California 93117.
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 	 	 	 	Percentage of Shares
Beneficially Owned	 	
Name of Beneficial Owner 	 	Shares
Beneficially
Owned	 	Before the
Offering	 	After the
Offering	 	
5% Stockholders:	 	 	 	 	 	 	 	 	 	 	
Abingworth Bioventures V LP and affiliated entities (1)	 	 	1,704,012	 	 	18.6	%	 	12.0	%	
OrbiMed Private Investments III, LP and affiliated entities (2)	 	 	3,185,308	 	 	34.8	 	 	22.5	 	
Clarus Lifesciences I, L.P. (3)	 	 	2,730,765	 	 	29.8	 	 	19.3	 	
Private Equity Managers (Healthcare) Offshore Holdings LP and affiliated entities (4)	 	 	783,005	 	 	8.6	 	 	5.5	 	
Teachers Insurance and Annuity Association of America (5)	 	 	630,748	 	 	6.9	 	 	4.5	 	
Named Executive Officers and Directors:	 	 	 	 	 	 	 	 	 	 	
Hani Zeini (6)	 	 	612,727	 	 	6.3	 	 	4.2	 	
Matthew Pigeon (7)	 	 	97,215	 	 	1.1	 	 	*	 	
Joel Smith (8)	 	 	74,547	 	 	*	 	 	*	 	
Nicholas Simon (9)	 	 	2,730,765	 	 	29.8	 	 	19.3	 	
Rishi Gupta (10)	 	 	3,185,308	 	 	34.8	 	 	22.5	 	
Timothy Haines (11)	 	 	1,704,012	 	 	18.6	 	 	12.0	 	
R. Scott Greer (12)	 	 	1,262	 	 	*	 	 	*	 	
Kevin O'Boyle (13)	 	 	1,262	 	 	*	 	 	*	 	
Jeffrey Nugent (14)	 	 	1,262	 	 	*	 	 	*	 	
All executive officers and directors as a group (9 persons) (15)	 	 	8,408,360	 	 	85.4	%	 	56.6	%	

*
Represents beneficial ownership of less than 1.0%

(1)
Consists of (i) 852,006 shares held of record by Abingworth Bioventures V LP, or ABV V, and (ii) 852,006 shares held of record by Abingworth Bioventures V Co-Invest Growth Equity Fund LP., or AGE. ABV V and AGE are collectively referred to as the "Abingworth Funds." The investment manager of the Abingworth Funds is Abingworth LLP, or Abingworth. Abingworth Bioventures V GP LP, a Scottish limited partnership, serves as the general partner of each of the Abingworth Funds. Abingworth Bioventures V GP LP has delegated to Abingworth all investment and dispositive power over the shares held by the Abingworth Funds. An investment committee of Abingworth, comprised of Joseph Anderson, Michael F. Bigham, Timothy Haines, one of our directors, Genghis Lloyd-Harris and Stephen W. Bunting, approves investment and voting decisions by a majority vote, and no individual member has the sole control or voting power over the shares held by the Abingworth Funds. Each of Abingworth Bioventures V GP LP, Abingworth Bioventures V LP Limited, Joseph Anderson, Michael F. Bigham, Timothy Haines, one of our directors, Genghis Lloyd-Harris and Stephen W. Bunting disclaims beneficial ownership of all shares held of record held by the Abingworth Funds. The address for the Abingworth Funds is c/o Abingworth LLP, 38 Jermyn Street, London SW1Y 6DN, United Kingdom.

(2)
Consists of (i) 3,155,260 shares held of record by OrbiMed Private Investments III, LP, or OPI III, and (ii) 30,048 shares held of record by OrbiMed Associates III, LP, or Associates III. OPI III and Associates III are collectively referred to as the "OrbiMed Funds". OrbiMed Capital GP III LC, or GP III, is the sole general partner of OPI III and as such may be deemed to beneficially own the shares held of record by OPI III. OrbiMed Advisors LLC, or OrbiMed, is the general partner of Associates III and the sole managing member of GP III, and may be deemed to beneficially own the shares held of record by the OrbiMed Funds. Samuel D. Isaly is the managing member of and owner of a controlling interest in OrbiMed and may be deemed to have voting and investment power over shares held by OPI III and Associates III. Mr. Isaly disclaims beneficial ownership over such shares, except to the extent of his pecuniary interest therein. Mr. Isaly disclaims beneficial ownership of all shares held of record by the OrbiMed Funds in which he does not have a pecuniary interest. Rishi Gupta, one of our directors, is a private equity partner at OrbiMed and may be deemed to have voting and investment power over shares held by the OrbiMed Funds. Mr. Gupta disclaims beneficial ownership over such shares, except to the extent of his pecuniary interest therein. The address for the OrbiMed Funds entities is c/o OrbiMed Advisors LLC, 601 Lexington Avenue, 54 th  Floor, New York, NY 10024.
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(3)
Consists of 2,730,765 shares held of record by Clarus Lifesciences I, L.P., or Clarus I. Clarus Ventures I Management, L.P., or Clarus I GPLP, is the sole general partner of Clarus I and may be deemed to beneficially own certain of the shares held by Clarus I. Clarus I GPLP disclaims beneficial ownership of all shares held of record by Clarus I in which Clarus I GPLP does not have a pecuniary interest. Clarus Ventures I, LLC, or Clarus I GPLLC, is the sole general partner of Clarus I GPLP, and may be deemed to beneficially own certain of the shares held of record by Clarus I. Clarus I GPLLC disclaims beneficial ownership of all shares held of record by Clarus I in which it does not have a pecuniary interest. Each of Messrs. Henner, Liptak, Galakatos, Simon, one of our directors, Steinmetz and Wheeler, as individual managing directors of Clarus I GPLLC, may be deemed to beneficially own certain of the shares held of record by Clarus I. Each of Messrs. Galakatos, Henner, Liptak, Simon, Steinmetz and Wheeler disclaims beneficial ownership of all shares held of record by Clarus I in which he does not have a pecuniary interest. The address for Clarus I is 101 Main Street, Suite 1210, Cambridge, MA 02142.

(4)
Consists of (i) 102,311 shares held of record by Private Equity Managers (Healthcare) Offshore Holdings LP, or PEM Healthcare Offshore, (ii) 128,482 shares held of record by Private Equity Partners 2000 Direct Investment Fund LP, or PEP 2000 Direct, (iii) 222,283 shares held of record by Private Equity Partners 2000 LP, or PEP 2000, (iv) 125,469 shares held of record by Private Equity Partners 2000 Offshore Holdings LP, or PEP 2000 Offshore, (v) 37,643 shares held of record by Private Equity Partners 2002 Direct Investment Fund LP, or PEP 2002 Direct, and (vi) 166,817 shares held of record by Private Equity Partners 2002 Offshore Holdings LP, or PEP 2002 Offshore. PEM Healthcare Offshore, PEP 2000 Direct, PEP 2000, PEP 2000 Offshore, PEP 2002 Direct and PEP 2002 Offshore are collectively referred to as the "GS Funds." The investment manager of the GS Funds is Goldman Sachs Asset Management, L.P., or GSAM. GSAM Gen-Par, LLC, a Delaware limited liability company, serves as the managing member of the general partner of those GS Funds organized in Delaware, and as the director of the general partner of those GS Funds organized in the Cayman Islands. GSAM Gen-Par, LLC has signing authority for the GS Funds and GSAM has all investment and dispositive power over the shares held of record by the GS Funds. An investment committee of senior members of The AIMS Private Equity Group of GSAM comprised of Michael J. Brandmeyer, Michael R. Miele, Marc O. Boheim, Harold P. Hope III, Julia Feldman, Suzanne Gauron, Stephen Lessar, Gabriel Mollerberg, Konnin Tam and Christian von Schimmelmann approves investment and voting decisions by a majority vote, and no individual member has the sole control or voting power over the shares held of record by the GS Funds. Each of such members disclaims beneficial ownership of all shares held of record held by the GS Funds. The address for the GS Funds is c/o The AIMS Private Equity Group, 200 West Street, New York, NY 10282.

(5)
Consists of 630,748 shares held of record by Teachers Insurance and Annuity Association of America, or TIAA. In accordance with New York State Insurance Law, the Board of Trustees comprised of Jeffrey R. Brown, Robert C. Clark, Roger W. Ferguson, Lisa W. Hess, Edward M. Hundert, Lawrence H. Linden, Maureen O'Hara, Donald K. Peterson, Sidney A. Ribeau, Dorothy K. Robinson, David L. Shedlarz, Ronald L. Thompson and Marta Tienda approves investment decisions made by TIAA. Approvals for certain transactions have been delegated to the investment committee of the Board of Trustees comprised of David L. Shedlarz, Jeffrey R. Brown, Lisa W. Hess, Maureen O'Hara and Donald K. Peterson. In certain cases, approvals for certain transactions have been further delegated to senior officers of TIAA, all subject to formal approval by the Board of Trustees. No individual member of the Board of Trustees, including the investment committee, or officer of TIAA has the sole control or voting power over the shares held by TIAA and such trustees and officers disclaim beneficial ownership of all shares held of record held by TIAA. The address for TIAA is 730 Third Avenue, New York, NY 10017.

(6)
Consists of (i) 90,909 shares held of record by Mr. Zeini and (ii) options to purchase 521,818 shares exercisable within 60 days of October 1, 2014.

(7)
Consists of options to purchase 97,215 shares exercisable within 60 days of October 1, 2014.

(8)
Consists of options to purchase 74,547 shares exercisable within 60 days of October 1, 2014.

(9)
Consists of the shares held of record by Clarus I and disclosed in footnote (3) above. Mr. Simon is a managing director of Clarus I GPLLC and may be deemed to beneficially own certain of the shares held of record by Clarus I, as disclosed in footnote (3). Mr. Simon disclaims beneficial ownership of all shares held of record by Clarus I, except to the extent of his pecuniary interest therein.

(10)
Consists of the shares held of record by the OrbiMed Funds and disclosed in footnote (2) above. OrbiMed is the general partner of Associates III and the sole managing member of GP III, and may be deemed to beneficially own certain of the shares held of record by the OrbiMed Funds. Mr. Gupta is a private equity partner at OrbiMed and may be deemed to beneficially own certain of the shares held of record by the OrbiMed Funds, as disclosed in footnote (2). Mr. Gupta disclaims beneficial ownership of all shares held of record by the OrbiMed Funds, except to the extent of his pecuniary interest therein.

(11)
Consists of the shares held of record by the Abingworth Funds and disclosed in footnote (1) above. Abingworth approves investment and voting decisions by a majority vote, and no individual member of Abingworth has the sole control or voting power over the shares held by the Abingworth Funds. Mr. Haines is a member of the investment committee of
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Abingworth and may be deemed to beneficially own certain of the shares held of record by Abingworth, as disclosed in footnote (1). Mr. Haines disclaims beneficial ownership of all shares held of record by the Abingworth Funds, except to the extent of his pecuniary interest therein.
(12)
Consists of options to purchase 1,262 shares exercisable within 60 days of October 1, 2014.

(13)
Consists of options to purchase 1,262 shares exercisable within 60 days of October 1, 2014.

(14)
Consists of options to purchase 1,262 shares exercisable within 60 days of October 1, 2014.

(15)
Consists of (i) 7,710,994 shares held of record by our current executive officers and directors and (ii) options to purchase 697,366 shares exercisable within 60 days of October 1, 2014.
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 SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has not been a public market for our common stock. Future sales of substantial amounts of our common stock in the public market, or the perception that such sales could occur, 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. Furthermore, because only a limited number of shares will be available for sale shortly after this offering due to existing contractual and legal restrictions on resale as described below, there may be sales of substantial amounts of our common stock in the public market after the restrictions lapse. This may adversely affect the prevailing market price and our ability to raise equity capital in the future.
Upon the completion of this offering, a total of 14,152,275 shares of common stock will be outstanding, assuming that there are no exercises of options after June 30, 2014. Of these shares, all 5,000,000 shares of common stock sold in this offering by us, plus any shares sold upon exercise of the underwriters' option to purchase additional shares, will be freely tradable in the public market without restriction or further registration under the Securities Act, unless these shares are held by "affiliates," as that term is defined in Rule 144 under the Securities Act, or our existing stockholders subject to the lock-up agreements described below.
The remaining 9,152,275 shares of our common stock will be "restricted securities," as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rules 144 or 701 under the Securities Act, which are summarized below.
As a result of the lock-up agreements described below and the provisions of Rule 144 and 701 under the Securities Act, each of which is described below, these restricted securities will be available for sale in the public market as follows:
•
no shares will be available for sale until 180 days after the date of this prospectus, subject to certain limited exceptions provided for in the lock-up agreements; and 

•
9,152,275 shares will be eligible for sale beginning 180 days after the date of this prospectus, subject, in the case of shares by our affiliates, to the volume limitations under Rule 144.
In addition, of the 1,635,936 shares of our common stock that were issuable upon the exercise of stock options outstanding as of July 31, 2014, options to purchase 1,171,779 shares of our common stock were exercisable as of that date, and upon exercise these shares will be eligible for sale subject to the lock-up agreements described below and Rules 144 and 701 under the Securities Act. Furthermore, all of the 47,710 shares of our common stock that were issuable upon the exercise of warrants outstanding as of July 31, 2014 were exercisable as of that date, and upon exercise these shares of common stock will be eligible for sale subject to the lock-up agreements described below and Rule 144.
Rule 144
In general, under Rule 144, as currently in effect, a person, or persons whose shares are aggregated, who is not deemed to be or have been one of our affiliates for purposes of the Securities Act at the time, or at any time during the 90 days preceding a sale and who has beneficially owned their shares for at least six months, including the holding period of any prior owner other than one of our affiliates, may sell such shares without registration, provided current public information about us is available. If such a person has beneficially owned the shares for at least one year, including the holding period of any prior owner other than one of our affiliates, then such person is entitled to sell such
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shares immediately upon the closing of this offering without regard to whether current public information about us is available.
In general, under Rule 144, as currently in effect, our affiliates or persons selling shares on behalf of our affiliates, who have met the six-month holding period for beneficial ownership of "restricted shares" of our common stock, are entitled to sell within any three-month period, a number of shares that does not exceed the greater of:
•
1% of the number of shares of our common stock then outstanding, which will equal approximately 141,500 shares immediately after this offering; or 

•
the average reported weekly trading volume of our common stock on NASDAQ during the four calendar weeks preceding the filing of a notice on Form 144 with respect to such sale.
Sales of restricted shares under Rule 144 held by our affiliates or persons selling shares on behalf of our affiliates are also subject to requirements regarding the manner of sale, notice and the availability of current public information about us. Rule 144 also provides that affiliates relying on Rule 144 to sell shares of our common stock that are not restricted shares must nonetheless comply with the same restrictions applicable to restricted shares, other than the holding period requirement.
Notwithstanding the availability of Rule 144, the holders of substantially all of our restricted shares have entered into lock-up agreements as described below and their restricted shares will become eligible for sale at the expiration of the restrictions set forth in those agreements.
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. However, all holders of Rule 701 shares are subject to the lock-up agreements described below or similar agreements with us and their shares will not become eligible for sale until the expiration of the lock-up period set forth in those agreements.
Lock-Up Agreements
We, along with our directors, executive officers and substantially all of our other stockholders, optionholders and warrantholders, have agreed with the underwriters that for a period of 180 days, or the "restricted period," after the date of this prospectus, subject to specified exceptions, we or they will not offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, any shares of common stock or any securities convertible into, or exercisable or exchangeable for, or that represent the right to receive shares of common stock, or enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock or demand that we file a registration statement related to our common stock. Piper Jaffray & Co. and Stifel, Nicolaus & Company, Incorporated may, in their sole discretion release all or any portion of the shares from restrictions in such agreement. Upon expiration of the restricted period, certain of our stockholders will have the right to require us to register their shares under the Securities Act.
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As described in the "Underwriting" section, any participants in the directed share program that have not entered into a 180-day contractual lock-up agreement with the underwriters will not be subject to any lock-up arrangements with any underwriter with respect to the directed shares sold to them.
After this offering, certain of our employees, including our executive officers and/or directors, may enter into written trading plans that are intended to comply with Rule 10b5-1 under the Exchange Act. Sales under these trading plans would not be permitted until the expiration of the lock-up agreements relating to the offering described above.
Registration Rights
Upon the closing of this offering and the expiration of the lock-up agreements, the holders of 8,942,930 shares of our common stock will be entitled to request that we register the sale of their shares under the Securities Act. Registration of these shares under the Securities Act would result in the shares becoming freely tradable without restriction, except for shares purchased by affiliates, immediately upon the effectiveness of that registration statement. Any sales of securities by these stockholders could have a material adverse effect on the trading price of our common stock. See "Description of Capital Stock — Registration Rights."
Stock Options and Form S-8 Registration Statement
As of July 31, 2014, we had outstanding options to purchase an aggregate of 1,635,936 shares of our common stock, of which options to purchase 1,171,779 shares were vested. Following this offering, we intend to file a registration statement on Form S-8 under the Securities Act to register all of the shares of our common stock subject to outstanding options and options and other awards issuable pursuant to our 2007 Plan, 2014 Plan and ESPP. Accordingly, shares of our common stock registered under the registration statements will be available for sale in the open market, subject to Rule 144 volume limitations applicable to affiliates, and subject to any vesting restrictions and lock-up agreements applicable to these shares.
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 MATERIAL UNITED STATES FEDERAL INCOME
AND ESTATE TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following discussion describes the material U.S. federal income and estate tax considerations relating to the purchase, ownership and disposition of our common stock by Non-U.S. Holders (defined below). This summary does not address all aspects of U.S. federal income and estate taxes, does not discuss the potential application of the alternative minimum tax or the 3.8% Medicare tax on net investment income and does not deal with state, local or non-U.S. tax consequences that may be relevant to Non-U.S. Holders of our common stock. This discussion is based upon the Code, the Treasury regulations promulgated or proposed thereunder and administrative and judicial interpretations thereof, all in effect and available as of the date hereof and all of which are subject to differing interpretations and to change, revocation or repeal at any time, possibly on a retroactive basis. We have not sought, and will not seek, any ruling from the U.S. Internal Revenue Service, or the IRS, with respect to the tax consequences discussed herein, and there can be no assurance that the IRS will not take a position contrary to the tax consequences discussed below or that any position taken by the IRS would not be sustained.
This summary assumes that Non-U.S. Holders will hold our common stock are held as a "capital asset" within the meaning of the Code (generally, property held for investment). This summary does not purport to deal with all aspects of U.S. federal income and estate taxation that might be relevant to particular Non-U.S. Holders in light of their particular investment circumstances or status, nor does it address specific tax considerations that may be relevant to particular persons (including, for example, banks, financial institutions or other financial services entities, broker-dealers and traders in securities, insurance companies, partnerships or other pass-through entities or entities that are treated as disregarded entities for U.S. federal income tax purposes (regardless of their places of organization or formation), certain U.S. expatriates, tax-exempt organizations, pension plans, tax-qualified retirement plans, "controlled foreign corporations," "passive foreign investment companies," corporations that accumulate earnings to avoid U.S. federal income tax, real estate investment trusts, regulated investment companies, persons subject to the alternative minimum tax, persons deemed to sell our common stock under the constructive sale provisions of the Code, persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation, or persons in special situations, such as those who have elected to mark securities to market or those who hold common stock as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment or risk reduction strategy). In addition, except as explicitly addressed herein with respect to estate tax, this summary does not address estate and gift tax considerations or considerations under the tax laws of any state, local or non-U.S. jurisdiction.
For purposes of this summary, a "Non-U.S. Holder" means a beneficial owner of common stock that for U.S. federal income tax purposes is not classified as a partnership (or entity or arrangement treated as a partnership for U.S. federal income tax purposes) and is not:
•
an individual who is a citizen or resident of the United States; 

•
a corporation or any other organization taxable as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States, any state thereof or the District of Columbia; 

•
an estate, the income of which is included in gross income for U.S. federal income tax purposes regardless of its source; or 

•
a trust if (1) a U.S. court is able to exercise primary supervision over the trust's administration and one or more "United States persons" (within the meaning of Section 7701(a)(3) of the Code) have the authority to control all of the trust's substantial decisions or (2) the trust has a valid election in effect under applicable Treasury regulations to be treated as a U.S. person.
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If an entity that is treated as a partnership for U.S. federal income tax purposes holds our common stock, the tax treatment of persons treated as its partners for U.S. federal income tax purposes will generally depend upon the status of the partner and the activities of the partnership. Partnerships and other entities that are classified as partnerships for U.S. federal income tax purposes and persons holding our common stock through a partnership or other entity treated as a partnership for U.S. federal income tax purposes are urged to consult their own tax advisors.
THIS SUMMARY IS FOR GENERAL INFORMATION ONLY AND IS NOT INTENDED TO BE TAX ADVICE. NON-U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS CONCERNING THE U.S. FEDERAL INCOME AND ESTATE TAXATION, STATE, LOCAL AND NON-U.S. TAXATION AND OTHER TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF OUR COMMON STOCK.
Distributions on Our Common Stock
As described in the section entitled "Dividend Policy," we do not anticipate declaring or paying dividends to holders of our common stock in the foreseeable future. However, in the event that we make a distribution of cash or property (other than certain stock distributions) with respect to our common stock (or in the case of certain redemptions that are treated as distributions with respect to our common stock), any such distributions generally will constitute dividends for U.S. federal income tax purposes to the extent of our current and accumulated earnings and profits, if any, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will constitute a return of capital and will first reduce the holder's adjusted tax basis in our common stock, but not below zero. Any remaining excess will be treated as capital gain, subject to the tax treatment described below in "— Gain on Sale, Exchange or Other Disposition of Our Common Stock." Any such distribution would also be subject to the discussion below under the sections titled "— Additional Withholding and Reporting Requirements" and "— Backup Withholding and Information Reporting."
Dividends paid to a Non-U.S. Holder generally will be subject to a 30% U.S. federal withholding tax unless such Non-U.S. Holder provides us or our agent, as the case may be, with the appropriate IRS Form W-8, such as:
•
IRS Form W-8BEN or W-8BEN-E (or successor form) certifying, under penalties of perjury, a reduction in withholding under an applicable income tax treaty, or 

•
IRS Form W-8ECI (or successor form) certifying that a dividend paid on our common stock is not subject to withholding tax because it is effectively connected with a trade or business in the United States of the Non-U.S. Holder (in which case such dividend generally will be subject to regular graduated U.S. tax rates as described below).
The certification requirement described above must be provided to us or our agent prior to the payment of dividends and must be updated periodically. The certification also may require a Non-U.S. Holder that provides an IRS form or that claims treaty benefits to provide its U.S. taxpayer identification number. Special certification and other requirements apply in the case of certain Non-U.S. Holders who hold shares of our common stock through intermediaries or who are pass-through entities for U.S. federal income tax purposes.
Dividends that are effectively connected with a trade or business in the United States of a Non-U.S. Holder (and, if required by an applicable income tax treaty, attributable to a U.S. permanent establishment or fixed base), generally will not be subject to U.S. withholding tax (provided that the certifications described above are satisfied), but instead generally will be subject to U.S. federal income
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tax on a net income basis in the same manner as if the Non-U.S. Holder were a resident of the United States. A corporate Non- U.S. Holder that receives effectively connected dividends may be subject to an additional branch profits tax at a rate of 30%, or a lower rate prescribed by an applicable income tax treaty.
Non-U.S. Holders that do not timely provide us or our agent with the required certification, but which are eligible for a reduced rate of U.S. federal withholding tax pursuant to an income tax treaty, may obtain a refund or credit of any excess amount withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. Holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.
Gain on Sale, Exchange or Other Disposition of Our Common Stock
Subject to the discussion below under the sections titled "— Additional Withholding and Reporting Requirements" and "— Backup Withholding and Information Reporting," in general, a Non-U.S. Holder will not be subject to any U.S. federal income tax or withholding tax on gain realized upon such holder's sale, exchange or other disposition of shares of our common stock unless (i) such gain is effectively connected with a trade or business carried on by the Non-U.S. Holder within the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by such Non-U.S. Holder in the United States), (ii) such Non-U.S. Holder is a nonresident alien individual who is present in the United States for 183 days or more in the taxable year of disposition, and certain other conditions are met; or (iii) we are or have been a "United States real property holding corporation," or USRPHC, for U.S. federal income tax purposes, at any time within the shorter of the five-year period preceding the disposition and the Non-U.S. Holder's holding period in the shares of our common stock, and, in the case where shares of our common stock are regularly traded on an established securities market, the Non-U.S. Holder owns, or is treated as owning, more than five percent of our common stock at any time during the foregoing period.
Net gain realized by a Non-U.S. Holder described in clause (i) above generally will be subject to U.S. federal income tax in the same manner as if the Non-U.S. Holder were a resident of the United States. Any gains of a corporate Non-U.S. Holder described in clause (i) above may also be subject to an additional "branch profits tax" at a 30% rate, or such lower rate as may be specified by an applicable income tax treaty.
Gain realized by an individual Non-U.S. Holder described in clause (ii) above will be subject to a flat 30% tax (or such lower rate specified by an applicable income tax treaty), which gain may be offset by U.S. source capital losses, even though the individual is not considered a resident of the United States, provided the Non-U.S. Holder has timely filed U.S. federal income tax returns with respect to such losses.
For purposes of clause (iii) above, a corporation is a USRPHC if the fair market value of its United States real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. We believe that we are not, and we do not anticipate that we will become, a United States real property holding corporation.
Non-U.S. Holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.
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Additional Withholding and Reporting Requirements
Under Sections 1471 to 1474 of the Code, 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 specially defined under 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 substantial information regarding certain 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 to payments of dividends and the gross proceeds of a disposition of our common stock paid to a "non-financial foreign entity" (as specially defined under applicable rules) unless such entity either certifies it does not have any substantial U.S. owners or provides the withholding agent with a certification identifying substantial direct and indirect U.S. owners of the entity. 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. The U.S. has entered into agreements with certain countries that modify these general rules for entities located in those countries. Prospective investors are encouraged to consult with their tax advisors regarding the possible implications of Foreign Account Tax Compliance Act, or FATCA, on their investment in our common stock.
The FATCA withholding provisions described above will generally apply to payments of dividends made on or after July 1, 2014 and to payments of gross proceeds from a sale or other disposition of common stock on or after January 1, 2017.
Backup Withholding and Information Reporting
Generally, we must report annually to the IRS and to each Non-U.S. Holder the gross amount of the distributions on our common stock paid to the holder and the tax withheld, if any, with respect to distributions that constitute dividends. These information reporting requirements apply even if withholding was not required because the dividends were effectively connected with the Non-U.S. Holder's conduct of a trade or business within the United States or withholding was reduced by an applicable income tax treaty. Non-U.S. Holders may have to comply with specific certification procedures to establish that the holder is not a United States person (as defined in the Code) in order to avoid backup withholding at the applicable rate, currently 28%, with respect to dividends on our common stock. Dividends paid to Non-U.S. Holders subject to the U.S. withholding tax, as described above under the section titled "— Distributions on Our Common Stock", generally will be exempt from U.S. backup withholding.
Information reporting and backup withholding will generally apply to the proceeds of a disposition of our common stock by a Non-U.S. Holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a Non-U.S. Holder and satisfies certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a Non-U.S. Holder where the transaction is effected outside the United States through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. Prospective investors should consult their tax advisors regarding the application of the information reporting and backup withholding rules to them.
Copies of information returns may be made available to the tax authorities of the country in which the Non-U.S. Holder resides or, in which the Non- U.S. Holder is incorporated, under the provisions of a specific treaty or agreement.
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Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a Non-U.S. Holder can be refunded or credited against the Non-U.S. Holder's U.S. federal income tax liability, if any, provided that an appropriate claim is timely filed with the IRS.
U.S. Federal Estate Tax
Common stock owned (or treated as owned) by an individual who is not a citizen or a resident of the United States (as defined for U.S. federal estate tax purposes) at the time of death will be included in the individual's gross estate for U.S. federal estate tax purposes unless an applicable estate or other tax treaty provides otherwise, and therefore, may be subject to U.S. federal estate tax.
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 UNDERWRITING
Piper Jaffray & Co. and Stifel, Nicolaus & Company, Incorporated are acting as representatives of each of the underwriters named below. Subject to the terms and conditions set forth in an underwriting agreement among us and the underwriters, we have agreed to sell to the underwriters, and each of the underwriters has agreed, severally and not jointly, to purchase from us, the number of shares of our common stock set forth opposite its name below.

					
Underwriters 	 	Number of Shares	 	
Piper Jaffray & Co. 	 	 	 	 	
Stifel, Nicolaus & Company, Incorporated	 	 	 	 	
Leerink Partners LLC	 	 	 	 	
William Blair & Company, L.L.C. 	 	 	 	 	
 	 	 	 	
 ​	​	​	​	​	
Total	 	 	5,000,000	 	
 	 	 	 	
 ​	​	​	​	​	
 ​	​	​	​	​	
 	 	 	 	
Subject to the terms and conditions set forth in the underwriting agreement, the underwriters have agreed, severally and not jointly, to purchase all of the shares sold under the underwriting agreement if any of these shares are purchased. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the nondefaulting underwriters may be increased or the underwriting agreement may be terminated.
We have agreed to indemnify the several underwriters against certain liabilities, including liabilities under the Securities Act relating to losses or claims resulting from material misstatements in or omissions from this prospectus, the registration statement of which this prospectus is a part, certain free writing prospectuses that may be used in the offering and in any marketing materials used in connection with this offering and to contribute to payments the underwriters may be required to make in respect of those liabilities.
At our request, the underwriters have reserved for sale at the initial public offering price up to 250,000 shares of common stock, or approximately 5% of the shares offered by this prospectus, for our employees, directors and other persons associated with us. Any directed shares purchased by our executive officers, directors, principal stockholders and employees will be subject to the 180-day lock-up restriction described in "— No Sales of Similar Securities" below. Any participants in the directed share program that have not entered into a 180-day contractual lock-up agreement with the underwriters will not be subject to any lock-up arrangements with any underwriter with respect to the directed shares sold to them. The number of shares of common stock available for sale to the general public in the offering will be reduced by the number of shares sold pursuant to the directed share program. Any directed shares not so purchased will be offered by the underwriters to the general public on the same terms as the other shares offered by this prospectus. We have agreed to indemnify the underwriters against certain liabilities and expenses, including liabilities under the Securities Act, in connection with sales of the directed shares. The directed share program will be arranged through Stifel, Nicolaus & Company, Incorporated.
Discount and Commissions
The representatives have advised us that the underwriters propose initially to offer the shares to the public at the public offering price set forth on the cover page of this prospectus and to dealers at that price less a concession not in excess of $             per share. After the initial offering, the public offering price, concession or any other term of this offering may be changed. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
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The following table shows the public offering price, underwriting discount and proceeds, before expenses, to us. The information assumes either no exercise or full exercise by the underwriters of their overallotment option.

											
 	 	Per Share	 	Without
Option	 	With
Option	 	
Public offering price	 	 $	 	 	 $	 	 	 $	 	 	
Underwriting discount	 	 $	 	 	 $	 	 	 $	 	 	
Proceeds, before expenses, to us	 	 $	 	 	 $	 	 	 $	 	 	
The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of common stock offered by this prospectus are subject to the approval of certain legal matters by their counsel and to certain other conditions. The underwriters are obligated to take and pay for all of the shares of common stock offered by this prospectus if any such shares are taken. However, the underwriters are not required to take or pay for the shares covered by the underwriters' overallotment option described below. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased.
Option to Purchase Additional Shares
We have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to 750,000 additional shares of common stock at the public offering price listed on the cover page of this prospectus, less the underwriting discount and commissions. The underwriters may exercise this option solely for the purpose of covering overallotments, if any, made in connection with the offering of the shares of common stock offered by this prospectus. To the extent the option is exercised, each underwriter will become obligated, subject to certain conditions, to purchase about the same percentage of the additional shares of common stock as the number listed next to the underwriter's name in the table above bears to the total number of shares of common stock listed next to the names of all underwriters in the preceding table.
The estimated offering expenses payable by us, exclusive of the underwriting discount and commissions, are approximately $3.0 million. We have also agreed to reimburse the underwriters for certain of their expenses, including up to an aggregate amount of $25,000 in connection with the clearance of this offering with the Financial Industry Regulatory Authority, Inc. as set forth in the underwriting agreement.
No Sales of Similar Securities
We, our executive officers and directors and substantially all of our other stockholders, optionholders and warrantholders have agreed not to sell or transfer any shares of our common stock or securities convertible into, exchangeable or exercisable for, or that represent the right to receive shares of our common stock, for 180 days after the date of this prospectus without first obtaining the written consent of Piper Jaffray & Co. and Stifel, Nicolaus & Company, Incorporated. Specifically, we and these other persons have agreed, with certain limited exceptions, not to directly or indirectly:
•
offer, pledge, announce the intention to sell, sell or contract to sell any shares of our common stock; 

•
sell any option or contract to purchase any shares of our common stock; 

•
purchase any option or contract to sell any shares of our common stock; 

•
grant any option, right or warrant to purchase any shares of our common stock;
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•
make any short sale or otherwise transfer or dispose of any shares of our common stock; 

•
enter into any swap or other agreement that transfers, in whole or in part, the economic consequences of ownership of any shares of our common stock whether any such swap or transaction is to be settled by delivery of shares or other securities, in cash or otherwise; or 

•
demand that we file a registration statement related to our common stock.
The restrictions in the preceding paragraph do not apply to transfers of securities:
•
as a bona fide gift or gifts; 

•
to an immediate family member or any trust, corporation, partnership, limited liability company or other business entity for the direct or indirect benefit of the stockholder or an immediate family member of the stockholder; 

•
if the stockholder is a corporation, partnership, limited liability company, trust or other business entity (i) transfers to another corporation, partnership, limited liability company, trust or other business entity that is a direct or indirect affiliate of the stockholder or (ii) distributions of shares of our common stock to limited partners, limited liability company members or stockholders of the stockholder, or to any investment fund or other entity that controls or manages the stockholder; 

•
if the stockholder is a trust, to the beneficiary of such trust; 

•
by testate succession or intestate succession; 

•
from an employee to us upon death, disability or termination or employment of such employee; 

•
if such securities were acquired in open market transactions after the completion of this offering; 

•
pursuant to the underwriting agreement; or 

•
pursuant to an order of a court or regulatory agency;
provided, in the case of a transfer described in bullets one through seven above, that such transfer does not involve a disposition for value, and each transferee agrees to be subject to the restrictions described in the immediately preceding paragraph and that no filing by any party under Section 16(a) of the Exchange Act, shall be required or shall be made voluntarily in connection with such transfer.
In addition, the transfer restrictions described above do not apply to:
•
the exercise of stock options granted pursuant to our equity plans; 

•
the conversion of the outstanding preferred shares into our common stock; 

•
the conversion or exercise of warrants into common stock; 

•
forfeitures to satisfy tax withholding obligations in connection with the conversion or exercise of our options or warrants; 

•
transfers pursuant to a "change of control" of our company; or 

•
the establishment of any 10b5-1 plan, provided that no sales of the stockholders common stock will be made under such plans for 180 days after the date of this prospectus.
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See "Shares Eligible for Future Sale" for a discussion of certain transfer restrictions.
Listing
We have applied to list our common stock on NASDAQ under the symbol "SIEN." In order to meet the requirements for listing on that exchange, the underwriters have undertaken to sell a minimum number of shares to a minimum number of beneficial owners as required by that exchange.
Before this offering, there has been no public market for our common stock. The initial public offering price will be determined through negotiations among us and the representatives. In addition to prevailing market conditions, the factors to be considered in determining the initial public offering price are:
•
the valuation multiples of publicly traded companies that the representatives believe to be comparable to us; 

•
our financial information; 

•
the history of, and the prospects for, our company and the industry in which we compete; 

•
an assessment of our management, its past and present operations and the prospects for, and timing of, our future net sales; 

•
the present state of our development; and 

•
the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also possible that after this offering the shares will not trade in the public market at or above the initial public offering price.
The underwriters do not expect to sell more than 5% of the shares in the aggregate to accounts over which they exercise discretionary authority.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares is completed, SEC rules may limit underwriters and selling group members from bidding for and purchasing shares of our common stock. However, the underwriters may engage in transactions that stabilize the price of our common stock, such as bids or purchases to peg, fix or maintain that price.
In connection with this offering, the underwriters may purchase and sell shares of our common stock in the open market. These transactions may include short sales, purchases on the open market to cover positions created by short sales and stabilizing transactions. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in this offering. "Covered" short sales are sales made in an amount not greater than the underwriters' overallotment option described above. The underwriters may close out any covered short position by either exercising their overallotment option or purchasing shares in the open market. In determining the source of shares to close out the covered short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase shares through the overallotment option. "Naked" short sales are sales in excess of the overallotment option. The underwriters must close out any naked short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of our common stock in the open market after pricing that could adversely affect investors who purchase in this offering. Stabilizing
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transactions consist of various bids for or purchases of shares of our common stock made by the underwriters in the open market prior to the closing of this offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Similar to other purchase transactions, the underwriters' purchases to cover the syndicate short sales may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock may be higher than the price that might otherwise exist in the open market. The underwriters may conduct these transactions on NASDAQ, in the over-the-counter market or otherwise.
Neither we nor any of the underwriters make any representation or prediction as to the direction or magnitude of any effect that the transactions described above may have on the price of our common stock. In addition, neither we nor any of the underwriters make any representation that the representatives will engage in these transactions or that these transactions, once commenced, will not be discontinued without notice.
Electronic Offer, Sale and Distribution of Shares
In connection with this offering, certain of the underwriters or securities dealers may distribute prospectuses by electronic means, such as e-mail. In addition, one or more of the underwriters may facilitate Internet distribution for this offering to certain of their Internet subscription customers. Any such underwriter may allocate a limited number of shares for sale to its online brokerage customers. An electronic prospectus is available on the Internet websites maintained by any such underwriter. Other than the prospectus in electronic format, the information on the websites of any such underwriter is not part of this prospectus.
Other Relationships
The underwriters and their respective affiliates are full service financial institutions engaged in various activities, which may include securities trading, commercial and investment banking, financial advisory, investment management, investment research, principal investment, hedging, financing and brokerage activities. Certain of the underwriters and their affiliates have engaged in, and may in the future engage in, investment banking and other commercial dealings in the ordinary course of business with us or our affiliates. They have received, or may in the future receive, customary fees and commissions for these transactions.
In the ordinary course of their various business activities, the underwriters and their respective affiliates may make or hold a broad array of investments and actively trade debt and equity securities (or related derivative securities) and financial instruments (including bank loans) for their own account and for the accounts of their customers, and such investment and securities activities may involve securities and/or instruments of the issuer. The underwriters and their respective affiliates may also make investment recommendations and/or publish or express independent research views in respect of such securities or instruments and may at any time hold, or recommend to clients that they acquire, long and/or short positions in such securities and instruments.
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Selling Restrictions
European Economic Area
In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, or each, a Relevant Member State, an offer to the public of any shares of our common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares of our common stock 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 any legal entity which is a qualified investor as defined in the Prospectus Directive;

(b)
to fewer than 100 or, if the Relevant Member State has implemented the relevant provision of the 2010 PD Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus Directive), as permitted under the Prospectus Directive, subject to obtaining the prior consent of the representatives for any such offer; or

(c)
in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares of our common stock shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive or supplement a prospectus pursuant to Article 16 of the Prospectus Directive.
For the purposes of this provision, the expression an "offer to the public" in relation to any shares of our common stock 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 shares of our common stock to be offered so as to enable an investor to decide to purchase any shares of our common stock, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression "Prospectus Directive" means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression "2010 PD Amending Directive" means Directive 2010/73/EU.
United Kingdom
Each underwriter has represented and agreed that:
(a)
it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (the "FSMA")) received by it in connection with the issue or sale of the shares of our common stock in circumstances in which Section 21(1) of the FSMA does not apply to us; and

(b)
it has complied and will comply with all applicable provisions of the FSMA with respect to anything done by it in relation to the shares of our common stock in, from or otherwise involving the United Kingdom.
Canada
The common shares may be sold only to purchasers purchasing as principal that are both "accredited investors" as defined in National Instrument 45-106 Prospectus and Registration Exemptions and "permitted clients" as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the common shares must be made in accordance with an exemption from the prospectus requirements and in compliance with the registration requirements of applicable securities laws.
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Switzerland
The common shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or the SIX, or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the common shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document nor any other offering or marketing material relating to the offering, or the common shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of common shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA, and the offer of common shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. Accordingly, no public distribution, offering or advertising, as defined in CISA, its implementing ordinances and notices, and no distribution to any non-qualified investor, as defined in CISA, its implementing ordinances and notices, shall be undertaken in or from Switzerland, and the investor protection afforded to acquirers of interests in collective investment schemes under CISA does not extend to acquirers of common shares.
France
This prospectus (including any amendment, supplement or replacement thereto) is not being distributed in the context of a public offering in France within the meaning of Article L. 411-1 of the French Monetary and Financial Code (Code monétaire et financier).
This prospectus has not been and will not be submitted to the French Autorité des Marchés Financiers, or the AMF, for approval in France and accordingly may not and will not be distributed to the public in France.
Pursuant to Article 211-3 of the AMF General Regulation, French residents are hereby informed that:
1.
the transaction does not require a prospectus to be submitted for approval to the AMF;

2.
persons or entities referred to in Point 2°, Section II of Article L.411-2 of the Monetary and Financial Code may take part in the transaction solely for their own account, as provided in Articles D. 411-1, D. 734-1, D. 744-1, D. 754-1 and D. 764-1 of the Monetary and Financial Code; and

3.
the financial instruments thus acquired cannot be distributed directly or indirectly to the public otherwise than in accordance with Articles L. 411-1, L. 411-2, L. 412-1 and L. 621-8 to L. 621-8-3 of the Monetary and Financial Code.
This prospectus is not to be further distributed or reproduced (in whole or in part) in France by the recipients of this prospectus. This prospectus has been distributed on the understanding that such recipients will only participate in the issue or sale of our common stock for their own account and undertake not to transfer, directly or indirectly, our common stock to the public in France, other than in compliance with all applicable laws and regulations and in particular with Articles L. 411-1 and L. 411-2 of the French Monetary and Financial Code.
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Dubai International Financial Centre
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be illiquid and subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized financial advisor.
Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission, or ASIC, in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons, or the Exempt Investors who are "sophisticated investors" (within the meaning of section 708(8) of the Corporations Act), "professional investors" (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Hong Kong
The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to "professional investors" as defined in the Securities and Futures Ordinance (Cap. 571) of Hong Kong and any rules made under that Ordinance; or (b) in other circumstances which do not result in the document being a "prospectus" as defined in the Companies Ordinance (Cap. 32) of Hong Kong or which do not constitute an offer to the public within the meaning of that Ordinance. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to the shares which are or are intended to be disposed of only to
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persons outside Hong Kong or only to "professional investors" as defined in the Securities and Futures Ordinance and any rules made under that Ordinance.
Japan
The shares have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (Law No. 25 of 1948, as amended) and, accordingly, will not be offered or sold, directly or indirectly, in Japan, or for the benefit of any Japanese Person or to others for re-offering or resale, directly or indirectly, in Japan or to any Japanese Person, except in compliance with all applicable laws, regulations and ministerial guidelines promulgated by relevant Japanese governmental or regulatory authorities in effect at the relevant time. For the purposes of this paragraph, "Japanese Person" shall mean any person resident in Japan, including any corporation or other entity organized under the laws of Japan.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore, or SFA (ii) to a relevant person pursuant to Section 275(1), or any person pursuant to Section 275(1A), and in accordance with the conditions specified in Section 275, of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
(a)
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or

(b)
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
securities (as defined in Section 239(1) of the SFA) of that corporation or the beneficiaries' rights and interest (howsoever described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
(a)
to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

(b)
where no consideration is or will be given for the transfer;

(c)
where the transfer is by operation of law;

(d)
as specified in Section 276(7) of the SFA; or
as specified in Regulation 32 of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.
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 LEGAL MATTERS
The validity of the shares of common stock being offered in this offering will be passed upon for us by Cooley LLP, Santa Monica, California. Certain legal matters relating to this offering will be passed upon for the underwriters by Latham & Watkins LLP, Costa Mesa, California.

 CHANGE IN INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP, or PwC, was previously our independent auditors since 2007. On December 13, 2013, we dismissed PwC and KPMG LLP was engaged as our independent auditors. The decision to change our independent auditors was approved by our board of directors.
During the years ended December 31, 2011 and 2012 and the subsequent interim period through December 13, 2013, there were no (1) disagreements with PwC on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures which disagreements if not resolved to PwC's satisfaction would have caused them to make reference thereto in their reports on the financial statements for such years, or (2) reportable events as defined in Item 304(a)(1)(v) of Regulation S-K, except as described below. PwC did not issue any audit reports for the years ended December 31, 2012 and 2013.
During October 2013, PwC notified us that it was in disagreement with our revenue recognition policies relating to the timing of revenue recognition given our terms and conditions and practices regarding returns. The subject matter of this disagreement was not discussed between our board of directors and PwC prior to PwC's dismissal. We authorized PwC to respond fully to the inquiries of KPMG LLP concerning the subject matter of this disagreement. We requested PwC to provide us with a letter addressed to the SEC stating whether or not PwC agrees with the above disclosures. A copy of PwC's letter, dated October 9, 2014, is attached as Exhibit 16.1 to the registration statement on Form S-1 of which this prospectus is a part.
KPMG LLP audited our financial statements for the years ended December 31, 2012 and 2013 and the audit reports of KPMG LLP for such years did not contain an adverse opinion or a disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the two fiscal years ended December 31, 2012 and through the subsequent interim period prior to KPMG LLP becoming the Company's independent auditors, the Company did not consult with KPMG LLP on either (1) the application of accounting principles to a specified transaction, either completed or proposed, (2) the type of audit opinion that may be rendered on the Company's financial statements; or (3) any matter that was either the subject of a disagreement, as defined in Item 304(a)(1)(iv) of Regulation S-K, or a reportable event. We are unable to quantify the impact of the matters subject to the disagreement and cannot state what the effect on our financial statements would have been as an evaluation of such matters was not completed prior to the dismissal of our former independent auditors.

 EXPERTS
The financial statements of Sientra, Inc. as of December 31, 2012 and 2013, and for the years then ended, have been included herein and in the registration statement in reliance upon the report of KPMG LLP, independent registered public accounting firm, appearing elsewhere herein, and upon the authority of said firm as experts in accounting and auditing.

 WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-1 with the SEC, which includes exhibits, schedules and amendments, under the Securities Act with respect to the common stock offered by this
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prospectus. Although this prospectus, which forms a part of the registration statement, contains all material information included in the registration statement, parts of the registration statement have been omitted as permitted by rules and regulations of the SEC. We refer you to the registration statement and its exhibits for further information about us, our common stock and this offering. The registration statement and its exhibits, as well as any other documents that we have filed with the SEC, may be inspected and copied at the SEC's public reference room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information about the operation of the public reference room by calling the SEC at 1-800-SEC-0330. In addition, the SEC maintains a website at www.sec.gov that contains registration statements, reports, proxy and information statements, and other information regarding issuers like us that file electronically with the SEC.
After we have completed this offering, we will become subject to the information and reporting requirements of the Exchange Act and will file annual, quarterly and current reports, proxy statements and other information with the SEC. You may read and copy any reports, statements or other information on file at the SEC's public reference rooms and the website of the SEC referred to above. Once the offering is completed, we intend to make these filings available on our website at www.sientra.com , at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. Information contained on our website is not a part of this prospectus and the inclusion of our website address in this prospectus is an inactive textual reference only.
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 INDEX TO FINANCIAL STATEMENTS
Years ended December 31, 2012 and 2013 (audited) and
Six months ended June 30, 2013 and 2014 (unaudited)

			
Report of Independent Registered Public Accounting Firm	 	F-2	
Balance Sheets	 	F-3	
Statements of Operations	 	F-4	
Statements of Convertible Preferred Stock and Stockholders' Deficit	 	F-5	
Statements of Cash Flows	 	F-6	
Notes to the Financial Statements	 	F-7	
Schedule II — Valuation and Qualifying Accounts	 	F-31	
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  Report of Independent Registered Public Accounting Firm
The Board of Directors and Stockholders
Sientra, Inc.:
We have audited the accompanying balance sheets of Sientra, Inc. (the Company) as of December 31, 2012 and 2013, and the related statements of operations, convertible preferred stock and stockholders' deficit, and cash flows for the years then ended. In connection with our audits of the financial statements, we also have audited the related financial statement schedule II — valuation and qualifying accounts. These financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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 financial statements referred to above present fairly, in all material respects, the financial position of Sientra, Inc. as of December 31, 2012 and 2013, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.
As described in Note 2 to the financial statements of Sientra, Inc., accumulated deficit as of December 31, 2011 has been restated to correct a misstatement from the Company's previously issued financial statements, which were audited by other auditors.

			
 	 	/s/ KPMG LLP

KPMG LLP	
Woodland Hills, California
July 17, 2014, except for the third paragraph of Note 1, as to which the date is October 17, 2014
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SIENTRA, INC.

Balance Sheets

(Information as of June 30, 2014 is unaudited)

(In thousands, except per share and share amounts)

														
 	 	December 31,	 	 	 	 	 	
 			 	June 30,
2014	 	Pro Forma June 30,
2014	 	
 	 	2012	 	2013					 	
 	 	 	 	 	 	(Unaudited)	 	(Unaudited)	 	
Assets	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current assets:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash and cash equivalents	 	 $	39,208	 	 	9,722	 	 	21,637	 	 	 	 	
Accounts receivable, net of allowances of $4,500, $8,543 and $10,385 at December 31, 2012, December 31, 2013 and June 30, 2014, respectively	 	 	3,350	 	 	6,111	 	 	5,111	 	 	 	 	
Inventories, net	 	 	10,680	 	 	21,533	 	 	19,508	 	 	 	 	
Prepaid expenses and other current assets	 	 	883	 	 	884	 	 	2,119	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total current assets	 	 	54,121	 	 	38,250	 	 	48,375	 	 	 	 	
Property and equipment, net	 	 	331	 	 	254	 	 	325	 	 	 	 	
Goodwill	 	 	14,278	 	 	14,278	 	 	14,278	 	 	 	 	
Other intangible assets, net	 	 	339	 	 	207	 	 	161	 	 	 	 	
Other assets	 	 	289	 	 	177	 	 	258	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total assets	 	 $	69,358	 	 	53,166	 	 	63,397	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Liabilities, Convertible Preferred Stock and Stockholders' Deficit	 	 	 	 	 	 	 	 	 	 	 	 	 	
Current liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts payable	 	 $	2,864	 	 	4,768	 	 	4,090	 	 	 	 	
Accrued and other current liabilities	 	 	4,224	 	 	4,065	 	 	4,208	 	 	 	 	
Accrual for contingent consideration	 	 	18,000	 	 	—	 	 	—	 	 	 	 	
Customer deposits	 	 	1,315	 	 	4,908	 	 	6,304	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total current liabilities	 	 	26,403	 	 	13,741	 	 	14,602	 	 	 	 	
Long-term debt	 	 	—	 	 	15,092	 	 	25,177	 	 	 	 	
Warranty reserve and other long-term liabilities	 	 	139	 	 	550	 	 	789	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total liabilities	 	 	26,542	 	 	29,383	 	 	40,568	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Commitments and contingencies (note 10)	 	 	 	 	 	 	 	 	 	 	 	 	 	
Convertible preferred stock, $0.01 par value — Authorized, issued and outstanding 24,593,087 shares at December 31, 2012, December 31, 2013 and June 30, 2014 (Liquidation preference of $151,000 as of December 31, 2013 and June 30, 2014)	 	 	150,456	 	 	150,456	 	 	150,456	 	 	—	 	
Stockholders' deficit:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Common stock, $0.01 par value — Authorized 30,200,000 shares; issued 276,854, 279,879 and 282,072 and outstanding 276,854, 207,152 and 209,345 shares at December 31, 2012, December 31, 2013 and June 30, 2014, respectively	 	 	3	 	 	3	 	 	3	 	 	92	 	
Additional paid-in capital	 	 	1,467	 	 	1,819	 	 	2,027	 	 	152,394	 	
Treasury stock, at cost (0 shares at December 31, 2012 and 72,727 shares at December 31, 2013 and June 30, 2014)	 	 	—	 	 	(260	)	 	(260	)	 	(260	)	
Accumulated deficit	 	 	(109,110	)	 	(128,235	)	 	(129,397	)	 	(129,397	)	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total stockholders' deficit	 	 	(107,640	)	 	(126,673	)	 	(127,627	)	 	22,829	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total liabilities, convertible preferred stock and stockholders' deficit	 	 $	69,358	 	 	53,166	 	 	63,397	 	 	63,397	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	

See accompanying notes to financial statements.
F-3

Table of Contents

SIENTRA, INC.

Statements of Operations

(Information for the six months ended June 30, 2013 and 2014 is unaudited)

(In thousands, except per share and share amounts)

														
 	 	Year Ended
December 31,	 	Six Months Ended
June 30,	 	
 	 	2012	 	2013	 	2013	 	2014	 	
 	 	 	 	 	 	(Unaudited)	 	
Net sales	 	 $	10,447	 	 $	35,171	 	 $	17,940	 	 $	21,947	 	
Cost of goods sold	 	 	2,352	 	 	8,592	 	 	4,384	 	 	5,455	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Gross profit	 	 	8,095	 	 	26,579	 	 	13,556	 	 	16,492	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Operating expenses:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Sales and marketing	 	 	17,919	 	 	22,229	 	 	10,797	 	 	11,863	 	
Research and development	 	 	3,670	 	 	4,479	 	 	2,166	 	 	2,305	 	
General and administrative	 	 	9,938	 	 	18,078	 	 	9,768	 	 	4,908	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total operating expenses	 	 	31,527	 	 	44,786	 	 	22,731	 	 	19,076	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Loss from operations	 	 	(23,432	)	 	(18,207	)	 	(9,175	)	 	(2,584	)	
Other (expense) income, net:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest expense	 	 	—	 	 	(872	)	 	(380	)	 	(842	)	
Other (expense) income, net:	 	 	(1	)	 	(46	)	 	(20	)	 	2,264	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Total other (expense) income, net              	 	 	(1	)	 	(918	)	 	(400	)	 	1,422	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Loss before income taxes	 	 	(23,433	)	 	(19,125	)	 	(9,575	)	 	(1,162	)	
Income taxes	 	 	—	 	 	—	 	 	—	 	 	—	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Net loss	 	 $	(23,433	)	 $	(19,125	)	 $	(9,575	)	 $	(1,162	)	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Basic and diluted net loss per share attributable to common stockholders	 	 $	(85.01	)	 $	(82.25	)	 $	(36.98	)	 $	(5.58	)	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Weighted average outstanding common shares used for net loss per share attributable to common stockholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted	 	 	275,642	 	 	232,512	 	 	258,928	 	 	208,294	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Pro forma net loss per share:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted (unaudited)	 	 	 	 	 $	(2.08	)	 	 	 	 $	(0.13	)	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	 	
Weighted average outstanding common shares used in computing pro forma net loss per share attributable to common stockholders:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Basic and diluted (unaudited)	 	 	 	 	 	9,175,442	 	 	 	 	 	9,151,224	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	

See accompanying notes to financial statements.
F-4

Table of Contents

SIENTRA, INC.

Statements of Convertible Preferred Stock and Stockholders' Deficit

(Information for the six months ended June 30, 2014 is unaudited)

(In thousands, except per share and share amounts)

																													
 	 	Convertible preferred
stock	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 			 	Common stock	 	Treasury stock	 	 	 	 	 	 	 	
 							 	Additional
paid-in
capital	 	Accumulated
deficit	 	Total
stockholders'
deficit	 	
 	 	Shares	 	Amount	 	Shares	 	Amount	 	Shares	 	Amount							 	
Balance at January 1, 2012	 	 	12,409,397	 	 $	85,903	 	 	 275,036	 	 $	3	 	 	—	 	 $	—	 	 	1,107	 	 	(84,818	)	 	(83,708	)	
Correction of prior period adjustments	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(859	)	 	(859	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Balance at January 1, 2012, restated	 	 	12,409,397	 	 	85,903	 	 	275,036	 	 	3	 	 	—	 	 	—	 	 	1,107	 	 	(85,677	)	 	(84,567	)	
Issuance of Series C convertible preferred stock at $5.335 per share, net of issuance costs of $447	 	 	12,183,690	 	 	64,553	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
Stock option exercises	 	 	—	 	 	—	 	 	1,818	 	 	—	 	 	—	 	 	—	 	 	3	 	 	—	 	 	3	 	
Employee stock-based compensation expense	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	357	 	 	—	 	 	357	 	
Net loss	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(23,433	)	 	(23,433	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Balances at December 31, 2012	 	 	24,593,087	 	 	150,456	 	 	276,854	 	 	3	 	 	—	 	 	—	 	 	1,467	 	 	(109,110	)	 	(107,640	)	
Stock option exercises	 	 	—	 	 	—	 	 	3,025	 	 	—	 	 	 	 	 	 	 	 	10	 	 	—	 	 	10	 	
Repurchased common shares	 	 	—	 	 	—	 	 	—	 	 	—	 	 	72,727	 	 	(260	)	 	—	 	 	—	 	 	(260	)	
Employee stock-based compensation expense	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	342	 	 	—	 	 	342	 	
Net loss	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(19,125	)	 	(19,125	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Balances at December 31, 2013	 	 	24,593,087	 	 $	150,456	 	 	 279,879	 	 $	3	 	 	72,727	 	 $	(260	)	 	1,819	 	 	(128,235	)	 	(126,673	)	
Stock option exercises (unaudited)	 	 	—	 	 	—	 	 	2,193	 	 	—	 	 	—	 	 	—	 	 	9	 	 	—	 	 	9	 	
Repurchased common shares (unaudited)                 	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	
Employee stock-based compensation expense (unaudited)	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	199	 	 	—	 	 	199	 	
Net loss (unaudited)	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	—	 	 	(1,162	)	 	(1,162	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Balances at June 30, 2014 (unaudited)	 	 	24,593,087	 	 $	150,456	 	 	 282,072	 	 $	3	 	 	72,727	 	 $	(260	)	 	2,027	 	 	(129,397	)	 	(127,627	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Pro forma:	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Conversion of convertible preferred stock to common stock (unaudited)	 	 	(24,593,087	)	 	(150,456	)	 	8,942,930	 	 	89	 	 	—	 	 	—	 	 	150,367	 	 	—	 	 	150,456	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Balances at June 30, 2014 (unaudited)	 	 	—	 	 $	—	 	 	 9,225,002	 	 $	92	 	 	72,727	 	 $	(260	)	 	152,394	 	 	(129,397	)	 	22,829	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	

See accompanying notes to financial statements.
F-5

Table of Contents

SIENTRA, INC.

Statements of Cash Flows

(Information for the six months ended June 30, 2013 and 2014 is unaudited)

(In thousands)

														
 	 	Year Ended
December 31,	 	Six Months
Ended
June 30,	 	
 	 	2012	 	2013	 	2013	 	2014	 	
 	 	 	 	 	 	(Unaudited)	 	
Cash flows from operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Net loss	 	 $	(23,433	)	 	(19,125	)	 	(9,575	)	 	(1,162	)	
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Depreciation and amortization	 	 	288	 	 	280	 	 	138	 	 	125	 	
Provision for sales return reserve	 	 	4,240	 	 	3,936	 	 	3,591	 	 	1,906	 	
Provision for (recovery of) doubtful accounts	 	 	140	 	 	107	 	 	—	 	 	(64	)	
Provision for warranties	 	 	123	 	 	392	 	 	203	 	 	246	 	
Change in fair value of warrants	 	 	—	 	 	46	 	 	20	 	 	93	 	
Non cash interest expense	 	 	—	 	 	179	 	 	74	 	 	208	 	
Stock-based compensation expense	 	 	357	 	 	342	 	 	171	 	 	199	 	
Changes in assets and liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accounts receivable	 	 	(7,636	)	 	(6,804	)	 	(6,610	)	 	(841	)	
Prepaid expenses, other current assets and other assets           	 	 	(575	)	 	195	 	 	248	 	 	(421	)	
Inventories	 	 	(7,520	)	 	(10,852	)	 	(4,509	)	 	2,025	 	
Accounts payable	 	 	390	 	 	1,904	 	 	552	 	 	(1,269	)	
Accrued and other liabilities	 	 	2,931	 	 	(70	)	 	2,071	 	 	(237	)	
Customer deposits	 	 	849	 	 	3,593	 	 	1,992	 	 	1,395	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Net cash (used in) provided by operating activities                	 	 	(29,846	)	 	(25,877	)	 	(11,634	)	 	2,203	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Cash flows from investing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Purchase of property and equipment	 	 	(394	)	 	(71	)	 	(23	)	 	(149	)	
Contingent payment related to Silimed acquisition	 	 	—	 	 	(18,000	)	 	(18,000	)	 	—	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Net cash used in investing activities	 	 	(394	)	 	(18,071	)	 	(18,023	)	 	(149	)	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Cash flows from financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Proceeds from exercise of stock options	 	 	3	 	 	10	 	 	—	 	 	9	 	
Repurchase of common stock	 	 	—	 	 	(260	)	 	(260	)	 	—	 	
Proceeds from issuance of preferred stock, net	 	 	64,553	 	 	—	 	 	—	 	 	—	 	
Proceeds from issuance of long-term debt	 	 	—	 	 	15,000	 	 	7,500	 	 	10,000	 	
Deferred financing costs	 	 	—	 	 	(288	)	 	(81	)	 	(148	)	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Net cash provided by financing activities	 	 	64,556	 	 	14,462	 	 	7,159	 	 	9,861	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Net increase (decrease) in cash and cash equivalents           	 	 	34,316	 	 	(29,486	)	 	(22,498	)	 	11,915	 	
Cash and cash equivalents at:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Beginning of period	 	 	4,892	 	 	39,208	 	 	39,208	 	 	9,722	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
End of period	 	 $	39,208	 	 	9,722	 	 	16,710	 	 	21,637	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Supplemental disclosure of cash flow information:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Cash paid during the year for:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Interest paid	 	 $	—	 	 	641	 	 	235	 	 	596	 	
Supplemental disclosure of noncash investing and financing activities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Accrual for the resolution of contingent payment related to Silimed acquisition	 	 $	18,000	 	 	—	 	 	—	 	 	—	 	
Accrued deferred equity issuance costs	 	 $	—	 	 	—	 	 	—	 	 	759	 	
    
See accompanying notes to financial statements.
F-6

Table of Contents

SIENTRA, INC.
Notes to the Financial Statements
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(1) Formation and Business of the Company
Sientra, Inc. (the Company) was incorporated in the state of Delaware on August 29, 2003 under the name Juliet Medical and subsequently changed its name to Sientra, Inc. at the end of 2006. The Company acquired substantially all the assets of Silimed, Inc. (Silimed) on April 4, 2007. The purpose of the acquisition was to acquire the rights to the silicone breast implant clinical trials. Following this acquisition, the Company focused on completing the clinical trials to gain Food and Drug Administration ("FDA") approval to offer its silicone gel breast implants in the United States.
In March 2012, Sientra announced it had received approval from the FDA for its portfolio of silicone gel breast implants, and in late May of the same year began commercialization efforts to sell its products in the United States. The Company, based in Santa Barbara, California, is a medical aesthetics company that focuses on serving board-certified plastic surgeons and offers a portfolio of silicone shaped and round breast implants, tissue expanders, and body contouring products.
On October 10, 2014, the board of directors and stockholders approved an amendment to our fourth amended and restated certificate of incorporation, which was filed on October 17, 2014, which effected a 1 for 2.75 reverse stock split of our issued and outstanding shares of common stock. The par value of the common stock was not adjusted as a result of the reverse stock split. All issued and outstanding shares of common stock, stock options and warrants and the related per share amounts contained in our consolidated financial statements have been retroactively adjusted to reflect this reverse stock split for all periods presented. Also, as a result of the reverse stock split of our common stock, the conversion ratios for all of our convertible preferred stock have been adjusted such that our preferred stock are now convertible into shares of common stock at a conversion rate of 2.75-to-1 instead of 1-to-1. The number of issued and outstanding shares of preferred stock and their related per share amounts have not been affected by the reverse stock split and therefore have not been adjusted in our consolidated financial statements. However, to the extent that our convertible preferred stock are presented on an as converted to common stock basis, such share and per share amounts contained in our consolidated financial statements have been retroactively adjusted to reflect this reverse stock split for all periods presented.
(2) Adjustment Related to Previously Issued Financial Statements
Subsequent to the issuance of the Company's audited financial statements as of and for the year ended December 31, 2011, certain adjustments were recorded to the Company's January 1, 2012, beginning accumulated deficit, primarily to record a fiscal 2011 bonus accrual and related expense in the correct period. The adjustments resulted in an increase in accumulated deficit at January 1, 2012 of $859.
(3) Summary of Significant Accounting Policies
(a)
Basis of Presentation and Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements, and the reported amounts of revenues and expenses
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Table of Contents

SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(3) Summary of Significant Accounting Policies (Continued)
during the reporting period. Actual results could differ from those estimates. Assets and liabilities which are subject to significant judgment and use of estimates include the allowance for doubtful accounts, sales return reserves, provision for warranties, valuation of inventories, recoverability of long-lived assets, valuation allowances with respect to deferred tax assets, useful lives associated with property and equipment and finite lived intangible assets, and the valuation and assumptions underlying stock-based compensation and other equity instruments. On an ongoing basis, the Company evaluates its estimates compared to historical experience and trends, which form the basis for making judgments about the carrying value of assets and liabilities. In addition, the Company engages the assistance of valuation specialists in concluding on fair value measurements in connection with stock-based compensation and other equity instruments.
(b)
Liquidity
Since inception, the Company has incurred net losses. During the year ended December 31, 2013 and the six months ended June 30, 2014, the Company incurred a net loss of $19,125 and $1,162, respectively. The Company used $25,877 of cash in operations during the year ended December 31, 2013, and generated $2,203 of cash from operations for the six months ended June 30, 2014. At December 31, 2013 and June 30, 2014 the Company had an accumulated deficit of $128,235 and $129,397, respectively. The Company's ability to continue to meet its obligations and to achieve its business objectives is dependent upon, amongst other things, raising additional capital and/or generating sufficient revenues. For the long term, management may need to explore additional financing alternatives, including private equity or debt financing, collaborative or other arrangements with corporate partners or other sources. There can be no assurance, however, that such financing will be successfully completed on terms acceptable to the Company, if at all. Failure to manage discretionary expenditures or raise additional financing, as needed, may adversely impact the Company's ability to achieve its intended business objectives. The Company believes that it has the ability to continue as a going concern through at least December 31, 2014.
(c)
Unaudited Interim Financial Information
The accompanying balance sheet as of June 30, 2014, the statements of operations and statements of cash flows for the six months ended June 30, 2013 and 2014, and the statement of convertible preferred stock and stockholders' deficit for the six months ended June 30, 2014 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company's financial position as of June 30, 2014 and the results of its operations and its cash flows for the six months ended June 30, 2013 and 2014. The financial data and other information disclosed in these notes related to the six months ended June 30, 2013 and 2014 are unaudited. The results for the six months ended June 30, 2014 are not necessarily indicative of results to be expected for the year ending December 31, 2014, any other interim periods, or any future year or period.
F-8

Table of Contents

SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(3) Summary of Significant Accounting Policies (Continued)
(d)
Unaudited Pro Forma Information
The accompanying unaudited pro forma balance sheet and statement of convertible preferred stock and stockholders' deficit as of June 30, 2014 has been prepared to give effect to the automatic conversion of all outstanding shares of convertible preferred stock into 8,942,930 shares of common stock. In the accompanying statements of operations, unaudited pro forma basic and diluted net loss per share attributable to common stockholders for the year ended December 31, 2013 and the six months ended June 30, 2014 have been prepared to give effect to the automatic conversion of all outstanding shares of convertible preferred stock into shares of common stock as if the proposed initial public offering had occurred on January 1, 2013. The requisite holders of convertible preferred stock have consented to the automatic conversion of the Series A, B and C preferred stock into shares of common stock upon the closing of this offering.
(e)
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents consist primarily of checking accounts.
(f)
Concentration of Credit and Supplier Risks
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents. The Company's cash and cash equivalents are deposited in demand accounts at a financial institution that management believes is creditworthy. The Company is exposed to credit risk in the event of default by this financial institution for cash and cash equivalents in excess of amounts insured by the Federal Deposit Insurance Corporation (FDIC). Management believes that the Company's investments in cash and cash equivalents are financially sound and have minimal credit risk and the Company has not experienced any losses on its deposits of cash and cash equivalents.
The Company currently purchases all of its breast products from one supplier under an exclusivity contract. The supplier and its production facility are located in Brazil. The Company is exposed to risks of foreign regulations in Brazil that could hinder the Company's ability to import goods, as well as halts or limitations in productions due to events outside of the Company's control occurring at the production facility. This could result in the Company not being able to acquire the inventory needed to meet customer demand, which would result in possible loss of sales and affect operating results adversely. Management believes that there is minimal risk of such events occurring.
(g)
Fair Value of Financial Instruments
The Company has estimated the fair value of its financial instruments using the following methods and assumptions:
•
Cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, and customer deposits are carried at cost, which approximates fair value because of the short term nature of those instruments.
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Table of Contents

SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(3) Summary of Significant Accounting Policies (Continued)
•
Long-term debt is included in the balance sheet at its amortized cost. The carrying value of the long-term debt approximates its fair value. The fair value of the Company's long-term debt was determined based on the relative timing of the instruments, all under substantially the same terms, including the issuance of each of the three tranches (tranche A, B, and C) drawn in 2013. In addition, tranches B and C were made available to the Company based on the Company meeting certain performance milestones. Furthermore, on June 30, 2014, the Company negotiated with Oxford to amend the Loan and Security Agreement, or original term loan agreement, and raise an additional $10,000 in a fourth tranche (tranche D). The terms for tranche D were substantially the same as for the prior tranches (see Note 5). Based upon this, for December 31, 2013 and June 30, 2014, the Company has determined the carrying value closely approximates the fair value.

(h)
Fair Value Measurements
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
•
Level 1 — Quoted prices in active markets for identical assets or liabilities. 

•
Level 2 — Observable inputs (other than Level 1 quoted prices) such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data. 

•
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Company's common stock warrant liabilities are carried at fair value determined according to the fair value hierarchy described above. The Company has utilized an option pricing valuation model to determine the fair value of its outstanding common stock warrant liabilities. The inputs to the model include fair value of the common stock related to the warrant, exercise price of the warrant, expected term, expected volatility, risk-free interest rate and dividend yield. The Company determines the fair value per share of the underlying common stock by taking into consideration its most recent sale of its convertible preferred stock as well as additional factors that the Company deems relevant. The Company historically has been a private company and lacks company-specific historical and implied volatility information of its stock. Therefore, it estimates its expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual
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Table of Contents

SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(3) Summary of Significant Accounting Policies (Continued)
term of the warrants. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company has estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends. As several significant inputs are not observable, the overall fair value measurement of the warrants is classified as Level 3.
The following tables present information about the Company's liabilities that are measured at fair value on a recurring basis as of December 31, 2013 and June 30, 2014 (unaudited) and indicate the level of the fair value hierarchy utilized to determine such fair value:

														
 	 	Fair Value Measurements as of
December 31, 2013 Using:	 	
 	 	Level 1	 	Level 2	 	Level 3	 	Total	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liability for common stock warrants	 	 $	—	 	 	—	 	 	90	 	 	90	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	

														
 	 	Fair Value Measurements as of
June 30, 2014 Using:	 	
 	 	Level 1	 	Level 2	 	Level 3	 	Total	 	
 	 	(Unaudited)	 	
Liabilities:	 	 	 	 	 	 	 	 	 	 	 	 	 	
Liability for common stock warrants	 	 $	—	 	 	—	 	 	293	 	 	293	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
There were no liabilities measured at fair value on a recurring basis as of December 31, 2012.
The following table provides a rollforward of the aggregate fair values of the Company's common stock warrants for which fair value is determined by Level 3 inputs:

					
Fair value upon issuance during 2013	 	 $	44	 	
Increase in fair value through December 31, 2013	 	 	46	 	
 	 	 	 	
 ​	​	​	​	​	
Balance, January 1, 2014	 	 	90	 	
Fair value of warrants upon issuance during 2014 (unaudited)	 	 	110	 	
Increase in fair value through June 30, 2014 (unaudited)	 	 	93	 	
 	 	 	 	
 ​	​	​	​	​	
Balance, June 30, 2014 (unaudited)	 	 	293	 	
 	 	 	 	
 ​	​	​	​	​	
 ​	​	​	​	​	
 	 	 	 	
(i)
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful life of the asset; generally three years. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the related asset. Upon retirement or sale of an asset, the cost and related accumulated depreciation or
F-11

Table of Contents

SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(3) Summary of Significant Accounting Policies (Continued)
amortization are removed from the balance sheet and any resulting gain or loss is reflected in operations in the period realized. Maintenance and repairs are charged to operations as incurred.
(j)
Goodwill and Other Intangible Assets
Goodwill represents the excess of the purchase price over the fair value of net assets of purchased businesses. Goodwill is not amortized, but instead subject to impairment tests on at least an annual basis and whenever circumstances suggest that goodwill may be impaired. The Company's annual test for impairment is performed as of October 1 of each fiscal year. The Company makes a qualitative assessment of whether it is more likely than not that a reporting unit's fair value is less than its carrying amount before applying the two-step goodwill impairment test. If the Company concludes that it is not more likely than not that the fair value of a reporting unit is less than its carrying amount, it is not required to perform the two-step impairment test for that reporting unit.
Under the first step of the test, the Company is required to compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is not considered impaired and the second test is not performed. If the results of the first step of the impairment test indicate that the fair value of a reporting unit does not exceed its carrying amount, then the second step of the test is required. The second step of the test compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. The impairment loss is measured by the excess of the carrying amount of the reporting unit goodwill over the implied fair value of that goodwill.
Management evaluates the Company as a single reporting unit for business and operating purposes as all of the Company's revenue streams are generated by the same underlying products via sales in the United States of America. In addition, the majority of the Company's costs are, by their nature, shared costs that are not specifically identifiable to a geography or product line, but relate to all products. As a result, there is a high degree of interdependency among the Company's net sales and cash flows for the entity and identifiable cash flows for a reporting unit separate from the entity are not meaningful.
Judgments about the recoverability of purchased finite-lived intangible assets are made whenever events or changes in circumstance indicate that impairment may exist. Each fiscal year the Company evaluates the estimated remaining useful lives of purchased intangible assets and whether events or changes in circumstance warrant a revision to the remaining periods of amortization. Recoverability of finite-lived intangible assets is measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. The intangible asset is amortized to the statement of operations based on estimated cash flows generated from the intangible over its estimated life.
(k)
Impairment of Long-Lived Assets
The Company's management routinely considers whether indicators of impairment of long-lived assets are present. If such indicators are present, management determines whether the sum of the estimated
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Table of Contents

SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(3) Summary of Significant Accounting Policies (Continued)
undiscounted cash flows attributable to the assets in question is less than their carrying value. If less, the Company will recognize an impairment loss based on the excess of the carrying amount of the assets over their respective fair values. Fair value is determined by discounted future cash flows, appraisals or other methods. If the assets determined to be impaired are to be held and used, the Company will recognize an impairment charge to the extent the present value of anticipated net cash flows attributable to the asset are less than the asset's carrying value. The fair value of the asset will then become the asset's new carrying value. There have been no impairments of long-lived assets recorded during the years ended December 31, 2012 and 2013 and the six months ended June 30, 2013 and 2014. The Company may record impairment losses in future periods if factors influencing its estimates change.
(l)
Revenue Recognition
The Company sells its product directly to customers in markets where it has regulatory approval. The Company offers a six-month return policy and recognizes revenue net of sales discounts and returns in accordance with FASB Accounting Standards Codification 605, Revenue Recognition (ASC 605). ASC 605 requires that six basic criteria must be met before revenue can be recognized when a right of return exists:
•
the seller's price to the buyer is substantially fixed or determinable at the date of sale; 

•
the buyer has paid the seller, or the buyer is obligated to pay the seller and the obligation is not contingent on resale of the product; 

•
the buyer's obligation to the seller would not be changed in the event of theft or physical destruction or damage of the product; 

•
the buyer acquiring the product for resale has economic substance apart from that provided by the seller; 

•
the seller does not have significant obligations for future performance to directly bring about resale of the product by the buyer; and 

•
the amount of future returns can be reasonably estimated.
Appropriate reserves are established for anticipated sales returns based on historical experience, recent gross sales and any notification of pending returns. The Company recognizes revenue when title to the product and risk of loss transfer to customers, provided there are no remaining performance obligations required of the Company or any written matters requiring customer acceptance. The Company allows for the return of product from customers within six months after the original sale and records estimated sales returns as a reduction of sales in the same period revenue is recognized. Sales return provisions are calculated based upon historical experience with actual returns. Actual sales returns in any future period are inherently uncertain and thus may differ from the estimates. If actual sales returns differ significantly from the estimates, an adjustment to revenue in the current or subsequent period would be recorded. The Company has established an allowance for sales returns of
F-13

Table of Contents

SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(3) Summary of Significant Accounting Policies (Continued)
$4,334, $8,270 and $10,176 as of December 31, 2012, December 31, 2013 and June 30, 2014, respectively, recorded net against accounts receivable in the balance sheet.
A portion of the Company's revenue is generated from consigned inventory of breast implants maintained at doctor, hospital, and clinic locations. The customer is contractually obligated to maintain a specific level of inventory and to notify the Company upon use. For these products, revenue is recognized at the time the Company is notified by the customer that the product has been implanted. Notification is usually through the replenishing of the inventory and the Company periodically reviews consignment inventories to confirm accuracy of customer reporting. FDA regulations require tracking the sales of all implanted products.
Shipping and handling charges are largely provided to customers free of charge. The associated costs are viewed as part of the Company's marketing programs and are recorded as a component of sales and marketing expense in the statement of operations. For the years ended December 31, 2012 and 2013, these costs amounted to $354 and $1,021, respectively. For the six month periods ended June 30, 2013 and 2014, these costs amounted to $533 and $655, respectively.
In other cases, shipping and handling charges may be invoiced to customers based on the amount of products sold. In such cases, shipping and handling fees collected are recorded as revenue and the related expense as a component of cost of goods sold.
(m)
Accounts Receivable and Allowance for Doubtful Accounts
Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company maintains allowances for doubtful accounts for estimated losses resulting from the inability to collect from some of its customers. The allowances for doubtful accounts are based on the analysis of historical bad debts, customer credit-worthiness, past transaction history with the customer, and current economic trends. If the financial condition of the Company's customers were to deteriorate, adversely affecting their ability to make payments, additional allowances may be required. The Company has established an allowance for doubtful accounts of $166, $273 and $209 as of December 31, 2012, December 31, 2013 and June 30, 2014, respectively.
(n)
Inventories and Cost of Goods Sold
Inventories represent finished goods that are recorded at the lower of cost or market on a first-in, first-out basis (FIFO). The Company periodically assesses the recoverability of all inventories to determine whether adjustments for impairment or obsolescence are required. The Company evaluates the remaining shelf life and other general obsolescence and impairment criteria in assessing the recoverability of the Company's inventory.
The Company recognizes the cost of inventory transferred to the customer in cost of goods sold when revenue is recognized.
F-14

Table of Contents

SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(3) Summary of Significant Accounting Policies (Continued)
At December 31, 2012, December 31, 2013 and June 30, 2014, approximately $0, $528 and $1,403, respectively, of the Company's inventory was held on consignment at doctors' offices, clinics, and hospitals. The value and quantity at any one location is not significant.
(o)
Income Taxes
The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.
The Company accounts for uncertain tax position in accordance with ASC 740-10, Accounting for Uncertainty in Income Taxes . The Company assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position's sustainability and is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of tax benefit might change as new information becomes available.
(p)
Research and Development Expenditures
Research and development costs are charged to operating expenses as incurred. Research and development, or R&D, primarily consist of clinical expenses, regulatory expenses, product development, consulting services, outside research activities, quality control, and other costs associated with the development of the Company's products and compliance with Good Clinical Practices, or GCP, requirements. R&D expenses also include related personnel and consultant compensation and stock based compensation expense.
(q)
Advertising
Expenses related to advertising are charged to sales and marketing expense as incurred. Advertising costs were $510 and $801 for fiscal years 2012 and 2013, respectively, and $279 and $855 for the six month periods ended June 30, 2013 and 2014, respectively.
(r)
Stock-Based Compensation
The Company applies the fair value provisions of FASB Accounting Standards Codification 718, Compensation — Stock Compensation (ASC 718). ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all employee share-based payments,
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Table of Contents

SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(3) Summary of Significant Accounting Policies (Continued)
including stock options. ASC 718 requires companies to estimate the fair value of share-based payment awards on the date of grant using an option-pricing model. All option grants valued are being expensed on a straight-line basis over their vesting period.
(s)
Product Warranties
The Company offers a limited warranty and a lifetime product replacement program for the Company's silicone gel breast implants. Under the limited warranty program, the Company will reimburse patients for certain out-of-pocket costs related to revision surgeries performed within ten years from the date of implantation in a covered event. Under the lifetime product replacement program, the Company provides no-charge replacement breast implants under a covered event. The programs are available to all patients implanted with the Company's silicone breast implants after April 1, 2012 and are subject to the terms, conditions, claim procedures, limitations and exclusions. Timely completion of a device tracking and warranty enrollment form by the patient's Plastic Surgeon is required to activate the programs and for the patient to be able to receive benefits under either program.
The Company accrued for warranties issued in fiscal 2012 and fiscal 2013 in the amounts of $123 and $392, respectively, and accrued for warranties issued during the six month periods ended June 30, 2013 and 2014 in the amounts of $203 and $246, respectively. As of December 31, 2012, December 31, 2013, and June 30, 2014, the Company held total warranty liabilities of $123, $515, and $761, respectively. To date, the Company has made no settlement payments for registered participants in either program.
(t)
Segment Information
Management has determined that it has one business activity and operates in one segment as it only reports financial information on an aggregate and consolidated basis to its Chief Executive Officer, who is the Company's chief operating decision maker. All tangible assets are held in the United States.
(u)
Net Loss Per Share
Basic loss per share attributable to common stockholders is computed by dividing net loss by the weighted average number of common shares outstanding during each period. Diluted loss per common share is computed by dividing net loss available to common stockholders by the weighted average number of common shares and dilutive potential common share equivalents then outstanding, to the extent they are dilutive. Potential common shares consist of shares issuable upon the exercise of stock options and warrants (using the treasury stock method), and the weighted average conversion of the convertible preferred stock into shares of common stock (using the if-converted method). Dilutive loss
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Table of Contents

SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(3) Summary of Significant Accounting Policies (Continued)
per share is the same as basic loss per share for all periods presented because the effects of potentially dilutive items were anti-dilutive.

														
 	 	December 31,	 	June 30,	 	
 	 	2012	 	2013	 	2013	 	2014	 	
 	 	 	 	 	 	(Unaudited)	 	
Net loss	 	 $	(23,433	)	 $	(19,125	)	 $	(9,575	)	 $	(1,162	)	
Weighted average common shares outstanding, basic and diluted	 	 	275,642	 	 	232,512	 	 	258,928	 	 	208,294	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Net loss per share attributable to common stockholders	 	 $	(85.01	)	 $	(82.25	)	 $	(36.98	)	 $	(5.58	)	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
The Company excluded the following potentially dilutive securities, outstanding as of December 31, 2012 and 2013 and as of June 30, 2013 and 2014, from the computation of diluted net loss per share attributable to common stockholders for the years ended December 31, 2012 and 2013 and the six months ended June 30, 2013 and 2014 because they had an anti-dilutive impact due to the net loss attributable to common stockholders incurred for the periods.

														
 	 	December 31,	 	June 30,	 	
 	 	2012	 	2013	 	2013	 	2014	 	
 	 	 	 	 	 	(Unaudited)	 	
Stock options to purchase common stock	 	 	1,409,047	 	 	1,422,315	 	 	1,419,770	 	 	1,566,670	 	
Warrants for the purchase of common stock	 	 	—	 	 	30,670	 	 	15,335	 	 	47,710	 	
Convertible preferred stock (as converted to common stock)	 	 	8,942,930	 	 	8,942,930	 	 	8,942,930	 	 	8,942,930	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
	 	 	10,351,977	 	 	10,395,915	 	 	10,378,035	 	 	10,557,310	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
(v)
Recent Accounting Pronouncements
In July 2012, the FASB issued an accounting standard update intended to simplify how an entity tests indefinite-lived intangible assets other than goodwill for impairment by providing entities with an option to perform a qualitative assessment to determine whether further impairment testing is necessary. This accounting standard update was effective for the Company beginning in the fiscal year 2013. There was no material impact on its financial statements upon the adoption of this guidance.
In May 2014, the FASB issued accounting standard update 2014-09, Revenue from Contracts with Customers . The standard was issued to provide a single framework that replaces existing industry and transaction specific US GAAP with a five step analysis of transactions to determine when and how revenue is recognized. This accounting standard updated will be effective for the Company beginning in fiscal year 2018. The Company is currently assessing the impact that the standard will have on the financial statements upon adoption of the guidance.
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(4) Balance Sheet Components
Property and equipment, net consist of the following:

											
 	 	December 31,	 	 	 	
 			 	June 30,
2014	 	
 	 	2012	 	2013			 	
 	 	 	 	 	 	(Unaudited)	 	
Leasehold improvements	 	 $	11	 	 	19	 	 	23	 	
Computer equipment	 	 	172	 	 	183	 	 	202	 	
Software	 	 	85	 	 	85	 	 	85	 	
Office equipment	 	 	76	 	 	128	 	 	128	 	
Furniture and fixtures	 	 	456	 	 	456	 	 	582	 	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
	 	 	800	 	 	871	 	 	1,020	 	
Less accumulated depreciation and amortization	 	 	(469	)	 	(617	)	 	(695	)	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
	 	 $	331	 	 	254	 	 	325	 	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	
Depreciation expense for the years ended December 31, 2012 and December 31, 2013 was $109 and $148, respectively, and for the six month periods ended June 30, 2013 and 2014 was $72 and $79, respectively.
Accrued and other current liabilities consist of the following:

											
 	 	December 31	 	 	 	
 			 	June 30,
2014	 	
 	 	2012	 	2013			 	
 	 	 	 	 	 	(Unaudited)	 	
Accrued clinical trial and research and development expenses	 	 $	191	 	 	166	 	 	135	 	
Audit, consulting and legal fees	 	 	675	 	 	124	 	 	274	 	
Payroll and related expenses	 	 	1,554	 	 	1,890	 	 	1,614	 	
Accrued commission	 	 	1,535	 	 	1,563	 	 	1,472	 	
Other	 	 	269	 	 	322	 	 	713	 	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
	 	 $	4,224	 	 	4,065	 	 	4,208	 	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	
(5) Long-term Debt
On January 17, 2013, the Company entered into the original term loan agreement with Oxford Finance LLC (Oxford) providing for a $15,000 term loan facility consisting of original term loans of (i) a $7,500 tranche A term loan, (ii) a $2,500 tranche B term loan and (iii) a $5,000 tranche C term loan, maturing on February 1, 2017. The term loan facility is collateralized by a first-priority security interest in substantially all of the Company's assets. Borrowings under the term loan facility bear interest at a rate equal to 8.4% per annum and the original term loan agreement provides for interest-only payments through June 30, 2015. The term loans include an additional lump sum payment of $975 due on February 1, 2017.
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(5) Long-term Debt (Continued)
The original term loan agreement includes various non-financial negative and affirmative covenants, as well as restrictions on the payment of dividends. The Company was not in compliance with a non-financial covenant related to timely delivery of the audited financial statements as of and for year ended December 31, 2012. The Company received a waiver from Oxford related to this covenant.
On June 30, 2014, the Company entered into the Amended and Restated Loan and Security Agreement, or amended term loan agreement, with Oxford, under which the interest-only period for the original term loans was extended to August 1, 2015 and raised an additional $10,000 in a fourth tranche (tranche D) maturing on January 1, 2019. The term loans are collateralized by a first-priority security interest in substantially all of the Company's assets. The term loans bear interest at a rate equal to 8.4% per annum. The interest-only period for the tranche A, B and C term loans ends on August 1, 2015 and the interest-only period for the tranche D term loan ends on the same date, but with a possible extension of another year if the Company raises at least $50,000 in gross proceeds as part of an initial public offering before June 30, 2015. The tranche D term loan includes an additional lump sum payment of $650 due on January 1, 2019.
The amended term loan agreement contains various negative and affirmative covenants, including certain restrictive covenants that limit the Company's ability to transfer or dispose of certain assets, engage in new lines of business, change the composition of Company management, merge with or acquire other companies, incur additional debt, create new liens and encumbrances, pay dividends or subordinated debt and enter into material transactions with affiliates, among others. The amended term loan agreement also contains financial reporting requirements.
The aggregate maturities of long-term debt as of December 31, 2013 are: $0 in 2014, $3,757 in 2015, $9,569 in 2016, and $1,674 in 2017.
The aggregate maturities of long-term debt as of June 30, 2014 are: $0 in the remaining six months of 2014, $4,799 in 2015, $12,225 in 2016, $4,562 in 2017, $3,140 in 2018 and $274 in 2019.
In connection with the original term loan agreement, the Company issued seven year warrants to Oxford to purchase shares of the Company's common stock with a value equal to 3.0% of the original term loan facility amount with an exercise price per share equal to the lesser of (i) the Series C preferred stock conversion price of $14.671 per share and (ii) the price per share in a subsequent qualified round of financing where gross proceeds are greater than $10,000.
In connection with the tranche D term loan, the Company issued additional seven year warrants to Oxford to purchase shares of the Company's common stock with a value equal to 2.5% of the tranche D term loan amount with an exercise price per share equal to the lesser of (i) the Series C preferred stock conversion price of $14.671 per share and (ii) the price per share in a subsequent qualified round of financing where gross proceeds are greater than $10,000.
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(5) Long-term Debt (Continued)
The fair value of the warrants at December 31, 2013 and June 30, 2014 was $90 and $293, respectively, and was recorded in accrued and other current liabilities in the balance sheet. The fair value of the warrants upon issuance of the debt instruments was $44 for tranches A, B and C and $110 for tranche D. The Company recognized changes in the fair value of these warrants amounting to $46, $20 and $93 in other income (expense), net in the statements of operations for the year ended December 31, 2013 and the six month periods ended June 30, 2013 and 2014, respectively.
(6) Acquisition of Silimed, Inc.
On April 4, 2007, the Company acquired substantially all of the assets of Silimed, a privately held Texas-based company engaged in the development and sale of medical devices including breast implants, under the terms of an Asset Purchase Agreement ("APA"). The consideration paid by the Company to Silimed was $29,850 in cash and 90,909 shares of the Company's common stock. The transaction also specified a series of contingent payments with a total potential value of $70,000. As the net assets acquired exceeded the purchase price, and since the contingencies were not resolved, the purchase price allocation included a deferred credit (negative goodwill) of $4,298.
On May 16, 2013, the Company, Grader Street (formerly, Silimed, Inc.) and Grader Street's founder reached a confidential agreement in which the Company agreed to pay Grader Street a gross amount of $18,000 and to release all claims that the Company had against Grader Street and its founder. In return, Grader Street and its founder also released all claims, including all future contingent payments, under the APA. In addition, under the terms of the agreement, the Company paid $260 to repurchase all 72,727 shares (of the original 90,909 shares issued) currently held by Grader Street's founder.
Accordingly, the excess fair value of the settlement payment and the release of $576 in other assets related to claims against Grader Street over the $4,298 deferred credit were recognized as additional cost of the asset acquisition as of December 31, 2012 and 2013.
(7) Goodwill and Other Intangible Assets
(a)
Goodwill
The changes in the carrying amount of goodwill for the year ended December 31, 2012 and 2013 and the six months ended June 30, 2014 are as follows:

											
 	 	Gross Carrying
Amount	 	Accumulated
Impairment	 	Goodwill, net	 	
Balance at December 31, 2011 (1)	 	 $	(4,298	)	 	—	 	 	(4,298	)	
Silimed settlement (note 6)	 	 	18,576	 	 	—	 	 	18,576	 	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
Balance at December 31, 2012 and 2013 and June 30, 2014	 	 	14,278	 	 	—	 	 	14,278	 	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	

(1)
Amount recorded as a deferred credit in the balance sheet at December 31, 2011.
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(7) Goodwill and Other Intangible Assets (Continued)
The Company has determined that it has one reporting unit and has chosen October 1 as the date for its annual impairment test. The Company performed the annual impairment test of goodwill for 2013 and 2012 and determined that goodwill was not impaired.
(b)
Other Intangible Assets
The Company recorded approximately $1,713 of intangible assets in connection with the acquisition of Silimed. The components of the Company's intangible assets are as follows:

											
 	 	December 31,	 	 	 	
 			 	June 30,
2014	 	
 	 	2012	 	2013			 	
 	 	 	 	 	 	(Unaudited)	 	
Acquired FDA non-gel product approval	 	 $	1,713	 	 	1,713	 	 	1,713	 	
Less accumulated amortization	 	 	(1,374	)	 	(1,506	)	 	(1,552	)	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
	 	 $	339	 	 	207	 	 	161	 	
 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	
Amortization expense for intangible assets for the years ended December 31, 2012 and 2013 was $179 and $132, respectively, and for the six month periods ended June 30, 2013 and 2014 was $66 and $46, respectively, and is recorded in general and administrative expense in the statement of operations. The remaining amortization period as of December 31, 2013 is 4 years. The following table summarizes the estimated amortization expense relating to the Company's intangible assets as of December 31, 2013:

					
2014	 	 $	93	 	
2015	 	 	62	 	
2016	 	 	36	 	
2017	 	 	16	 	
 	 	 	 	
 ​	​	​	​	​	
	 	 $	207	 	
 	 	 	 	
 ​	​	​	​	​	
The remaining amortization period as of June 30, 2014 is 3.5 years. The following table summarizes the estimated amortization expense relating to the Company's intangible assets as of June 30, 2014:

					
Remaining six months of 2014	 	 $	47	 	
2015	 	 	62	 	
2016	 	 	36	 	
2017	 	 	16	 	
 	 	 	 	
 ​	​	​	​	​	
	 	 $	161	 	
 	 	 	 	
 ​	​	​	​	​	
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(8) Income Taxes
Actual income tax expense differs from that obtained by applying the statutory federal income tax rate of 34% to income before income taxes as follows:

								
 	 	Year Ended
December 31,	 	
 	 	2012	 	2013	 	
Tax at federal statutory rate	 	 $	(7,967	)	 	(6,502	)	
State, net of federal benefit	 	 	(774	)	 	(576	)	
Permanent items	 	 	255	 	 	339	 	
Research and development credits	 	 	(186	)	 	(232	)	
Other	 	 	98	 	 	15	 	
Change in valuation allowance	 	 	8,574	 	 	6,956	 	
 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	
	 	 $	—	 	 	—	 	
 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	
 	 	 	 	 	 	
The tax effects of temporary differences and carryforwards that give rise to significant portions of the deferred tax assets are as follows:

								
 	 	December 31,	 	
 	 	2012	 	2013	 	
Net operating loss carryforwards	 	 $	30,963	 	 	37,278	 	
Research and development credits	 	 	1,782	 	 	2,014	 	
Depreciation	 	 	22	 	 	31	 	
Accruals and reserves	 	 	2,044	 	 	3,706	 	
Intangibles	 	 	8,321	 	 	7,058	 	
 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	
	 	 	43,132	 	 	50,087	 	
Less valuation allowance	 	 	(43,132	)	 	(50,087	)	
 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	
Total deferred tax assets	 	 $	—	 	 	—	 	
 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	
 	 	 	 	 	 	
The Company has established a full valuation allowance against its deferred tax assets due to the uncertainty surrounding realization of such assets.
As of December 31, 2013, the Company had net operating loss carryforwards of approximately $96,928 and $76,572 available to reduce future taxable income, if any, for federal and California state income tax purposes, respectively. The federal net operating loss carryforward begins expiring in 2027, and the state net operating loss carryforward begins expiring in 2017.
As of December 31, 2013, the Company had research and development credit carryforwards of approximately $1,622 and $1,610 available to reduce future taxable income, if any, for federal and California state income tax purposes, respectively. The federal credit carryforwards begin expiring in 2027 and the state credits carryforward indefinitely.
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(8) Income Taxes (Continued)
At December 31, 2013, the Company had unrecognized tax benefits of approximately $671 associated with the research and development credits. The Company does not anticipate that total unrecognized net tax benefits will significantly change over the next twelve months.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

					
Ending balance at December 31, 2011	 	 $	532	 	
Additions based on tax positions taken in the current year	 	 	62	 	
 	 	 	 	
 ​	​	​	​	​	
Ending balance at December 31, 2012	 	 	594	 	
Additions based on tax positions taken in the current year	 	 	77	 	
 	 	 	 	
 ​	​	​	​	​	
Ending balance at December 31, 2013	 	 $	671	 	
 	 	 	 	
 ​	​	​	​	​	
 ​	​	​	​	​	
 	 	 	 	
It is the Company's policy to include penalties and interest expense related to income taxes as a component of other expense and interest expense, respectively, as necessary. There was no interest expense or penalties related to unrecognized tax benefits recorded through December 31, 2013.
The Company files U.S. federal and state income tax returns in jurisdictions with varying statute of limitations. The years that may be subject to examination will vary by jurisdiction. The Company's tax years 2009 to 2013 will remain open for examination by the federal and state tax authorities.
(9) Stockholders' Deficit
(a)
Convertible Preferred Stock
Under the Company's Certificate of Incorporation, as amended, the Company's convertible preferred stock is issued in three series: A, B and C. At December 31, 2013 and June 30, 2014, the Company's convertible preferred stock consists of the following:

															
Series 	 	Shares
authorized	 	Outstanding	 	Proceeds
net of
issuance
costs	 	Liquidation
value	 	Issuance
date	
A	 	 	1,000,000	 	 	1,000,000	 	 $	994	 	 	1,000	 	October 2006	
B	 	 	11,409,397	 	 	11,409,397	 	 	84,909	 	 	85,000	 	April 2007 and
October 2008	
C	 	 	12,183,690	 	 	12,183,690	 	 	64,553	 	 	65,000	 	March 2012	
 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
	 	 	24,593,087	 	 	24,593,087	 	 $	150,456	 	 	151,000	 	 	
 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(9) Stockholders' Deficit (Continued)
As of December 31, 2013 and June 30, 2014, the holders of convertible preferred stock have various rights and preferences as follows:
(b)
Voting Rights
The holder of each share of Series A, Series B and Series C convertible preferred stock are entitled to the number of votes equal to the number of shares of the common stock into which each share of the preferred stock could be converted on the record date. The holders of shares of preferred stock have voting rights and powers equal to the voting rights and powers of holders of common stock. Fractional votes are not permitted and any fractional voting rights will be rounded to the nearest whole number.
As long as at least 500,000 shares of convertible preferred stock remain outstanding, the holders of outstanding shares of convertible preferred stock are entitled to elect three of the six members of the Board of Directors. The holders of outstanding shares of common stock are entitled to elect one director. The holders of outstanding shares of convertible preferred stock and common stock, voting together on an as converted basis, are entitled to elect the remaining two directors of the Company.
As long as at least 20% of the shares of the convertible preferred stock (as adjusted for any stock splits, stock dividends, recapitalizations or the like) are outstanding, the Company must obtain approval from at least 65% of the holders of convertible preferred stock in order to amend the Certificate of Incorporation or Bylaws, issue shares or increase the authorized shares of common stock, reduce or increase the size of the Board of Directors, declare and pay a dividend, redeem or repurchase any shares of the Company's capital stock or options to purchase capital stock, create a new class or series of shares having rights on par or senior to the Series C, take any action to effect a liquidation of the Company, incur indebtedness for borrowed money in excess of $500 other than debt facilities approved by the Board of Directors, or take any action that will result in taxation of holders of preferred stock under Section 305 of the Internal Revenue Code of 1986, as amended.
(c)
Dividends
The holders of convertible preferred stock are entitled to receive noncumulative dividends, when and if declared by the Board of Directors, out of any assets legally available, prior to and in preference to any declaration or payment of dividends on the common stock of the Company. Dividends are payable at an annual rate of 8% of the original issue price for all series of convertible preferred stock (adjusted to reflect subsequent stock dividends, stock splits or recapitalization). Holders of Series C are entitled to be paid first prior to payment of holders of Series A and Series B. Thereafter, holders of Series B are entitled to be paid next prior to payment of holders of Series A. After payment to the holders of the convertible preferred stock, the holders of common stocks are entitled to receive dividends, when and if declared by the Board of Directors, out of any assets legally available. No dividends have been declared to date. As of December 31, 2013 and June 30, 2014, no dividends have been declared.
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(9) Stockholders' Deficit (Continued)
(d)
Liquidation Preference
In the event of any corporate reorganization, liquidation, dissolution or winding up of the Company, whether voluntary or involuntary, the holders of Series A, Series B and Series C are entitled to receive an amount of $1.00, $7.45 and $5.335 per share, respectively (adjusted to reflect stock dividends, stock splits, and recapitalization), plus any accrued but unpaid dividends. Corporate reorganizations include (i) any mergers, consolidations, or reorganizations where existing stockholders no longer hold at least 51% of the voting power; (ii) sales, exchanges, conveyances, leases, exclusive licenses, transfer or other disposition of all or substantially all of the Company's assets; or (iii) sale, exchange, or transfer of shares of capital stock representing at least 50% of the voting power of the voting securities of the Company, but excluding a qualified initial public offering. Holders of Series C are entitled to be paid first prior to payment of holders of Series A and Series B. Thereafter, the holders of Series B are entitled to be paid prior to payment of holders of Series A. The remaining assets, if any, shall be distributed among common stockholders. If upon such liquidation, dissolution or winding up of the Company, the assets of the Company are insufficient to provide for the cash payment of the full preferential amount to the holders of preferred convertible stock, then the entire assets and funds of the Company legally available for distribution shall be distributed first ratably among the holders of Series C in proportion to the full preferential amount each holder is otherwise entitled to receive, and to the extent funds are available, next among holders of Series B prior to holders of Series A.
As of December 31, 2013 and June 30, 2014, the carrying value of the preferred stock has not been adjusted to its liquidation redemption value as an event that would trigger liquidation redemption is not considered probable.
(e)
Conversion Rights
Each share of convertible preferred stock, at the option of the holder, is convertible at any time into the number of shares of common stock (adjusted to reflect stock dividends, stock splits and recapitalization) that results from dividing the original issue price by the conversion price in effect at the time of the conversion. The initial per share conversion price of the Series A, Series B and C convertible preferred stock is $2.75, $20.49 and $14.671 per share, respectively, and subject to adjustment in accordance with antidilution provisions contained in the Company's Articles of Incorporation.
If not previously converted at the option of the holder, the conversion of the convertible preferred stock is automatic and will be converted at the then applicable conversion prices upon the earlier of any of the following events: (i) affirmative election of the holders of at least 65% of the then outstanding shares of the convertible preferred stock on an as-if converted basis, or (ii) the closing of a firm commitment underwritten public offering based on an effective registration statement under the Securities Act of 1933 for the issuance of common stock. The per-share price must be at least 200% of the Series C purchase price resulting in the aggregate proceeds raised from the offering of at least greater than $35,000 or (iii) consent of holders of at least 65% of the then outstanding shares of the convertible preferred stock, on an as-if converted basis, in connection with any mandatory conversion,
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(9) Stockholders' Deficit (Continued)
as prescribed in the Certificate of Incorporation, in which the current fair market value of the Company's Common Stock exceeds the Series C purchase price or (iv) upon the consent of the holders of at least 65% of the then outstanding shares of the convertible preferred stock, on an as-if converted basis, including the consent of all stockholders that hold in excess of 19% of the then outstanding shares of the preferred stock of the Company.
(f)
Common Stock
The Company's Certificate of Incorporation, as amended, authorizes the Company to issue 30,200,000 shares of $0.01 par value common stock. At December 31, 2013 and June 30, 2014, the Company has reserved sufficient shares of common stock for issuance upon conversion of convertible preferred stock and exercise of stock options. Common stockholders are entitled to dividends when and if declared by the Board of Directors. There have been no dividends declared to date. The holder of each share of common stock is entitled to one vote.
(g)
Stock Option Plan
In April 2007, the Company adopted the 2007 Equity Incentive Plan (the 2007 Plan). The 2007 Plan provides for the granting of stock options to employees, directors and consultants of the Company. Options granted under the 2007 Plan may either be incentive stock options or nonstatutory stock options. Incentive stock options (ISO) may be granted only to Company employees. Nonstatutory stock options (NSO) may be granted to all eligible recipients. A total of 1,690,448 shares of the Company's common stock were reserved for issuance for the 2007 Plan.
Options under the 2007 Plan may be granted for periods of up to ten years as determined by the Board of Directors, provided, however, that (i) the exercise price of an ISO shall not be less than 100% of the estimated fair value of the shares on the date of grant, and (ii) the exercise price of an ISO granted to a more than 10% shareholder shall not be less than 110% of the estimated fair value of the shares on the date of grant. An NSO has no such exercise price limitations. The options generally vest over four years. The vesting provisions of individual options may vary but provide for vesting of at least 25% per year.
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(9) Stockholders' Deficit (Continued)
The following summarizes all option activity under the 2007 Plan:

														
 	 	 	 	Options outstanding	 	
 	 	Options
available
for
grant	 	Number of
options	 	Weighted
average
exercise
price	 	Weighted
average
remaining
contractual
term
(years)	 	
Balances at December 31, 2011	 	 	 160,343	 	 	 900,984	 	 $	1.90	 	 	 	 	
Additional shares authorized	 	 	626,811	 	 	—	 	 	—	 	 	 	 	
Options granted	 	 	(514,244	)	 	514,244	 	 	3.99	 	 	 	 	
Options exercised	 	 	—	 	 	(1,818	)	 	1.65	 	 	 	 	
Options forfeited	 	 	4,363	 	 	(4,363	)	 	2.34	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Balances at December 31, 2012	 	 	 277,273	 	 	 1,409,047	 	 $	2.67	 	 	 	 	
Additional shares authorized	 	 	 	 	 	 	 	 	 	 	 	 	 	
Options granted	 	 	(26,356	)	 	26,356	 	 	3.80	 	 	 	 	
Options exercised	 	 	—	 	 	(3,025	)	 	3.41	 	 	 	 	
Options forfeited	 	 	10,063	 	 	(10,063	)	 	3.93	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Balances at December 31, 2013	 	 	 260,980	 	 	 1,422,315	 	 $	2.67	 	 	5.76	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Additional shares authorized (unaudited)	 	 	—	 	 	—	 	 	 	 	 	 	 	
Options granted (unaudited)	 	 	(155,441	)	 	155,441	 	 	11.00	 	 	 	 	
Options exercised (unaudited)	 	 	—	 	 	(2,193	)	 	3.99	 	 	 	 	
Options forfeited (unaudited)	 	 	8,893	 	 	(8,893	)	 	3.96	 	 	 	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
Balances at June 30, 2014 (unaudited)	 	 	 114,432	 	 	 1,566,670	 	 $	3.49	 	 	5.71	 	
 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	 	
Vested and expected to vest at December 31, 2013	 	 	 	 	 	1,422,315	 	 	2.67	 	 	5.76	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Vested and exercisable at December 31, 2013          	 	 	 	 	 	1,099,525	 	 	2.31	 	 	5.02	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Vested and expected to vest at June 30, 2014 (unaudited)	 	 	 	 	 	1,566,670	 	 	3.49	 	 	5.71	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Vested and exercisable at June 30, 2014 (unaudited)	 	 	 	 	 	1,171,779	 	 	2.39	 	 	4.71	 	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	 	 	 	
The weighted average grant date fair value of stock options granted to employees and directors during the years ended December 31, 2012 and 2013 was $2.31 and $1.90 per share, respectively, and $1.95 and $6.02 per share for the six months ended June 30, 2013 and 2014, respectively. Stock-based compensation expense for the years ended December 31, 2012 and 2013 was $357 and $342 respectively, and $171 and $199 for the six months ended June 30, 2013 and 2014, respectively. As of December 31, 2013 and June 30, 2014, there were total unrecognized compensation costs of $723 and $1,458, respectively, related to these stock options. The expense is recorded within the operating expense captions in the statement of operations based on the employees receiving the awards. As of December 31, 2013, these costs are expected to be recognized over a weighted average period of 2.29 years.
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(9) Stockholders' Deficit (Continued)
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company's common stock for those stock options that had exercise prices lower than the fair value of the Company's common stock. The aggregate intrinsic value of stock options exercised was $4 and $1 during the years ended December 31, 2012 and 2013, respectively, and $0 and $18 during the six months ended June 30, 2013 and 2014, respectively.
The Company estimated the fair value of stock options using the Black-Scholes option valuation model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of employee stock options was estimated using the following assumptions:

														
 	 	Year ended December 31,	 	Six months ended June 30,	 	
 	 	2012	 	2013	 	2013	 	2014	 	
 	 	 	 	 	 	(Unaudited)	 	
Expected term (in years)	 	 	6.02 to 6.08	 	 	6.08	 	 	6.08	 	 	6.08	 	
Expected volatility	 	 	62% to 64	%	 	56	%	 	56	%	 	57	%	
Risk-free interest rate	 	 	0.85% to 1.15	%	 	1.00% to 1.76	%	 	1.00% to 1.04	%	 	2.00	%	
Dividend yield	 	 	—	 	 	—	 	 	 	 	 	—	 	
The expected term of employee stock options, risk-free interest rate and volatility represents the weighted average, based on grant date period, which the stock options are expected to remain outstanding. The Company utilized the simplified method to estimate the expected term of the options pursuant to ASC Subtopic 718-10 for all option grants to employees. The expected volatility is based upon historical volatilities of an index of a peer group because it is not practicable to make a reasonable estimate of the Company's volatility. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant for periods corresponding with the expected term of the option. The dividend yield assumption is based on the Company's history and expectation of dividend payouts. The Company has never declared or paid any cash dividends on its common stock, and the Company does not anticipate paying any cash dividends in the foreseeable future.
As stock-based compensation expense recognized in the Company's statement of operations is based on awards ultimately expected to vest, the amount has been reduced for estimated forfeitures. Forfeitures were estimated based on the Company's historical experience and future expectations.
For purposes of financial accounting for stock-based compensation, the Company has determined the fair values of its options based in part on the work of a third-party valuation specialist. The determination of stock-based compensation is inherently uncertain and subjective and involves the application of valuation models and assumptions requiring the use of judgment. If the Company had made different assumptions, its stock-based compensation expense, and its net loss could have been significantly different.
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(10) Commitments and Contingencies
(a)
Operating Lease Commitment
In May 2009, the Company entered into a 27 month sublease agreement in Santa Barbara, California. This operating lease is used for general office use only. This lease was automatically extended on August 1, 2011 and will be automatically extended annually on August 1 every year thereafter, until July 31, 2014.
In May 2012, the Company entered into a new lease agreement for a warehouse in Santa Barbara, California. The lease commenced on January 1, 2013 and has a term of 37 months.
In August 2013, the Company entered into a four month warehouse lease in Santa Barbara, California, commencing on September 1, 2013. This operating lease is used for additional general office, warehouse, and research and development. This lease was renewed on December 10, 2013 for an additional six months, and was renewed again in June 2014 for an additional 12 months.
As of December 31, 2013, future minimum lease payments under all non-cancelable operating leases are as follows:

					
Years ending December 31:	 	 	 	 	
2014	 	 $	229	 	
2015	 	 	101	 	
2016 and thereafter	 	 	—	 	
 	 	 	 	
 ​	​	​	​	​	
	 	 $	330	 	
 	 	 	 	
 ​	​	​	​	​	
 ​	​	​	​	​	
 	 	 	 	
In March 2014, the Company entered into a 68 month lease agreement in Santa Barbara, California. The operating lease is for general office use only and commenced on July 1, 2014.
The terms of the facility lease provide for rental payments on a graduated scale. The Company recognizes rent expense on a straight-line basis over the lease term. Rent expense for the years ended December 31, 2012 and 2013 was $376 and $359, respectively, and for the six months ended June 30, 2013 and 2014 was $172 and $181, respectively.
(b)
Contingencies
The Company is subject to claims and assessments from time to time in the ordinary course of business. Other than as noted, the Company's management does not believe that any such matters, individually or in the aggregate, will have a materially adverse effect on the Company's balance sheet, results of operations, or cash flows.
On March 27, 2012, Mentor Worldwide LLC (Mentor), a wholly owned subsidiary of Johnson & Johnson, filed thirteen lawsuits against fifteen employees of the Company (all former Mentor employees) and, on June 8, 2012, filed a fourteenth lawsuit against the Company and an additional employee. In general, these fourteen lawsuits alleged that the former employees of Mentor breached
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SIENTRA, INC.
Notes to the Financial Statements (Continued)
(Information as of and for the six months ended June 30, 2013 and 2014 is unaudited)
(In thousands, except for share and per share amounts)
(10) Commitments and Contingencies (Continued)
their confidentiality and non-compete agreements when they resigned in favor of employment with the Company; misappropriated confidential Mentor information and trade secrets; and breached their respective duties of loyalty. Although not a party to thirteen employee lawsuits, the Company provided for the defense of its employees in the lawsuits. In the employee lawsuits, all of Mentor's claims for Preliminary Injunctive Relief were denied. Following that, some of the employee lawsuits were dismissed with prejudice and others dismissed without prejudice. On October 3, 2013, the last of the thirteen employee lawsuits was dismissed.
In the sole lawsuit against the Company, the Company and its employee prevailed at trial with verdicts of "no liability" rendered by the jury and judge. Final judgment in this case was entered on October 3, 2013 with the plaintiff ordered to reimburse defendants for certain court costs, and in 2014, Mentor waived its right to appeal.
In 2012, the Company filed a claim with the Hartford Insurance Company (Hartford) for reimbursement of legal costs incurred in connection with litigation with Mentor. The Company holds a D&O insurance policy with Hartford, and the Company and Hartford settled the matter in May 2014. The Company received settlement payments from Hartford of $351 and $2,129 for the year ended December 31, 2013 and the six months ended June 30, 2014, respectively.
(11) Subsequent Events
Management has evaluated all transactions and events through August 27, 2014, the date on which these financial statements were issued and did not note any items, other than those discussed below, that would adjust the financial statements or require additional disclosure.
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 SIENTRA, INC.

Schedule II — Valuation and Qualifying Accounts

December 31, 2012 and 2013

(In thousands)

														
 	 	Balance at
beginning of
period	 	Additions
charged to
costs and
expenses	 	Deductions (1)	 	Balance at
end of
period	 	
Year ended December 31, 2012	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance for sales returns	 	 $	95	 	 $	27,884	 	 $	(23,645	)	 $	4,334	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 	 	 	 	 	 	 	 	 	 	
Year ended December 31, 2013	 	 	 	 	 	 	 	 	 	 	 	 	 	
Allowance for sales returns	 	 $	4,334	 	 $	93,768	 	 $	(89,832	)	 $	8,270	 	
 	 	 	 	 	 	 	 	 	 	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	
 ​	​	​	​	​	​	​	​	​	​	​	​	​	​	

(1)
Amounts represent actual sales returns.
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5,000,000 Shares
SIENTRA, INC.
Common Stock

PROSPECTUS

Until and including                           , 2014 (the 25 th  day after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

			
Piper Jaffray	 	Stifel	

Leerink Partners	
 	
William Blair	
    
                    , 2014

Table of Contents

 PART II
Information Not Required in Prospectus
Item 13.    Other Expenses of Issuance and Distribution.
The following table sets forth an itemization of the various costs and expenses, other than the underwriting discount and commissions, expected to be incurred by us in connection with the issuance and distribution of the common stock being registered hereunder. All of the amounts shown are estimates, except for the SEC registration fee, the FINRA filing fee and the NASDAQ listing fee.

					
Item 	 	Amount to be paid	 	
SEC registration fee	 	 $	10,691	 	
FINRA filing fee	 	 	14,300	 	
NASDAQ listing fee	 	 	125,000	 	
Printing and engraving expenses	 	 	350,000	 	
Legal fees and expenses	 	 	1,500,000	 	
Accounting fees and expenses	 	 	600,000	 	
Registrar and transfer agent fees	 	 	200,000	 	
Miscellaneous expenses	 	 	200,009	 	
 	 	 	 	
 ​	​	​	​	​	
Total	 	 $	3,000,000	 	
 	 	 	 	
 ​	​	​	​	​	
 ​	​	​	​	​	

*
To be provided by amendment.
Item 14.    Indemnification of Directors and Officers.
The Registrant is incorporated under the laws of the State of Delaware. Section 145 of the General Corporation Law of the State of Delaware provides that a Delaware corporation may indemnify any persons who were, are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person is or was an officer, director, employee or agent of such corporation, or is or was serving at the request of such corporation as an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided that such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation's best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe that his or her conduct was illegal. A Delaware corporation may indemnify any persons who were, are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person is or was a director, officer, employee or agent of such corporation, or is or was serving at the request of such corporation as a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit provided such person acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the corporation's best interests except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him or her against the expenses (including attorneys' fees) actually and reasonably incurred.
The Registrant's amended and restated certificate of incorporation and amended and restated bylaws, each of which will become effective upon the closing of this offering, provide for the indemnification
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of its directors and officers to the fullest extent permitted under the General Corporation Law of the State of Delaware.
Section 102(b)(7) of the General Corporation Law of the State of Delaware permits a corporation to provide in its certificate of incorporation that a director of the corporation shall not be personally liable to the corporation or its stockholders for monetary damages for breach of fiduciary duties as a director, except for liability for any:
•
transaction from which the director derives an improper personal benefit; 

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

•
unlawful payment of dividends or redemption of shares; or 

•
breach of a director's duty of loyalty to the corporation or its stockholders.
The Registrant's amended and restated certificate of incorporation includes such a provision. Expenses incurred by any officer or director in defending any such action, suit or proceeding in advance of its final disposition shall be paid by the Registrant upon delivery to it of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified by the Registrant.
Section 174 of the General Corporation Law of the State of Delaware provides, among other things, that a director who willfully or negligently approves of an unlawful payment of dividends or an unlawful stock purchase or redemption, may be held liable for such actions. A director who was either absent when the unlawful actions were approved or dissented at the time may avoid liability by causing his or her dissent to such actions to be entered in the books containing minutes of the meetings of the board of directors at the time such action occurred or immediately after such absent director receives notice of the unlawful acts.
As permitted by the General Corporation Law of the State of Delaware, the Registrant has entered into indemnity agreements with each of its directors and executive officers, that require the Registrant to indemnify such persons against any and all costs and expenses (including attorneys', witness or other professional fees) actually and reasonably incurred by such persons in connection with any action, suit or proceeding (including derivative actions), whether actual or threatened, to which any such person may be made a party by reason of the fact that such person is or was a director or officer or is or was acting or serving as an officer, director, employee or agent of the Registrant or any of its affiliated enterprises. Under these agreements, the Registrant is not required to provided indemnification for certain matters, including:
•
indemnification beyond that permitted by the General Corporation Law of the State of Delaware; 

•
indemnification for any proceeding with respect to the unlawful payment of remuneration to the director or officer; 

•
indemnification for certain proceedings involving a final judgment that the director or officer is required to disgorge profits from the purchase or sale of the Registrant's stock; 

•
indemnification for proceedings involving a final judgment that the director's or officer's conduct was in bad faith, knowingly fraudulent or deliberately dishonest or constituted willful misconduct or a breach of his or her duty of loyalty, but only to the extent of such specific determination;
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•
indemnification for proceedings or claims brought by an officer or director against us or any of the Registrant's directors, officers, employees or agents, except for (i) claims to establish a right of indemnification or proceedings, (ii) claims approved by the Registrant's board of directors, (iii) claims required by law, (iv) when there has been a change of control as defined in the indemnification agreement with each director or officer, or (v) by the Registrant in its sole discretion pursuant to the powers vested to the Registrant under Delaware law; 

•
indemnification for settlements the director or officer enters into without the Registrant's consent; or 

•
indemnification in violation of any undertaking required by the Securities Act or in any registration statement filed by the Registrant.
The indemnification agreements also set forth certain procedures that will apply in the event of a claim for indemnification thereunder.
Except as otherwise disclosed under the heading "Legal Proceedings" in the "Business" section of the prospectus included in this registration statement, there is at present no pending litigation or proceeding involving any of the Registrant's directors or executive officers as to which indemnification is required or permitted, and the Registrant is not aware of any threatened litigation or proceeding that may result in a claim for indemnification.
The Registrant has an insurance policy in place that covers its officers and directors with respect to certain liabilities, including liabilities arising under the Securities Act of 1933, as amended, or the Securities Act, or otherwise.
The Registrant plans to enter into an underwriting agreement which provides that the underwriters are obligated, under some circumstances, to indemnify the Registrant's directors, officers and controlling persons against specified liabilities, including liabilities under the Securities Act.
Item 15.    Recent Sales of Unregistered Securities.
During the last three years, we sold the following unregistered securities. The information below reflects a 1 for 2.75 reverse stock split of our common stock effected on October 17, 2014 as described in the prospectus.
(1)
From March 31, 2011 to June 30, 2014, we issued and sold to our employees, directors and consultants an aggregate of 7,039 shares of common stock pursuant to option exercises under our 2007 Equity Incentive Plan at prices ranging from $1.65 to $3.99 per share for an aggregate purchase price of $22,067.

(2)
From March 31, 2011 to June 30, 2014, we granted options under our 2007 Equity Incentive Plan to purchase an aggregate of 696,091 shares of common stock to our employees having an exercise price ranging from $3.58 to $11.00 per share.

(3)
In March 2012, pursuant to a Series C preferred stock purchase agreement, we issued and sold to investors an aggregate of 12,183,690 shares of Series C preferred stock at a purchase price of $5.335 per share for an aggregate purchase price of $65.0 million.

(4)
From January 17, 2013 to December 13, 2013, we issued to Oxford warrants to purchase up to 30,670 shares of common stock, with an exercise price of the lesser of (i) the Series C preferred stock conversion price of $14.671 per share or (ii) the price per share in a subsequent qualified round of financing where gross proceeds are greater than $10.0 million.
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(5)
On June 30, 2014, we issued to Oxford warrants to purchase up to 17,040 shares of common stock, with an exercise price of the lesser of (i) the Series C preferred stock conversion price of $14.671 per share or (ii) the price per share in a subsequent qualified round of financing where gross proceeds are greater than $10.0 million.

(6)
On July 22, 2014, we granted options under our 2007 Equity Incentive Plan to purchase an aggregate of 69,266 shares of common stock to our new directors and employees having an exercise price of $13.26 per share.
No underwriters were used in connection with any of the foregoing transactions. These issuances were deemed to be exempt from registration under the Securities Act in reliance on Section 4(2) of the Securities Act, including in some cases, Regulation D and Rule 506 promulgated thereunder, or Rule 701 promulgated under Section 3(b) of the Securities Act, as transactions by an issuer not involving a public offering or transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. The purchasers of securities in each such transaction represented their intention to acquire the securities for investment only and not with a view to offer or sell, in connection with any distribution of the securities, and appropriate legends were affixed to the share certificates and instruments issued in such transactions.
Item 16.    Exhibits and Financial Statement Schedules.
(a)     Exhibits .     See the Exhibit Index immediately following the signature page hereto, which is fully incorporated by reference as if fully set forth herein.
(b)     Financial Statement Schedules .     Schedule II — Valuation and Qualifying Accounts is included in the registration statement beginning on page F-31.
Item 17.    Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriter at the closing specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the 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 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 of 1933, 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 of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.
II-4

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2.
For the purpose of determining any liability under the Securities Act of 1933, 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.
II-5

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 SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Santa Barbara, State of California, on October 20, 2014.

								
 		 	Sientra, Inc.	
 		 	By:	 	/s/ HANI ZEINI
	
 		 	 	 	Name:	 	Hani Zeini	
 		 	 	 	Title:	 	President and Chief Executive Officer	
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on October 20, 2014.

			
Name 	 	Title 	

 	
 	
/s/ HANI ZEINI

Hani Zeini	 	President, Chief Executive Officer and Director (Principal Executive Officer)	

/s/ MATTHEW PIGEON

Matthew Pigeon	
 	
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)	

*

Nicholas Simon	
 	
Director	

*

Rishi Gupta	
 	
Director	

*

Timothy Haines	
 	
Director	

*

R. Scott Greer	
 	
Director	

*

Kevin O'Boyle	
 	
Director	

*

Jeffrey Nugent	
 	
Director	

					
*By:	 	/s/ MATTHEW PIGEON
	 	 	
Name:	 	Matthew Pigeon	 	 	
Title:	 	Attorney-in-Fact	 	 	
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 EXHIBIT INDEX

				
Exhibit No.	 	Exhibit Description	
 	1.1	 	Form of Underwriting Agreement.	

3.1	
 	
Fourth Amended and Restated Certificate of Incorporation, as amended and as currently in effect.	

3.2	
 	
Form of Amended and Restated Certificate of Incorporation to become effective upon closing of this offering.	

3.3	
**	
Bylaws, as currently in effect.	

3.4	
 	
Form of Amended and Restated Bylaws to become effective upon closing of this offering.	

4.1	
 	
Form of Common Stock Certificate.	

4.2	
**	
Amended and Restated Investor Rights Agreement, dated March 28, 2012, by and among Sientra, Inc., and the investors and stockholders party thereto.	

4.3	
**	
Warrant to Purchase Stock issued to Oxford Finance LLC, dated January 17, 2013.	

4.4	
**	
Warrant to Purchase Stock issued to Oxford Finance LLC, dated January 17, 2013.	

4.5	
**	
Warrant to Purchase Stock issued to Oxford Finance LLC, dated August 1, 2013.	

4.6	
**	
Warrant to Purchase Stock issued to Oxford Finance LLC, dated August 1, 2013.	

4.7	
**	
Warrant to Purchase Stock issued to Oxford Finance LLC, dated December 13, 2013.	

4.8	
**	
Warrant to Purchase Stock issued to Oxford Finance LLC, dated December 13, 2013.	

4.9	
**	
Warrant to Purchase Stock issued to Oxford Finance LLC, dated June 30, 2014.	

4.10	
**	
Warrant to Purchase Stock issued to Oxford Finance LLC, dated June 30, 2014.	

4.11	
 	
Conversion and Amendment Agreement by and among Sientra, Inc. and certain stockholders, dated October 10, 2014.	

5.1	
 	
Opinion of Cooley LLP.	

10.1	
#**	
Form of Indemnity Agreement by and between Sientra, Inc. and its directors and officers.	

10.2	
#**	
2007 Equity Incentive Plan, as amended, and forms of award agreements thereunder.	

10.3	
#	
2014 Equity Incentive Plan and forms of award agreements thereunder to become effective upon closing of this offering.	

10.4	
#**	
2014 Non-Employee Director Compensation Policy.	

10.5	
#	
2014 Employee Stock Purchase Plan.	

10.6	
**	
Multi-Purpose Commercial Building Lease, dated March 28, 2014, by and between Sientra, Inc. and Fairview Business Center, L.P.	

10.7	
**	
Amended and Restated Loan and Security Agreement, dated as of June 30, 2014, by and between Sientra, Inc. and Oxford Finance LLC.	

10.8	
†	
Amended and Restated Exclusivity Agreement, dated April 4, 2007, by and between Sientra, Inc. (formerly, Juliet Medical, Inc.) and Silimed Industria de Implantes Ltda. (formerly, Silimed-Silicone e Instrumental Medico-Cirugio e Hospitalar Ltda.).	

10.9	
**	
Amendment No. 1 to Amended and Restated Exclusivity Agreement, dated May 12, 2010, by and between Sientra, Inc. (formerly, Juliet Medical, Inc.) and Silimed Industria de Implantes Ltda. (formerly, Silimed-Silicone e Instrumental Medico-Cirugio e Hospitalar Ltda.).	

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Exhibit No.	 	Exhibit Description	
 	10.10	**	Amendment No. 2 to Amended and Restated Exclusivity Agreement, dated November 8, 2013, by and between Sientra, Inc. (formerly, Juliet Medical, Inc.) and Silimed Industria de Implantes Ltda. (formerly, Silimed-Silicone e Instrumental Medico-Cirugio e Hospitalar Ltda.).	

10.11	
#**	
Offer Letter to R. Scott Greer, dated July 9, 2014.	

10.12	
#**	
Offer Letter to Kevin O'Boyle, dated July 9, 2014.	

10.13	
#**	
Offer Letter to Jeffrey Nugent, dated July 9, 2014.	

10.14	
#	
Amended and Restated Employment Agreement by and between Sientra, Inc. and Hani Zeini, dated October 15, 2014.	

10.15	
#	
Amended and Restated Employment Agreement by and between Sientra, Inc. and Matthew Pigeon, dated October 15, 2014.	

10.16	
#	
Amended and Restated Employment Agreement by and between Sientra, Inc. and Joel Smith, dated October 15, 2014.	

16.1	
**	
Letter from PricewaterhouseCoopers LLP to the Securities and Exchange Commission, dated October 9, 2014.	

21.1	
**	
List of Subsidiaries.	

23.1	
 	
Consent of KPMG LLP, an independent registered public accounting firm.	

23.2	
 	
Consent of Cooley LLP (included in Exhibit 5.1).	

24.1	
**	
Power of Attorney (included in signature page to the original filing of the Registration Statement).	

**
Previously filed.

†
Confidential treatment has been requested for portions of this exhibit. These portions were omitted from the Registration Statement and submitted separately to the Securities and Exchange Commission.

#
Indicates a management contract or compensatory plan or arrangement.

Exhibit 1.1
 
[    ·    ] Shares
 
Sientra, Inc.
 
Common Stock
 
PURCHASE AGREEMENT
 
[    ·    ], 2014
 
PIPER JAFFRAY & CO.
STIFEL, NICOLAUS & COMPANY, INCORPORATED
As Representatives of the several
Underwriters named in Schedule I hereto
 
c/o Piper Jaffray & Co.
800 Nicollet Mall
Minneapolis, Minnesota 55402
 
c/o Stifel, Nicolaus & Company, Incorporated
One Montgomery Street, Suite 3700
San Francisco, California 94104

Ladies and Gentlemen:
 
Sientra, Inc., a Delaware corporation (the “ Company” ), proposes to issue and sell to the several Underwriters named in Schedule I hereto (the “Underwriters” ) an aggregate of [    ·    ] shares (the “Firm Shares” ) of common stock, $0.001 par value per share (the “Common Stock” ), of the Company.  The Company has also granted to the several Underwriters an option to purchase up to [    ·    ] additional shares of Common Stock, on the terms and for the purposes set forth in Section 3 hereof (the “Option Shares” ).  The Firm Shares and any Option Shares purchased pursuant to this Purchase Agreement (the “Agreement” ) are herein collectively called the “Securities.”
 
As part of the offering contemplated by this Agreement, Stifel, Nicolaus & Company, Incorporated (the “ Designated Underwriter ” ) has agreed to reserve out of the Firm Shares purchased by it under this Agreement, up to [    ·    ] shares for sale to the Company’s directors, employees and other parties associated with the Company (collectively, the “ Directed Stock Participants ” ), as set forth in the Prospectus (as defined herein) under the heading “Underwriting” (the “ Directed Stock Program ” ) and subject to the applicable rules, regulations and interpretations of the Financial Industry Regulatory Authority, Inc. (“ FINRA ”).  The Firm Shares to be sold by the Designated Underwriter pursuant to the Directed Stock Program (the “ Directed Stock ” ) will be sold by the Designated Underwriter pursuant to this Agreement at the public offering price.  Any Directed Stock not subscribed for by 9:00 a.m. (New York time) on the business day following the date on which this Agreement is executed will be offered to the public by the Underwriters as set forth in the Prospectus.

 
The Company hereby confirms its agreement with respect to the sale of the Securities to the several Underwriters, for whom Piper Jaffray & Co. and Stifel, Nicolaus & Company, Incorporated are acting as representatives (the “Representatives” or “you” ).
 
1.                                     Registration Statement and Prospectus .  A registration statement on Form S-1 (File No. 333-198837) with respect to the Securities, including a preliminary form of prospectus, has been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the “Act” ), and the rules and regulations (the “Rules and Regulations” ) of the Securities and Exchange Commission (the “Commission” ) thereunder and has been filed with the Commission.  Such registration statement, including the amendments, exhibits and schedules thereto, as of the time it became effective, including the Rule 430A Information (as defined below), is referred to herein at the “Registration Statement” .  The Company will prepare and file a prospectus pursuant to Rule 424(b) of the Rules and Regulations that discloses the information previously omitted from the prospectus in the Registration Statement in reliance upon Rule 430A of the Rules and Regulations, which information will be deemed retroactively to be a part of the Registration Statement in accordance with Rule 430A of the Rules and Regulations (the “Rule 430A Information” ).  If the Company has elected to rely upon Rule 462(b) of the Rules and Regulations to increase the size of the offering registered under the Act, the Company will prepare and file with the Commission a registration statement with respect to such increase pursuant to Rule 462(b) of the Rules and Regulations (such registration statement, including the contents of the Registration Statement incorporated by reference therein is the “Rule 462(b) Registration Statement” ).  References herein to the “Registration Statement” will be deemed to include the Rule 462(b) Registration Statement at and after the time of filing of the Rule 462(b) Registration Statement.  “Preliminary Prospectus” means any prospectus included in the Registration Statement prior to the effective time of the Registration Statement, any prospectus filed with the Commission pursuant to Rule 424(a) under the Rules and Regulations and each prospectus that omits Rule 430A Information used after the effective time of the Registration Statement.  “Prospectus” means the prospectus that discloses the public offering price and other final terms of the Securities and the offering and otherwise satisfies Section 10(a) of the Act.  All references in this Agreement to the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement to any of the foregoing, is deemed to include the copy filed with the Commission pursuant to its Electronic Data Gathering, Analysis and Retrieval System or any successor system thereto ( “EDGAR” ).
 
2.                                     Representations and Warranties of the Company .
 
(a)                                Representations and Warranties of the Company .  The Company represents and warrants to, and agrees with, the several Underwriters as follows:
 
(i)                                   Registration Statement and Prospectuses .  The Registration Statement and any post-effective amendment thereto has become effective under the Act.  No stop order suspending the effectiveness of the Registration Statement or any post-effective amendment thereto has been issued by the Commission, and no proceeding for that purpose has been initiated or, to the Company’s knowledge, threatened by the Commission.  No order preventing or suspending the use of any Preliminary Prospectus or the Prospectus (or any supplement thereto) has been issued by the Commission and no proceeding for that
 
2 

 
purpose has been initiated or, to the Company’s knowledge, threatened by the Commission.  As of the time each part of the Registration Statement (or any post-effective amendment thereto) became or becomes effective, such part conformed or will conform in all material respects to the requirements of the Act and the Rules and Regulations.  Upon the filing or first use within the meaning of the Rules and Regulations, each Preliminary Prospectus and the Prospectus (or any supplement to either) conformed or will conform in all material respects to the requirements of the Act and the Rules and Regulations.
 
(ii)                               Accurate Disclosure .  Each Preliminary Prospectus, at the time of filing thereof or the time of first use within the meaning of the Rules and Regulations, did not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading.  Neither the Registration Statement nor any amendment thereto, at the effective time of each part thereof, at the First Closing Date (as defined below) or at the Second Closing Date (as defined below), contained, contains or will contain an untrue statement of a material fact or omitted, omits or will omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. As of the Time of Sale (as defined below), neither (A) the Time of Sale Disclosure Package (as defined below) nor (B) any issuer free writing prospectus (as defined below), when considered together with the Time of Sale Disclosure Package, included an untrue statement of a material fact or omitted to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Neither the Prospectus nor any supplement thereto, as of its issue date, at the time of any filing with the Commission pursuant to Rule 424(b) of the Rules and Regulations, at the First Closing Date or at the Second Closing Date, included, includes or will include an untrue statement of a material fact or omitted, omits or will omit to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  The representations and warranties in this Section 2(a)(ii) shall not apply to statements in or omissions from any Preliminary Prospectus, the Registration Statement (or any amendment thereto), the Time of Sale Disclosure Package or the Prospectus (or any supplement thereto) made in reliance upon, and in conformity with, written information furnished to the Company by you, or by any Underwriter through you, specifically for use in the preparation of such document, it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 6(e).
 
Each reference to an “issuer free writing prospectus” herein means an issuer free writing prospectus as defined in Rule 433 of the Rules and Regulations.
 
“Time of Sale Disclosure Package” means the Preliminary Prospectus dated [    ·    ] , 2014, any free writing prospectus set forth on Schedule III and the information on Schedule IV, all considered together.
 
Each reference to a “free writing prospectus” herein means a free writing prospectus as defined in Rule 405 of the Rules and Regulations.
 
3 

 
“Time of Sale” means [    ·    ] :00 [a/p]m (Eastern time) on the date of this Agreement.
 
(iii)               Issuer Free Writing Prospectuses .
 
(A)                           Each issuer free writing prospectus, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Securities or until any earlier date that the Company notified or notifies the Representatives as described in Section 4(a)(iii)(B), did not, does not and will not include any information that conflicted, conflicts or will conflict with the information contained in the Registration Statement, any Preliminary Prospectus or the Prospectus.  The foregoing sentence does not apply to statements in or omissions from any issuer free writing prospectus based upon and in conformity with written information furnished to the Company by you or by any Underwriter through you specifically for use therein; it being understood and agreed that the only such information furnished by any Underwriter consists of the information described as such in Section 6(e).
 
(B)                            At the time of filing the Registration Statement and any post-effective amendment thereto, and at the date hereof, the Company was not and is not an “ineligible issuer,” as defined in Rule 405 of the Rules and Regulations, without taking account of any determination by the Commission pursuant to Rule 405 of the Rules and Regulations that it is not necessary that the Company be considered an ineligible issuer.
 
(C)                            Each issuer free writing prospectus satisfied, as of its issue date and at all subsequent times through the completion of the public offer and sale of the Securities, all other conditions to use thereof as set forth in Rules 164 and 433 under the Act.
 
(iv)                           Emerging Growth Company .  From the time of initial confidential submission of the Registration Statement to the Commission (or, if earlier, the first date on which the Company engaged directly or through any person authorized to act on its behalf in any Testing-the-Waters Communication (as defined below)) through the date hereof, the Company has been and is an “emerging growth company,” as defined in Section 2(a) of the Act (an “Emerging Growth Company” ).  “Testing-the-Waters Communication” means any oral or written communication with potential investors undertaken in reliance on Section 5(d) of the Act.
 
(v)                               Testing-the-Waters Materials.   The Company (i) has not alone engaged in any Testing-the-Waters Communications, other than Testing-the-Waters Communications with the prior consent of the Representatives with entities that are qualified institutional buyers within the meaning of Rule 144A under the Act or institutions that are accredited investors within the meaning of Rule 501 under the Act and (ii) has not authorized anyone other than the Representatives to engage in Testing-the-Waters Communications.  The Company reconfirms that the Representatives have been authorized to act on its behalf in undertaking Testing-the-Waters Communications.  The Company has
 
4 

 
not distributed any Written Testing-the-Waters Communications (as defined below) other than those listed on Schedule V hereto.  “Written Testing-the-Waters Communication” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Act.  Each Written Testing-the-Waters Communication does not conflict in any material respect with the information contained in the Registration Statement or the Time of Sale Disclosure Package, complied in all material respects with the Act, and when taken together with the Time of Sale Disclosure Package as of the Time of Sale, did not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.
 
(vi)                           No Other Offering Materials .  The Company has not distributed and will not distribute any prospectus or other offering material in connection with the offering and sale of the Securities other than any Preliminary Prospectus, the Time of Sale Disclosure Package or the Prospectus or other materials permitted by the Act to be distributed by the Company; provided, however, that, except as set forth on Schedule III, the Company has not made and will not make any offer relating to the Securities that would constitute a free writing prospectus, except in accordance with the provisions of Section 4(a)(xiii) of this Agreement and, except as set forth on Schedule V, the Company has not made and will not make any communication relating to the Securities that would constitute a Testing-the-Waters Communication, except in accordance with the provisions of Section 2(a)(v) of this Agreement.
 
(vii)                       Financial Statements .  The financial statements of the Company, together with the related notes and supporting schedule thereto, set forth in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus comply in all material respects with the requirements of the Act and fairly present in all material respects the financial condition of the Company as of the dates indicated and the results of operations and changes in cash flows for the periods therein specified in conformity with generally accepted accounting principles in the United States ( “GAAP” ) consistently applied throughout the periods involved; the supporting schedule included in the Registration Statement present fairly in all material respects the information required to be stated therein; all non-GAAP financial information included in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus complies in all material respects with the requirements of Regulation G and Item 10 of Regulation S-K under the Act; and, except as disclosed in the Time of Sale Disclosure Package and the Prospectus, there are no material off-balance sheet arrangements (as defined in Regulation S-K under the Act, Item 303(a)(4)(ii)) or any other relationships with unconsolidated entities or other persons, that may have a material current or, to the Company’s knowledge, material future effect on the Company’s financial condition, results of operations, liquidity, capital expenditures, capital resources or significant components of revenue or expenses.  No other financial statements or schedules are required to be included in the Registration Statement, the Time of Sale Disclosure Package or the Prospectus.
 
(viii)                   Independent Accountants .  KPMG LLP, which has expressed its opinion with respect to the financial statements and schedules filed as a part of the
 
5 

 
Registration Statement and included in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, is (x) an independent public accounting firm within the meaning of the Act and the Rules and Regulations, (y) a registered public accounting firm (as defined in Section 2(a)(12) of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act” )) and (z) not in violation of the auditor independence requirements of the Sarbanes-Oxley Act.
 
(ix)                           Organization and Good Standing .  The Company has been duly organized and is validly existing as a corporation in good standing under the laws of the State of Delaware. The Company has full corporate power and authority to own its properties and conduct its business as currently being carried on and as described in the Registration Statement, the Time of Sale Disclosure Package and Prospectus, and is duly qualified to do business as a foreign corporation in good standing in each jurisdiction in which it owns or leases real property or in which the conduct of its business makes such qualification necessary, except where the failure to have such power or authority or be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a material adverse effect upon the business, prospects, management, properties, operations, condition (financial or otherwise) or results of operations of the Company, taken as a whole ( “Material Adverse Effect” ).
 
(x)                               Absence of Certain Events .  Except as contemplated in the Time of Sale Disclosure Package and the Prospectus, subsequent to the respective dates as of which information is given in the Time of Sale Disclosure Package, the Company has not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, or declared or paid any dividends or made any distribution of any kind with respect to its capital stock; and there has not been any change in the capital stock (other than a change in the number of outstanding shares of Common Stock due to the issuance of shares upon the exercise of outstanding options or warrants or conversion of convertible securities), or any material change in the short-term or long-term debt (other than as a result of the conversion of convertible securities), or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock, of the Company, or any material adverse change in the condition (financial or otherwise), business, prospects, management, properties, operations or results of operations of the Company, taken as a whole ( “Material Adverse Change” ) or any development which would reasonably be expected to result in any Material Adverse Change.
 
(xi)                           Absence of Proceedings .  Except as set forth in the Time of Sale Disclosure Package and the Prospectus, there is not pending or, to the knowledge of the Company, threatened or contemplated, any action, suit or proceeding (a) to which the Company is a party or (b) which has as the subject thereof any officer or director of the Company, any employee benefit plan sponsored by the Company or any property or assets owned or leased by the Company before or by any court or Governmental Authority (as defined below), or any arbitrator, which would, individually or in the aggregate, reasonably be expected to result in a Material Adverse Change, or would materially and adversely affect the ability of the Company to perform its obligations under this Agreement or which are otherwise material in the context of the sale of the Securities.  There are no current or, to
 
6 

 
the knowledge of the Company, pending, legal, governmental or regulatory actions, suits or proceedings (x) to which the Company is subject or (y) which has as the subject thereof any officer or director of the Company, any employee plan sponsored by the Company or any property or assets owned or leased by the Company, that are required to be described in the Registration Statement, Time of Sale Disclosure Package and Prospectus by the Act or by the Rules and Regulations and that have not been so described.
 
(xii)                       Authorization; No Conflicts; Authority .  This Agreement has been duly authorized, executed and delivered by the Company, and constitutes a valid, legal and binding obligation of the Company, enforceable in accordance with its terms, except as rights to indemnity hereunder may be limited by federal or state securities laws and except as such enforceability may be limited by bankruptcy, insolvency, reorganization or similar laws affecting the rights of creditors generally and subject to general principles of equity.  The execution, delivery and performance of this Agreement and the consummation of the transactions herein contemplated will not (A) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, or result in the creation or imposition of any lien, charge or encumbrance upon any property or assets of the Company pursuant to any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company is a party or by which the Company is bound or to which any of the property or assets of the Company is subject, (B) result in any violation of the provisions of the Company’s charter or by-laws or (C) result in the violation of any law or statute or any judgment, order, rule, regulation or decree of any court or arbitrator or federal, state, local or foreign governmental agency or regulatory authority having jurisdiction over the Company or any of its properties or assets (each, a “Governmental Authority” ), except in the case of clause (A) as would not result in a Material Adverse Effect.  No consent, approval, authorization or order of, or registration or filing with any Governmental Authority is required for the execution, delivery and performance of this Agreement or for the consummation of the transactions contemplated hereby, including the issuance or sale of the Securities by the Company, except such as may be required under the Act, the rules of FINRA, the NASDAQ Stock Market or state securities or blue sky laws; and the Company has full power and authority to enter into this Agreement and to consummate the transactions contemplated hereby, including the authorization, issuance and sale of the Securities as contemplated by this Agreement.
 
(xiii)                   Capitalization; the Securities; Registration Rights .  All of the issued and outstanding shares of capital stock of the Company, including the outstanding shares of Common Stock, are duly authorized and validly issued, fully paid and nonassessable, have been issued in compliance with all federal and state and foreign securities laws and were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities that have not been waived in writing; the Securities which may be sold hereunder by the Company have been duly authorized and, when issued, delivered and paid for in accordance with the terms of this Agreement, will have been validly issued and will be fully paid and nonassessable; and the capital stock of the Company, including the Common Stock, conforms in all material respects to the description thereof in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus.  Except as otherwise stated in the Registration Statement, the Time of Sale Disclosure Package and the
 
7 

 
Prospectus, (A) there are no preemptive rights or other rights to subscribe for or to purchase, or any restriction upon the voting or transfer of, any shares of Common Stock pursuant to the Company’s charter, by-laws or any agreement or other instrument to which the Company is a party or by which the Company is bound, (B) neither the filing of the Registration Statement nor the offering or sale of the Securities as contemplated by this Agreement gives rise to any rights for or relating to the registration of any shares of Common Stock or other securities of the Company (collectively “Registration Rights” ) and (C) any person to whom the Company has granted Registration Rights has agreed not to exercise such rights until after expiration of the Lock-Up Period (as defined below).  The Company has an authorized and outstanding capitalization as set forth in the Registration Statement, in the Time of Sale Disclosure Package and the Prospectus under the caption “Capitalization.”
 
(xiv)                   Stock Options .  Except as described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, there are no options, warrants, agreements, contracts or other rights in existence to purchase or acquire from the Company any shares of the capital stock of the Company.  The description of the Company’s stock option, stock bonus and other stock plans or arrangements (the “Company Stock Plans” ), and the options (the “Options” ) or other rights granted thereunder, set forth in the Time of Sale Disclosure Package and the Prospectus accurately and fairly presents in all material respects the information required to be shown with respect to such plans, arrangements, options and rights.  Each grant of an Option (A) was duly authorized no later than the date on which the grant of such Option was by its terms to be effective by all necessary corporate action, including, as applicable, approval by the board of directors of the Company (or a duly constituted and authorized committee thereof) and any required stockholder approval by the necessary number of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party thereto and (B) was made in accordance with the terms of the applicable Company Stock Plan, and all applicable laws and regulatory rules or requirements, including all applicable federal securities laws.
 
(xv)                       Compliance with Laws .  The Company holds, and is operating in compliance in all material respects with, all licenses, permits, consents, certificates and orders or other authorizations and approvals issued by the applicable Governmental Authority or self-regulatory body (the “Permits” ) required for the conduct of its business and all such Permits are valid and in full force and effect, except where the failure to possess or comply with such Permits would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  To the Company’s knowledge, the Company has not received notice of any revocation or modification of any such Permit that would, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, and has no reason to believe that any such Permit will not be renewed in the ordinary course.  The Company is in compliance in all material respects with all applicable federal, state, local and foreign laws, regulations, orders and decrees.
 
(xvi)                   Ownership of Assets .  The Company has good and valid title to all property (whether real or personal)  described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus as being owned by it, in each case free and clear
 
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of all liens, claims, security interests, other encumbrances or defects except such as are described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus and except where the failure to have such ownership or title would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.  The property held under lease by the Company is held by it under valid, subsisting and enforceable leases  with only such exceptions with respect to any particular lease as do not interfere with the conduct of the business of the Company and except where the failure to have such leasehold title would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect.
 
(xvii)               Intellectual Property .  Except as disclosed in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, the Company owns, possesses or has rights to all Intellectual Property (as defined below) necessary for the conduct of the Company’s business as now conducted or as described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus to be conducted, except as such failure to own, possess or have such rights would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.  Furthermore, (A) to the knowledge of the Company, there is no infringement, misappropriation or violation by third parties of any such Intellectual Property, except as such infringement, misappropriation or violation that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; (B) there is no pending or, to the knowledge of the Company, threatened, action, suit, proceeding or claim by others challenging the Company’s rights in or to any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (C) the Intellectual Property owned by the Company, and to the knowledge of the Company, the Intellectual Property licensed to the Company, has not been adjudged invalid or unenforceable, in whole or in part, and there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others challenging the validity or scope of any such Intellectual Property, and the Company is unaware of any facts which would form a reasonable basis for any such claim; (D) there is no pending or, to the knowledge of the Company, threatened action, suit, proceeding or claim by others that the Company infringes, misappropriates or otherwise violates any Intellectual Property or other proprietary rights of others, except as would not, individually or in the aggregate, result in a Material Adverse Effect, and the Company has not received any written notice of such claim and the Company is unaware of any other fact which would form a reasonable basis for any such claim; and (E) except as disclosed in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, to the Company’s knowledge, no employee of the Company is in or has ever been in violation of any term of any employment contract, patent disclosure agreement, invention assignment agreement, non-competition agreement, non-solicitation agreement, nondisclosure agreement or any restrictive covenant to or with a former employer where the basis of such violation relates to such employee’s employment with the Company or actions undertaken by the employee while employed with the Company, except as such violation would not result in a Material Adverse Effect. “Intellectual Property” shall mean all patents, patent applications, trade and service marks, trade and service mark registrations, trade names, copyrights, licenses, inventions, trade secrets, domain names, technology, know-how and other intellectual property.
 
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(xviii)           Regulatory Complianc e.  Except as described in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, the Company: (i) has not received any unresolved U.S. Food and Drug Administration ( “FDA” ) Form 483 or other Governmental Authority notice of inspectional observations, notice of adverse filing, warning letter, untitled letter or other correspondence or notice from the FDA, or any other court or arbitrator or federal, state, local or foreign governmental or regulatory authority, alleging or asserting noncompliance with the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 301 et seq.), or received any requests or requirements to make changes to the Company products by the FDA or any other Governmental Authority; (ii) is and has been in material compliance with applicable health care laws, including without limitation, the Federal Food, Drug and Cosmetic Act (21 U.S.C. § 301 et seq.), the federal Anti-kickback Statute (42 U.S.C. § 1320a-7b(b)), the civil False Claims Act (31 U.S.C. § 3729 et seq.), the administrative False Claims Law (42 U.S.C. § 1320a-7b(a)), the Civil Monetary Penalties Law (42 U.S.C. § 1320a-7a), the Health Insurance Portability and Accountability Act of 1996 (42 U.S.C. § 1320d et seq.), as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (collectively, “HIPAA” ), the exclusion laws (42 U.S.C. § 1320a-7), the Physician Payments Sunshine Act (42 U.S.C. § 1320a-7h), all criminal laws relating to health care fraud and abuse, including but not limited to 18 U.S.C. Sections 286 and 287, and the health care fraud criminal provisions under HIPAA, Medicare (Title XVIII of the Social Security Act), Medicaid (Title XIX of the Social Security Act), and the regulations promulgated pursuant to such laws, and comparable state laws, and all other local, state, federal, national, supranational and foreign laws, manual provisions, policies and administrative guidance relating to the regulation of the Company (collectively, the “Health Care Laws” ); (iii) possesses all licenses, certificates, approvals, clearances, authorizations, permits and supplements or amendments thereto required by any such Health Care Laws to carry on its businesses as now or proposed to be conducted (collectively, the “Authorizations” ) and such Authorizations are valid and in full force and effect and the Company is not in material violation of any term of any such Authorizations; (iv) has not received notice of any ongoing claim, action, suit, proceeding, hearing, enforcement, investigation, arbitration or other action from any Governmental Authority or third party alleging any material violation of any Health Care Laws or Authorizations and has no knowledge that any such Governmental Authority or third party is considering any such claim, litigation, arbitration, action, suit, investigation or proceeding; (v) has not received notice that any Governmental Authority has taken, is taking or intends to take action to limit, suspend, modify or revoke any Authorizations and has no knowledge that any such Governmental Authority is considering such action; (vi) has filed, obtained, maintained or submitted all material reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments thereto as required by any Health Care Laws or Authorizations and all such reports, documents, forms, notices, applications, records, claims, submissions and supplements or amendments were complete, correct and not misleading on the date filed (or were corrected or supplemented by a subsequent submission if required by law); (vii) has not, either voluntarily or involuntarily, initiated, conducted, or issued or caused to be initiated, conducted or issued, any recall, market withdrawal or replacement, safety alert, post sale warning, “dear doctor” letter, or other notice or action relating to the alleged lack of safety, efficacy or regulatory compliance of any product or
 
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any alleged product defect or violation and, to the Company’s knowledge, no third party has initiated or conducted any such notice or action and there are no facts which are reasonably likely to cause, and the Company has not received any written notice from the FDA or any other regulatory agency regarding, a material recall, market withdrawal or replacement of any Company product sold or intended to be sold by the Company, a material change in the marketing classification or a material adverse change in the labeling of any such Company products, or a termination or suspension of the manufacturing, marketing, or distribution of such Company products; (viii) is not a party to any corporate integrity agreement, deferred prosecution agreement, monitoring agreement, consent decree, settlement order, or similar agreements, or has any reporting obligations pursuant to any such agreement, plan or correction or other remedial measure entered into with any Governmental Authority; (ix) has not, nor has any officer, director, employee, or, to the knowledge of the Company, any agent or distributor of the Company, made an untrue statement of a material fact or a fraudulent statement to the FDA or any other Governmental Authority, failed to disclose a material fact required to be disclosed to the FDA or any other Governmental Authority, or committed an act, made a statement, or failed to make a statement, in each such case, related to the business of the Company that, at the time such disclosure was made, would reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities”, set forth in 56 Fed. Reg. 46191 (September 10, 1991) or for the FDA or any other Governmental Authority to invoke any similar policy, except for any act or statement or failure to make a statement that, individually or in the aggregate, has not had and would not reasonably be expected to have a Material Adverse Effect; (x) has not, nor has any officer, director, employee, or, to the knowledge of the Company, any agent or distributor of the Company, been debarred or convicted of any crime or engaged in any conduct for which debarment is mandated by 21 U.S.C. § 335a(a) or any similar Law or authorized by 21 U.S.C. § 335a(b) or any similar Law applicable in other jurisdictions in which material quantities of any of the Company products or Company product candidates are sold or intended by the Company to be sold; and (xi) none of the Company or its officers, directors, or employees, or, to the knowledge of the Company, its agents or contractors, has been or is currently excluded from participation in the Medicare and Medicaid programs or any other state or federal health care program.
 
(xix)                   Clinical Studies .  The studies, tests and preclinical and clinical trials conducted or sponsored by or, to the knowledge of the Company, conducted on behalf of, the Company as described in the Prospectus, were and, if still pending, are, in all material respects, being conducted in accordance with applicable experimental protocols, procedures and controls pursuant to accepted professional medical and scientific standards and all relevant applicable laws and Authorizations, including, without limitation, the Federal Food, Drug and Cosmetic Act and the rules and regulations promulgated thereunder; the descriptions of the results of such studies, tests and trials contained in the Registration Statement and the Prospectus are accurate and complete in all material respects and fairly present the data derived from such studies, tests and trials; except to the extent disclosed in the Registration Statement and the Prospectus, the Company has no knowledge of any studies, tests or trials the results of which the Company believes reasonably call into question the study, test or trial results described or referred to in the Registration Statement
 
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and the Prospectus when viewed in the context in which such results are described and the clinical state of development; and the Company has not received any notices or correspondence from any Governmental Authority requiring the termination, suspension or material modification of any studies, tests or preclinical or clinical trials conducted by or on behalf of the Company.
 
(xx)                       No Violations or Defaults .  The Company is (i) not in violation of its charter, by-laws or other organizational documents, or (ii) in breach of or otherwise in default, and no event has occurred which, with notice or lapse of time or both, would constitute such a default in the performance of any material obligation, agreement or condition contained in any bond, debenture, note, indenture, loan agreement or any other material contract, lease or other instrument to which it is subject or by which it may be bound, or to which any of the material property or assets of the Company is subject, except in the case of clause (ii) above, for such defaults as would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect.
 
(xxi)                   Taxes .  The Company has timely filed all federal, state, local and foreign income and other material tax returns required to be filed through the date hereof and is not in default in the payment of any taxes which were payable pursuant to said returns or any assessments with respect thereto, other than any which the Company is contesting in good faith.  There is no pending dispute with any taxing authority relating to any of such returns, and the Company has no knowledge of any proposed material liability for any tax to be imposed upon the properties or assets of the Company for which there is not an adequate reserve reflected in the Company’s financial statements included in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus.
 
(xxii)               Exchange Listing and Exchange Act Registration .  The Securities have been approved for listing on the NASDAQ Global Select Market upon official notice of issuance and, on the date the Registration Statement became effective, the Company’s Registration Statement on Form 8-A or other applicable form under the Securities Exchange Act of 1934, as amended (the “Exchange Act” ), became effective.  Except as previously disclosed to counsel for the Underwriters or as set forth in the Time of Sale Disclosure Package and the Prospectus, there are no affiliations with members of FINRA among the Company’s officers or directors or, to the knowledge of the Company, any five percent or greater stockholders of the Company or any beneficial owner of the Company’s unregistered equity securities that were acquired during the 180-day period immediately preceding the initial filing date of the Registration Statement.
 
(xxiii)           Ownership of Other Entitie s .  The Company has no subsidiaries.  The Company, directly or indirectly, owns no capital stock or other equity or ownership or proprietary interest in any corporation, partnership, association, trust or other entity.
 
(xxiv)           Internal Controls .  The Company maintains a system of internal accounting controls that are designed to provide reasonable assurances that (i) transactions are executed in accordance with management’s general or specific authorization; (ii) transactions are recorded as necessary to permit preparation of financial statements in
 
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conformity with generally accepted accounting principles in the United States and to maintain accountability for assets; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; and (iv) the recorded accountability for assets is compared with existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  Except as disclosed in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, the Company’s internal control over financial reporting is effective and none of the Company, its board of directors and audit committee is aware of any “significant deficiencies” or “material weaknesses” (each as defined by the Public Company Accounting Oversight Board) in its internal control over financial reporting, or any fraud, whether or not material, that involves management or other employees of the Company who have a significant role in the Company’s internal controls; and since the end of the latest audited fiscal year, there has been no change in the Company’s internal control over financial reporting (whether or not remediated) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.  The Company’s board of directors has, subject to the exceptions, cure periods and the phase-in periods specified in the applicable exchange rules ( “Exchange Rules” ), validly appointed an audit committee to oversee internal accounting controls whose composition satisfies the applicable requirements of the Exchange Rules and the Company’s board of directors and/or the audit committee has adopted a charter that satisfies the requirements of the Exchange Rules.
 
(xxv)               No Brokers or Finders .  Other than as contemplated by this Agreement, the Company has not incurred and will not incur any liability for any finder’s or broker’s fee or agent’s commission in connection with the execution and delivery of this Agreement or the consummation of the transactions contemplated hereby.
 
(xxvi)           Insurance .  The Company carries, or is covered by, insurance in such amounts and covering such risks as the Company reasonably believes is adequate for the conduct of its business and the value of its properties; all policies of insurance and any fidelity or surety bonds insuring the Company or its business, assets, employees, officers and directors are in full force and effect; the Company is in compliance with the terms of such policies and instruments in all material respects; there are no claims by the Company under any such policy or instrument as to which any insurance company is denying liability or defending under a reservation of rights clause; the Company has not been refused any insurance coverage sought or applied for; and the Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not have a Material Adverse Effect.
 
(xxvii)       Investment Company Act .  The Company is not and, after giving effect to the offering and sale of the Securities and the application of proceeds therefrom, will not be an “investment company,” as such term is defined in the Investment Company Act of 1940, as amended.
 
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(xxviii)   Sarbanes-Oxley Act.   The Company is in compliance with all applicable provisions of the Sarbanes-Oxley Act and the rules and regulations of the Commission thereunder.
 
(xxix)           Disclosure Controls .  The Company has established and maintains disclosure controls and procedures (as defined in Rules 13a-14 and 15d-14 under the Exchange Act) and such controls and procedures have been designed to ensure and are effective in ensuring that material information relating to the Company is made known to the Company’s principal executive officer and principal financial officer.
 
(xxx)               Anti-Bribery and Anti-Money Laundering Laws .  Each of the Company, its affiliates and its officers, directors, supervisors, managers, or employees, or to the Company’s knowledge, agents has not violated, its participation in the offering will not violate, and the Company has instituted and maintains policies and procedures designed to ensure continued compliance with, each of the following laws:  (A) anti-bribery laws, including but not limited to, any applicable law, rule, or regulation of any locality, including but not limited to any law, rule, or regulation promulgated to implement the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, signed December 17, 1997, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.K. Bribery Act 2010, or any other law, rule or regulation of similar purposes and scope or (B) anti-money laundering laws, including but not limited to, applicable federal, state, international, foreign or other laws, regulations or government guidance regarding anti-money laundering, including, without limitation, Title 18 US. Code section 1956 and 1957, the Patriot Act, the Bank Secrecy Act, and international anti-money laundering principles or procedures by an intergovernmental group or organization, such as the Financial Action Task Force on Money Laundering, of which the United States is a member and with which designation the United States representative to the group or organization continues to concur, all as amended, and any Executive order, directive, or regulation pursuant to the authority of any of the foregoing, or any orders or licenses issued thereunder.
 
(xxxi)           OFAC . (A)                        Neither the Company, nor any of its directors, officers or employees, nor, to the Company’s knowledge, any agent, affiliate or representative of the Company, is an individual or entity that is, or is owned or controlled by an individual or entity that is: (1) the subject of any sanctions administered or enforced by the U.S. Department of Treasury’s Office of Foreign Assets Control, the United Nations Security Council, the European Union, Her Majesty’s Treasury, or other relevant sanctions authority (collectively, “Sanctions” ), nor (2) located, organized or resident in a country or territory that is the subject of Sanctions (including, without limitation, Burma/Myanmar, Cuba, Iran, Libya, North Korea, Sudan and Syria).
 
(B)                            The Company will not, directly or indirectly, use the proceeds of the offering, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other individual or entity:
 
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(1)                               to fund or facilitate any activities or business of or with any individual or entity or in any country or territory that, at the time of such funding or facilitation, is the subject of Sanctions; or
 
(2)                               in any other manner that will result in a violation of Sanctions by any individual or entity (including any individual or entity participating in the offering, whether as underwriter, advisor, investor or otherwise).
 
(C)                            For the past five years, the Company has not knowingly engaged in, and is not now knowingly engaged in, any dealings or transactions with any individual or entity, or in any country or territory, that at the time of the dealing or transaction is or was the subject of Sanctions.
 
(xxxii)       Compliance with Environmental Laws .  Except as disclosed in the Time of Sale Disclosure Package and the Prospectus, the Company is not in violation of any statute, any rule, regulation, decision or order of any Governmental Authority or any court, domestic or foreign, relating to the use, disposal or release of hazardous or toxic substances or relating to the protection or restoration of the environment or human exposure to hazardous or toxic substances (collectively, “Environmental Laws” ), owns or operates any real property contaminated with any substance that is subject to any Environmental Laws, is liable for any off-site disposal or contamination pursuant to any Environmental Laws, or is subject to any claim relating to any Environmental Laws, which violation, contamination, liability or claim would individually or in the aggregate, have a Material Adverse Effect; and the Company is not aware of any pending investigation which might lead to such a claim.  The Company does not anticipate incurring any material capital expenditures relating to compliance with Environmental Laws.
 
(xxxiii)   Compliance with Occupational Laws .  The Company (A) is in compliance, in all material respects, with any and all applicable foreign, federal, state and local laws, rules, regulations, treaties, statutes and codes promulgated by any and all Governmental Authorities (including pursuant to the Occupational Health and Safety Act) relating to the protection of human health and safety in the workplace ( “Occupational Laws” ); (B) has received all material permits, licenses or other approvals required of it under applicable Occupational Laws to conduct its business as currently conducted; and (C) is in compliance, in all material respects, with all terms and conditions of such permit, license or approval.  No action, proceeding, revocation proceeding, writ, injunction or claim is pending or, to the Company’s knowledge, threatened against the Company relating to Occupational Laws, and the Company does not have knowledge of any facts, circumstances or developments relating to its operations or cost accounting practices that could reasonably be expected to form the basis for or give rise to such actions, suits, investigations or proceedings that would reasonably be expected to have a Material Adverse Effect.
 
(xxxiv)   ERISA and Employee Benefits Matters .  (A) To the knowledge of the Company, no “prohibited transaction” as defined under Section 406 of ERISA (as defined below) or Section 4975 of the Code (as defined below) and not exempt under
 
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ERISA Section 408 and the regulations and published interpretations thereunder has occurred with respect to any Employee Benefit Plan (as defined below).  At no time has the Company or any ERISA Affiliate (as defined below) maintained, sponsored, participated in, contributed to or has or had any material liability or obligation in respect of any Employee Benefit Plan subject to Part 3 of Subtitle B of Title I of ERISA, Title IV of ERISA, or Section 412 of the Code or any “multiemployer plan” as defined in Section 3(37) of ERISA or any multiple employer plan for which the Company or any ERISA Affiliate has incurred or would reasonably be expected to incur liability under Section 4063 or 4064 of ERISA.  No Employee Benefit Plan provides or promises, or at any time provided or promised, retiree health, life insurance, or other retiree welfare benefits except as may be required by the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended, or similar state law.  Each Employee Benefit Plan is and has been operated in material compliance with its terms and all applicable laws, including but not limited to ERISA and the Code and, to the knowledge of the Company, no event has occurred (including a “reportable event” as such term is defined in Section 4043 of ERISA) and no condition exists that would subject the Company or any ERISA Affiliate to any material tax, fine, lien, penalty or liability imposed by ERISA, the Code or other applicable law, except as would not reasonably be expected to have a Material Adverse Effect.  Each Employee Benefit Plan intended to be qualified under Code Section 401(a) is so qualified and has a favorable determination or opinion letter from the Internal Revenue Service upon which it can rely, and any such determination or opinion letter remains in effect and has not been revoked and to the knowledge of the Company, nothing has occurred since the date of any such determination or opinion letter that is reasonably likely to adversely affect such qualification; and (B) the Company does not have any obligations under any collective bargaining agreement with any union and to the knowledge of the Company, no organization efforts are underway with respect to Company employees.  As used in this Agreement, “Code” means the Internal Revenue Code of 1986, as amended; “Employee Benefit Plan” means any “employee benefit plan” within the meaning of Section 3(3) of ERISA, including, without limitation, all stock purchase, stock option, stock-based severance, employment, change-in-control, medical, disability, fringe benefit, bonus, incentive, deferred compensation, employee loan and all other employee benefit plans, agreements, programs, policies or other arrangements, whether or not subject to ERISA, under which (x) any current or former employee, director or independent contractor of the Company has any present or future right to benefits and which are contributed to, sponsored by or maintained by the Company or (y) the Company has had or has any present or future obligation or liability; “ERISA” means the Employee Retirement Income Security Act of 1974, as amended; and “ERISA Affiliate” means any member of the Company’s controlled group as defined in Code Section 414(b), (c), (m) or (o).  The Company has no Employee Benefit Plan established, maintained or contributed to outside of the United States of America or which covers any employee working or residing outside of the United States.
 
(xxxv)       Business Arrangements .  Except as disclosed in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus, the Company has not granted rights to develop, manufacture, produce, assemble, distribute, license, market or sell its products to any other person and is not bound by any agreement that affects the exclusive
 
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right of the Company to develop, manufacture, produce, assemble, distribute, license, market or sell its products.
 
(xxxvi)   Labor Matters .  No labor dispute with the employees of the Company exists or, to the knowledge of the Company, is threatened or imminent, and the Company is not aware of any existing or imminent labor disturbance by the employees of any of its principal suppliers, contractors or customers, except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
 
(xxxvii)     Disclosure of Legal Matters . There are no statutes, regulations, legal or governmental proceedings or contracts or other documents required to be described in the Time of Sale Disclosure Package or the Prospectus or included as exhibits to the Registration Statement that are not described in all material respects or included as required.
 
(xxxviii)       Statistical Information . Any third-party statistical and market-related data included in the Registration Statement, the Time of Sale Disclosure Package and the Prospectus are based on or derived from sources that the Company reasonably believes to be reliable and accurate in all material respects.
 
(xxxix)   Forward-looking Statements .  No forward-looking statement (within the meaning of Section 27A of the Act and Section 21E of the Exchange Act) contained in the Registration Statement, the Time of Sale Disclosure Package or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
 
(xl)                           DSP Compliance .  Except with notice to the Representatives and compliance with applicable laws, none of the Directed Stock distributed in connection with the Directed Stock Program will be offered or sold outside of the United States.
 
(b)                               Effect of Certificates .  Any certificate signed by any officer of the Company and delivered to you or to counsel for the Underwriters shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby.
 
3.                                     Purchase, Sale and Delivery of Securities .
 
(a)                                Firm Shares .  On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company agrees to issue and sell [    ·    ] Firm Shares to the several Underwriters, and each Underwriter agrees, severally and not jointly, to purchase from the Company the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto.  The purchase price for each Firm Share shall be $ [    ·    ] per share.  The obligation of each Underwriter to the Company shall be to purchase from the Company that number of Firm Shares (to be adjusted by the Representatives to avoid fractional shares) which represents the same proportion of the number of Firm Shares to be sold by the Company pursuant to this Agreement as the number of Firm Shares set forth opposite the name of such Underwriter in Schedule I hereto represents to the total number of Firm Shares to be purchased by all Underwriters pursuant to this Agreement.  In making this Agreement, each Underwriter is contracting severally and not jointly; except as provided in paragraph (d) of this
 
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Section 3 and in Section 8 hereof, the agreement of each Underwriter is to purchase only the respective number of Firm Shares specified in Schedule I.
 
(b)                               Option Shares .  On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company hereby grants to the several Underwriters an option to purchase all or any portion of the Option Shares at the same purchase price as the Firm Shares, for use solely in covering any over-allotments made by the Underwriters in the sale and distribution of the Firm Shares.  The option granted hereunder may be exercised in whole or in part at any time (but not more than once) within 30 days after the effective date of this Agreement upon notice (confirmed in writing) by the Representatives to the Company setting forth the aggregate number of Option Shares as to which the several Underwriters are exercising the option and the date and time, as determined by you, when the Option Shares are to be delivered, but in no event earlier than the First Closing Date (as defined below) nor earlier than the second business day (unless such date is the same date as the First Closing Date) or later than the tenth business day after the date on which the option shall have been exercised.  The number of Option Shares to be purchased by each Underwriter shall be the same percentage of the total number of Option Shares to be purchased by the several Underwriters as the number of Firm Shares to be purchased by such Underwriter is of the total number of Firm Shares to be purchased by the several Underwriters, as adjusted by the Representatives in such manner as the Representatives deem advisable to avoid fractional shares.  No Option Shares shall be sold and delivered unless the Firm Shares previously have been, or simultaneously are, sold and delivered.
 
(c)                                Payment and Delivery .
 
(i)                                   The Securities to be purchased by each Underwriter hereunder, in book-entry form and in such authorized denominations and registered in such names as Piper Jaffray & Co. may request upon at least forty-eight hours’ prior notice to the Company, shall be delivered by or on behalf of the Company to Piper Jaffray & Co., through the facilities of the Depository Trust Company ( “DTC” ), for the account of such Underwriter, with any transfer taxes payable in connection with the transfer of the Securities to the Underwriters duly paid, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified by the Company to Piper Jaffray & Co. at least forty-eight hours in advance.  The time and date of such delivery and payment shall be, with respect to the Firm Shares, 9:30 a.m., New York City time, on [    ·    ] , 2014 or such other time and date as Piper Jaffray & Co. and the Company may agree upon in writing, and, with respect to the Option Shares, 9:30 a.m., New York City time, on the date specified by Piper Jaffray & Co. in each written notice given by Piper Jaffray & Co. of the Underwriters’ election to purchase such Option Shares, or such other time and date as Piper Jaffray & Co. and the Company may agree upon in writing.  Such time and date for delivery of the Firm Shares is herein called the “First Closing Date” , each such time and date for delivery of the Option Shares, if not the First Closing Date, is herein called a “Second Closing Date” , and each such time and date for delivery is herein called a “Closing” .
 
(ii)                               The documents to be delivered at each Closing by or on behalf of the parties hereto pursuant to Section 5 hereof, including the cross receipt for the Securities and
 
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any additional documents requested by the Underwriters pursuant to Section 5(j) hereof, will be delivered at the offices of Latham & Watkins LLP, 650 Town Center Drive, 20 th  Floor, Costa Mesa, California 92625 (the “Closing Location” ), and the Securities will be delivered to Piper Jaffray & Co., through the facilities of the DTC, for the account of such Underwriter, all at such Closing.  A meeting will be held at the Closing Location at [    ·    ]  [a/p].m., New York City time, on the New York Business Day (as defined below) next preceding such Closing, at which meeting the final drafts of the documents to be delivered pursuant to the preceding sentence will be available for review by the parties hereto.  For the purposes of this Section 3, “New York Business Day” shall mean each Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on which banking institutions in New York City are generally authorized or obligated by law or executive order to close.
 
(d)                              Purchase by Representatives on Behalf of Underwriters .  It is understood that you, individually and not as Representatives of the several Underwriters, may (but shall not be obligated to) make payment to the Company on behalf of any Underwriter for the Securities to be purchased by such Underwriter.  Any such payment by you shall not relieve any such Underwriter of any of its obligations hereunder.  Nothing herein contained shall constitute any of the Underwriters an unincorporated association or partner with the Company.
 
4.                                     Covenants .
 
(a)                                Covenants of the Company .  The Company covenants and agrees with the several Underwriters as follows:
 
(i)                                   Required Filings .  The Company will prepare and file a Prospectus with the Commission containing the Rule 430A Information omitted from the Preliminary Prospectus within the time period required by, and otherwise in accordance with the provisions of, Rules 424(b) and 430A of the Rules and Regulations.  If the Company has elected to rely upon Rule 462(b) of the Rules and Regulations to increase the size of the offering registered under the Act and the Rule 462(b) Registration Statement has not yet been filed and become effective, the Company will prepare and file the Rule 462(b) Registration Statement with the Commission within the time period required by, and otherwise in accordance with the provisions of, Rule 462(b) and the Act.  The Company will prepare and file with the Commission, promptly upon your request, any amendments or supplements to the Registration Statement or Prospectus that, in your opinion, may be necessary or advisable in connection with the distribution of the Securities by the Underwriters; and the Company will furnish the Representatives and counsel for the Underwriters a copy of any proposed amendment or supplement to the Registration Statement or Prospectus and will not file any amendment or supplement to the Registration Statement or Prospectus to which you shall reasonably object by notice to the Company after having been furnished a copy a reasonable time prior to the filing.
 
(ii)                               Notification of Certain Commission Actions .  The Company will advise you, promptly after it shall receive notice or obtain knowledge thereof, of the issuance by the Commission of any stop order suspending the effectiveness of the
 
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Registration Statement, or any post-effective amendment thereto or preventing or suspending the use of any Preliminary Prospectus, the Time of Sale Disclosure Package, the Prospectus or any issuer free writing prospectus, of the suspension of the qualification of the Securities for offering or sale in any jurisdiction, or of the initiation or threatening of any proceeding for any such purpose; and the Company will promptly use its best efforts to prevent the issuance of any stop order or to obtain its withdrawal if such a stop order should be issued.
 
(iii)                           Continued Compliance with Securities Laws .
 
(A)                           Within the time during which a prospectus (assuming the absence of Rule 172) relating to the Securities is required to be delivered under the Act by any Underwriter or dealer, the Company will comply with all requirements imposed upon it by the Act, as now and hereafter amended, and by the Rules and Regulations, as from time to time in force, so far as necessary to permit the continuance of sales of or dealings in the Securities as contemplated by the provisions hereof, the Time of Sale Disclosure Package and the Prospectus.  If during such period any event occurs as a result of which the Prospectus (or if the Prospectus is not yet available to prospective purchasers, the Time of Sale Disclosure Package) would include an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances then existing, not misleading, or if during such period it is necessary to amend the Registration Statement or supplement the Prospectus (or if the Prospectus is not yet available to prospective investors, the Time of Sale Disclosure Package) to comply with the Act, the Company promptly will (x) notify you of such untrue statement or omission, (y) amend the Registration Statement or supplement the Prospectus (or, if the Prospectus is not yet available to prospective purchasers, the Time of Sale Disclosure Package) (at the expense of the Company) so as to correct such statement or omission or effect such compliance and (z) notify you when any amendment to the Registration Statement is filed or becomes effective or when any supplement to the Prospectus (or, if the Prospectus is not yet available to prospective purchasers, the Time of Sale Disclosure Package) is filed.
 
(B)                            If at any time following issuance of an issuer free writing prospectus or Written Testing-the-Waters Communication, there occurred or occurs an event or development as a result of which such issuer free writing prospectus or Written Testing-the-Waters Communication conflicted or would conflict with the information contained in the Registration Statement, any Preliminary Prospectus or the Prospectus relating to the Securities or included or would include an untrue statement of a material fact or omitted or would omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances prevailing at that subsequent time, not misleading, the Company (x) has promptly notified or promptly will notify the Representatives of such conflict, untrue statement or omission, (y) has promptly amended or will promptly amend or supplement, at its own expense, such issuer free writing prospectus or Written Testing-the-Waters Communication to eliminate or correct such conflict, untrue
 
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statement or omission and (z) has notified or promptly will notify you when such amendment or supplement was or is filed with the Commission to the extent required to be filed by the Rules and Regulations.
 
(iv)                           Blue Sky Qualifications .  The Company shall take or cause to be taken all necessary action to qualify the Securities for sale under the securities laws of such domestic United States or foreign jurisdictions as you reasonably designate or as is necessary to effect the distribution of the Directed Stock and to continue such qualifications in effect so long as required for the distribution of the Securities, except that the Company shall not be required in connection therewith to qualify as a foreign corporation or to execute a general consent to service of process in any state or to subject itself to taxation in any jurisdiction if it is not otherwise so subject.
 
(v)                               Provision of Documents .  The Company will furnish, at its own expense, to the Underwriters and counsel for the Underwriters copies of the Registration Statement, each Preliminary Prospectus, the Time of Sale Disclosure Package, the Prospectus, any issuer free writing prospectus and all amendments and supplements to such documents, in each case as soon as practicable and in such quantities as you may from time to time reasonably request.
 
(vi)                           Rule 158 .  The Company will make generally available to its security holders as soon as practicable, but in no event later than 15 months after the end of the Company’s current fiscal quarter (which may be satisfied by filing on EDGAR), an earnings statement (which need not be audited) covering a 12-month period beginning after the effective date of the Registration Statement (which, for purposes of this paragraph, will be deemed to be the effective date of the Rule 462(b) Registration Statement, if applicable) that shall satisfy the provisions of Section 11(a) of the Act and Rule 158 of the Rules and Regulations.
 
(vii)                       Payment and Reimbursement of Expenses .  The Company, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, will pay or cause to be paid (A) all expenses (including transfer taxes allocated to the respective transferees) incurred in connection with the delivery to the Underwriters of the Securities, (B) all expenses and fees (including, without limitation, fees and expenses of the Company’s accountants and counsel but, except as otherwise provided below, not including fees of the Underwriters’ counsel) in connection with the preparation, printing, filing, delivery, and shipping of the Registration Statement (including the financial statements therein and all amendments, schedules, and exhibits thereto), the Securities, each Preliminary Prospectus, the Time of Sale Disclosure Package, the Prospectus, any issuer free writing prospectus and any amendment thereof or supplement thereto, and the printing, delivery, and shipping of this Agreement and other underwriting documents, including blue sky memoranda (covering the states and other applicable jurisdictions), (C) all filing fees and reasonable fees and disbursements of the Underwriters’ counsel incurred in connection with the qualification of the Securities for offering and sale by the Underwriters or by dealers under the securities or blue sky laws of the states and other jurisdictions which you shall designate, (D) the fees
 
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and expenses of the custodian and any transfer agent or registrar, (E) the filing fees and reasonable fees and disbursements of Underwriters’ counsel incident to any required review and approval by FINRA of the terms of the sale of the Securities (such fees and expenses of counsel not to exceed $25,000 (excluding filing fees)), (F) listing fees, if any, (G) the cost and expenses of the Company relating to investor presentations or any “road show” undertaken in connection with marketing of the Securities, including, without limitation, expenses associated with the preparation or dissemination of any electronic road show, expenses associated with the production of road show slides and graphics, fees and expenses of any consultants engaged in connection with the road show presentations with the prior approval of the Company, travel and lodging expenses of the representatives and officers of the Company and any such consultants, and 50% of the cost of any aircraft chartered in connection with the road show (the remaining 50% of the cost of such aircraft to be paid by the Underwriters), (H) all fees and disbursements of counsel incurred by the Underwriters in connection with the Directed Stock Program and stamp duties, similar taxes or duties or other taxes, if any, incurred by the Underwriters in connection with the Directed Stock Program and (I) all other costs and expenses of the Company incident to the performance of its obligations hereunder that are not otherwise specifically provided for herein. If this Agreement is terminated by the Representatives pursuant to Section 9 hereof or if the sale of the Securities provided for herein is not consummated by reason of any failure, refusal or inability on the part of the Company to perform any agreement on its part to be performed, or because any other condition of the Underwriters’ obligations hereunder required to be fulfilled by the Company is not fulfilled, the Company will reimburse the several Underwriters for all reasonable out-of-pocket accountable disbursements (including but not limited to fees and disbursements of counsel, printing expenses, travel expenses, postage, facsimile and telephone charges, subject to the limitations set forth in (E) and (G) above) incurred by the Underwriters in connection with their investigation, preparing to market and marketing the Securities or in contemplation of performing their obligations hereunder; provided, however, that in the event any such termination is effected after the First Closing Date but prior to any Second Closing Date with respect to the purchase of any Option Shares, the Company shall only reimburse the Underwriters for all of their out-of-pocket expenses, including the reasonable fees and disbursements of counsel for the Underwriters, incurred after the First Closing Date in connection with the proposed purchase of any such Option Shares.  For the avoidance of doubt, it is understood that the Company will not pay or reimburse any costs, fees or expenses incurred by any Underwriter that defaults on its obligations to purchase the Securities.
 
(viii)                   Use of Proceeds .  The Company will apply the net proceeds from the sale of the Securities to be sold by it hereunder for the purposes set forth in the Time of Sale Disclosure Package and the Prospectus and will file such reports with the Commission with respect to the sale of the Securities and the application of the proceeds therefrom as may be required in accordance with Rule 463 of the Rules and Regulations.
 
(ix)                           Company Lock-Up .  The Company will not, without the prior written consent of Piper Jaffray & Co. and Stifel, Nicolaus & Company, Incorporated, from the date of execution of this Agreement and continuing to and including the date
 
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180 days after the date of the Prospectus (the “Lock-Up Period” ), (A) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable for Common Stock or (B) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Common Stock, whether any such transaction described in clause (A) or (B) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise.  The restrictions contained in the preceding paragraph shall not apply to (i) the Securities to be sold to the Underwriters pursuant to this Agreement, (ii) the issuance by the Company of shares of Common Stock upon the exercise of an option or warrant, the settlement of any other stock-based awards, or the conversion of a security outstanding on the date hereof which is described in the Time of Sale Disclosure Package and the Prospectus, (iii) the grant by the Company of stock options or other stock-based awards (or the issuance of shares of Common Stock upon exercise thereof) to eligible participants pursuant to employee benefit or equity incentive plans of the Company described in the Time of Sale Disclosure Package and the Prospectus; provided that , prior to the grant of any such stock options or other stock-based awards pursuant to this clause (iii) that vest within the Lock-Up Period, each recipient of such grant shall sign and deliver a lock-up agreement substantially in the form of Exhibit A hereto, (iii) the Securities issued in connection with any joint venture, commercial or collaborative relationship or the acquisition or license by the Company of the securities, businesses, property or other assets of another person or entity or pursuant to any employee benefit plan assumed by the Company in connection with any such acquisition; provided, however, that in the case of this clause (iii), the recipients thereof deliver a lock-up agreement substantially in the form of Exhibit A hereto, or (iv) the filing of a registration statement on Form S-8 with respect to the registration of securities to be offered under any employee benefit or equity incentive plans of the Company described in the Time of Sale Disclosure Package and the Prospectus to the Company’s employees.
 
(x)                               Stockholder Lock-Ups .  The Company has caused to be delivered to you prior to the date of this Agreement a letter, substantially in the form of Exhibit A hereto (the “Lock-Up Agreement” ), from each individual or entity listed on Schedule II.  The Company will enforce the terms of each Lock-Up Agreement and issue stop-transfer instructions to its transfer agent and registrar for the Common Stock with respect to any transaction or contemplated transaction that would constitute a breach of or default under the applicable Lock-Up Agreement.  If the Representatives, in their sole discretion, agree to release or waive the restrictions of any Lock-Up Agreement between an officer or director of the Company and the Representatives and provides the Company with notice of the impending release or waiver at least three business days before the effective date of such release or waiver, the Company agrees to announce the impending release or waiver by means of a press release substantially in the form of Exhibit B hereto, issued through a major news service, at least two business days before the effective date of the release or waiver.
 
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(xi)                           No Market Stabilization or Manipulation .  The Company has not taken and will not take, directly or indirectly, any action designed to or which would reasonably be expected to cause or result in, or which has constituted, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Securities, and has not effected any sales of Common Stock which are required to be disclosed in response to Item 701 of Regulation S-K under the Act which have not been so disclosed in the Registration Statement.
 
(xii)                       SEC Reports .  The Company, during the period when a Prospectus relating to the Securities is required to be delivered under the Act, will file on a timely basis with the Commission such periodic and special reports as required by the Rules and Regulations.
 
(xiii)                   Free Writing Prospectuses .  The Company represents and agrees that, unless it obtains the prior written consent of Piper Jaffray & Co., and each Underwriter severally represents and agrees that, unless it obtains the prior written consent of the Company and Piper Jaffray & Co., it has not made and will not make any offer relating to the Securities that would constitute an issuer free writing prospectus or that would otherwise constitute a free writing prospectus required to be filed with the Commission; provided that the prior written consent of the parties hereto shall be deemed to have been given in respect of the free writing prospectuses included in Schedule III.  Any such free writing prospectus consented to by the Company and Piper Jaffray & Co. is hereinafter referred to as a “Permitted Free Writing Prospectus.”   The Company represents that it has treated or agrees that it will treat each Permitted Free Writing Prospectus as an issuer free writing prospectus, and has complied and will comply with the requirements of Rules 164 and 433 of the Rules and Regulations applicable to any Permitted Free Writing Prospectus.  The Company represents that it has satisfied and agrees that it will satisfy the conditions in Rule 433 to avoid a requirement to file with the Commission any electronic road show.  Each Underwriter severally represents and agrees that, (A) unless it obtains the prior written consent of the Company and Piper Jaffray & Co., it has not distributed, and will not distribute any Written Testing-the-Waters Communication other than those listed on Schedule V, and (B) any Testing-the-Waters Communication undertaken by it was with entities that are qualified institutional buyers with the meaning of Rule 144A under the Act or institutions that are accredited investors within the meaning of Rule 501 under the Act.
 
(xiv)                   Emerging Growth Company .  The Company will promptly notify the Representatives if the Company ceases to be an Emerging Growth Company at any time prior to the later of (A) completion of the distribution of Securities within the meaning of the Act and (B) completion of the 180-day restricted period referenced to in Section 4(a)(ix) hereof.
 
5.                                     Conditions of Underwriters’ Obligations .  The obligations of the several Underwriters hereunder are subject to the accuracy, as of the date hereof and at each of the First Closing Date and the Second Closing Date (as if made at such Closing Date), of and compliance with all representations, warranties and agreements of the Company contained herein, to the
 
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performance by the Company of its obligations hereunder and to the following additional conditions:
 
(a)                                Required Filings; Absence of Certain Commission Actions .  All filings required by Rules 424, 430A and 433 of the Rules and Regulations shall have been timely made (without reliance on Rule 424(b)(8) or Rule 164(b)); no stop order suspending the effectiveness of the Registration Statement or any part thereof or any amendment thereof, nor suspending or preventing the use of the Time of Sale Disclosure Package, the Prospectus or any issuer free writing prospectus shall have been issued; no proceedings for the issuance of such an order shall have been initiated or threatened; and any request of the Commission for additional information (to be included in the Registration Statement, the Time of Sale Disclosure Package, the Prospectus, any issuer free writing prospectus or otherwise) shall have been complied with to your reasonable satisfaction.
 
(b)                               Continued Compliance with Securities Laws .  No Underwriter shall have advised the Company that (i) the Registration Statement or any amendment thereof or supplement thereto contains an untrue statement of a material fact which, in your opinion, is material or omits to state a material fact which, in your opinion, is required to be stated therein or necessary to make the statements therein not misleading, or (ii) the Time of Sale Disclosure Package or the Prospectus, or any amendment thereof or supplement thereto, or any issuer free writing prospectus contains an untrue statement of fact which, in your opinion, is material, or omits to state a fact which, in your opinion, is material and is required to be stated therein, or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading.
 
(c)                                Absence of Certain Events .  Except as contemplated in the Time of Sale Disclosure Package and the Prospectus, subsequent to the respective dates as of which information is given in the Time of Sale Disclosure Package and the Prospectus, the Company shall not have incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, or declared or paid any dividends or made any distribution of any kind with respect to its capital stock; and there shall not have been any change in the capital stock (other than a change in the number of outstanding shares of Common Stock due to the issuance of shares upon the exercise of outstanding options or warrants or conversion of convertible securities), or any material change in the short-term or long-term debt of the Company (other than as a result of the conversion of convertible securities), or any issuance of options, warrants, convertible securities or other rights to purchase the capital stock of the Company, or any Material Adverse Change or any development that would reasonably be expected to result in a Material Adverse Change (whether or not arising in the ordinary course of business), that, in your judgment, makes it impractical or inadvisable to offer or deliver the Securities on the terms and in the manner contemplated in the Time of Sale Disclosure Package and the Prospectus.
 
(d)                              No Downgrade .  On or after the Time of Sale (i) no downgrading shall have occurred in the rating accorded the Company’s debt securities or preferred stock by any “nationally recognized statistical organization,” as that term is defined by the Commission for purposes of Rule 436(g)(2) under the Act, and (ii) no such organization shall have publicly announced that it has under surveillance or review, with possible negative implications, its rating of any of the Company’s debt securities or preferred stock;
 
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(e)                                Opinion of Company Counsel .  On each Closing Date, there shall have been furnished to you, as Representatives of the several Underwriters, the opinion of Cooley LLP, counsel for the Company, dated such Closing Date and addressed to you, in the form agreed upon by the Representatives and Cooley LLP.
 
(f)                                 Opinion of Underwriters’ Counsel .  On each Closing Date, there shall have been furnished to you, as Representatives of the several Underwriters, such opinion or opinions of Latham & Watkins LLP, counsel for the several Underwriters, dated such Closing Date and addressed to you, with respect to the formation of the Company, the validity of the Securities, the Registration Statement, the Time of Sale Disclosure Package or the Prospectus and other related matters as you reasonably may request, and such counsel shall have received such papers and information as they request to enable them to pass upon such matters.
 
(g)                               Comfort Letter .  On the date hereof, on the effective date of any post-effective amendment to the Registration Statement filed after the date hereof and on each Closing Date you, as Representatives of the several Underwriters, shall have received a letter of KPMG LLP, dated such date and addressed to you, in form and substance satisfactory to you.
 
(h)                               Officers’ Certificate .  On each Closing Date, there shall have been furnished to you, as Representatives of the Underwriters, a certificate, dated such Closing Date and addressed to you, signed by the chief executive officer and by the chief financial officer of the Company, to the effect that:
 
(i)                                   The representations and warranties of the Company in this Agreement are true and correct as if made at and as of such Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to such Closing Date; and
 
(ii)                               No stop order or other order suspending the effectiveness of the Registration Statement or any part thereof or any amendment thereof or the qualification of the Securities for offering or sale, nor suspending or preventing the use of the Time of Sale Disclosure Package, the Prospectus or any issuer free writing prospectus, has been issued, and no proceeding for that purpose has been instituted or, to their knowledge, is contemplated by the Commission or any state or regulatory body.
 
(i)                                   Lock-Up Agreement .  The Representatives on behalf of the Underwriters shall have received all of the Lock-Up Agreements referenced in Section 4 and the Lock-Up Agreements shall remain in full force and effect.
 
(j)                                   Other Documents .  The Company shall have furnished to you and counsel for the Underwriters such additional documents, certificates and evidence as you or they may have reasonably requested.
 
(k)                               FINRA No Objections .  FINRA shall have raised no objection to the fairness and reasonableness of the underwriting terms and arrangements.
 
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(l)                                   Exchange Listing .  The Securities to be delivered on such Closing Date will have been approved for listing on the NASDAQ Global Select Market, subject to official notice of issuance.
 
All such opinions, certificates, letters and other documents will be in compliance with the provisions hereof only if they are reasonably satisfactory in form and substance to you and counsel for the Underwriters.  The Company will furnish you with such conformed copies of such opinions, certificates, letters and other documents as you shall reasonably request.
 
6.                                     Indemnification and Contribution .
 
(a)                                Indemnification by the Company .  The Company agrees to indemnify and hold harmless each Underwriter, its affiliates, directors and officers and each person, if any, who controls such Underwriter within the meaning of Section 15 of the Act or Section 20 of the Exchange Act, from and against any losses, claims, damages or liabilities, joint or several, to which such Underwriter may become subject, under the Act or otherwise (including in settlement of any litigation if such settlement is effected with the written consent of the Company), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) (i) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, including the Rule 430A Information and any other information deemed to be a part of the Registration Statement at the time of effectiveness and at any subsequent time pursuant to the Rules and Regulations, if applicable, any Preliminary Prospectus, the Time of Sale Disclosure Package, the Prospectus, or any amendment or supplement thereto, any issuer free writing prospectus, any issuer information that the Company has filed or is required to file pursuant to Rule 433(d) of the Rules and Regulations, or any Written Testing-the-Waters Communication, or any road show as defined in Rule 433(h) under the Act (a “road show” ), or (ii) arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse each Underwriter for any legal or other expenses reasonably incurred by it in connection with investigating or defending against such loss, claim, damage, liability or action as such expenses are incurred; provided, however, that the Company will not be liable in any such case to the extent that any such loss, claim, damage, liability or action arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in reliance upon and in conformity with written information furnished to the Company by you, or by any Underwriter through you, specifically for use in the preparation thereof; it being understood and agreed that the only information furnished by an Underwriter consists of the information described as such in Section 6(e).
 
The Company agrees to indemnify and hold harmless the Designated Underwriter and each person, if any, who controls the Designated Underwriter within the meaning of either Section 15 of the Act or Section 20 of the Exchange Act (the “ Designated Entities ” ), from and against any and all losses, claims, damages and liabilities (including, without limitation, any legal or other expenses reasonably incurred in connection with defending or investigating any such action or claim) (i) caused by any untrue statement or alleged untrue statement of a material fact contained in any material prepared by or with the consent of the Company for distribution to Directed Stock Participants in connection with the Directed Stock Program or caused by any omission or alleged
 
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omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading; (ii) caused by the failure of any Directed Stock Participant to pay for and accept delivery of Directed Stock that the Directed Stock Participant agreed to purchase; or (iii) related to, arising out of, or in connection with the Directed Stock Program, other than losses, claims, damages or liabilities (or expenses relating thereto) that are finally judicially determined to have resulted from the bad faith or gross negligence of the Designated Entities.
 
(b)                               Indemnification by the Underwriters .  Each Underwriter will, severally and not jointly, indemnify and hold harmless the Company, its affiliates, directors and officers and each person, if any, who controls the Company within the meaning of Section 15 of the Act and Section 20 of the Exchange Act, from and against any losses, claims, damages or liabilities to which the Company may become subject, under the Act or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Underwriter), insofar as such losses, claims, damages or liabilities (or actions in respect thereof) (i) arise out of or are based upon an untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, any Preliminary Prospectus, the Time of Sale Disclosure Package, the Prospectus, or any amendment or supplement thereto, any issuer free writing prospectus, any issuer information that the Company has filed or is required to file pursuant to Rule 433(d) of the Rules and Regulations, or any Written Testing-the-Waters Communication, or any road show, or (ii) arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in conformity with written information furnished to the Company by you, or by such Underwriter through you, specifically for use in the preparation thereof (it being understood and agreed that the only information furnished by an Underwriter consists of the information described as such in Section 6(e)), and will reimburse the Company for any legal or other expenses reasonably incurred by the Company in connection with investigating or defending against any such loss, claim, damage, liability or action as such expenses are incurred.
 
(c)                                Notice and Procedures .  Promptly after receipt by an indemnified party under subsection (a) or (b) above of notice of the commencement of any action, such indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under such subsection, notify the indemnifying party in writing of the commencement thereof; but the omission to so notify the indemnifying party shall not relieve the indemnifying party from any liability that it may have to any indemnified party except to the extent such indemnifying party has been materially prejudiced by such failure (through the forfeiture of substantive rights or defenses).  In case any such action shall be brought against any indemnified party, and it shall notify the indemnifying party of the commencement thereof, the indemnifying party shall be entitled to participate in, and, to the extent that it shall wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party, and after notice from the indemnifying party to such indemnified party of the indemnifying party’s election so to assume the defense thereof, the indemnifying party shall not be liable to such indemnified party under such subsection for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation; provided, however, that if, in the sole judgment of the Representatives, it is advisable for the Underwriters to be represented as a group by separate counsel, the Representatives shall have the right to employ a
 
28 

 
single counsel (in addition to local counsel) to represent the Representatives and all Underwriters who may be subject to liability arising from any claim in respect of which indemnity may be sought by the Underwriters under subsection (a) of this Section 6, in which event the reasonable fees and expenses of such separate counsel shall be borne by the indemnifying party or parties and reimbursed to the Underwriters as incurred.  Notwithstanding anything contained herein to the contrary, if indemnity may be sought pursuant to the last paragraph in Section 6(a) hereof in respect of such action or proceeding, then in addition to such separate firm for the indemnified parties, the indemnifying party shall be liable for the reasonable fees and expenses of not more than one separate firm (in addition to any local counsel) for the Designated Entities for the defense of any losses, claims, damages and liabilities arising out of the Directed Stock Program if representation of the Underwriters and the Designated Entities by the same counsel would be inappropriate due to actual or potential differing interests between them.  An indemnifying party shall not be obligated under any settlement agreement relating to any action under this Section 6 to which it has not agreed in writing.  In addition, no indemnifying party shall, without the prior written consent of the indemnified party (which consent shall not be unreasonably withheld or delayed) effect any settlement of any pending or threatened proceeding unless such settlement includes an unconditional release of such indemnified party for all liability on claims that are the subject matter of such proceeding and does not include a statement as to, or an admission of, fault, culpability or a failure to act by or on behalf of an indemnified party.  Notwithstanding the foregoing, if at any time an indemnified party shall have requested an indemnifying party to reimburse the indemnified party for fees and expenses of counsel pursuant to this Section 6(c), such indemnifying party agrees that it shall be liable for any settlement effected without its written consent if (i) such settlement is entered into more than 60 days after receipt by such indemnifying party of the aforesaid request and (ii) such indemnifying party shall not have reimbursed such indemnified party in accordance with such request prior to the date of such settlement.
 
(d)                              Contribution; Limitations on Liability; Non-Exclusive Remedy .  If the indemnification provided for in this Section 6 is unavailable or insufficient to hold harmless an indemnified party under subsection (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities referred to in subsection (a) or (b) above, (i) in such proportion as is appropriate to reflect the relative benefits received by the Company on the one hand and the Underwriters on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and the Underwriters on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations.  The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same proportion as the total net proceeds from the offering (net of the underwriting discount and commissions but before deducting any other expenses) received by the Company bear to the total underwriting discount and commissions received by the Underwriters, in each case as set forth in the table on the cover page of the Prospectus.  The relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or the Underwriters and the parties’ relevant intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission.  The Company
 
29 

 
and the Underwriters agree that it would not be just and equitable if contributions pursuant to this subsection (d) were to be determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the first sentence of this subsection (d).  The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending against any action or claim which is the subject of this subsection (d).  Notwithstanding the provisions of this subsection (d), no Underwriter shall be required to contribute any amount in excess of the amount by which the total underwriting discount and commissions received by such Underwriter with respect to the Securities exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.  The Underwriters’ obligations in this subsection (d) to contribute are several in proportion to their respective underwriting obligations and not joint.  The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies that might otherwise be available to any indemnified party at law or in equity.
 
(e)                                Information Provided by the Underwriters .  The Underwriters severally confirm and the Company acknowledges that the statements with respect to (i) the concession figure set forth in the first paragraph under the subheading “Discount and Commissions,” (ii) sales to accounts over which the underwriters exercise discretionary authority set forth in the last paragraph under the subheading “Listing” and (iii) the public offering of the Securities by the Underwriters set forth in the second, third and fourth paragraphs under the subheading “Price Stabilization, Short Positions and Penalty Bids” under the caption “Underwriting” in the Time of Sale Disclosure Package and the Prospectus are correct and constitute the only information concerning such Underwriters furnished in writing to the Company by or on behalf of the Underwriters specifically for inclusion in the Registration Statement, any Preliminary Prospectus, the Time of Sale Disclosure Package, the Prospectus or any issuer free writing prospectus.
 
7.                                     Representations and Agreements to Survive Delivery .  All representations, warranties, and agreements of the Company herein or in certificates delivered pursuant hereto, and the agreements of the several Underwriters and the Company contained in Section 6 hereof, shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any Underwriter or any controlling person thereof, or the Company or any of its officers, directors, or controlling persons, and shall survive delivery of, and payment for, the Securities to and by the Underwriters hereunder and any termination of this Agreement.
 
8.                                     Substitution of Underwriters .
 
(a)                                Obligation to Purchase Under Certain Circumstances .  If any Underwriter or Underwriters shall fail to take up and pay for the amount of Firm Shares agreed by such Underwriter or Underwriters to be purchased hereunder, upon tender of such Firm Shares in accordance with the terms hereof, and the amount of Firm Shares not purchased does not aggregate more than 10% of the total amount of Firm Shares set forth in Schedule I hereto, the remaining
 
30 

Underwriters shall be obligated to take up and pay for (in proportion to their respective underwriting obligations hereunder as set forth in Schedule I hereto except as may otherwise be determined by you) the Firm Shares that the withdrawing or defaulting Underwriters agreed but failed to purchase.
 
(b)                               Termination Under Certain Circumstances .  If any Underwriter or Underwriters shall fail to take up and pay for the amount of Firm Shares agreed by such Underwriter or Underwriters to be purchased hereunder, upon tender of such Firm Shares in accordance with the terms hereof, and the amount of Firm Shares not purchased aggregates more than 10% of the total amount of Firm Shares set forth in Schedule I hereto, and arrangements satisfactory to you for the purchase of such Firm Shares by other persons are not made within 36 hours thereafter, this Agreement shall terminate.  In the event of any such termination, neither the Company shall be under any liability to any Underwriter (except to the extent provided in Section 4(a)(vii) and Section 6 hereof) nor shall any Underwriter (other than an Underwriter who shall have failed, otherwise than for some reason permitted under this Agreement, to purchase the amount of Firm Shares agreed by such Underwriter to be purchased hereunder) be under any liability to the Company (except to the extent provided in Section 6 hereof).
 
(c)                                Postponement of Closing .  If Firm Shares to which a default relates are to be purchased by the non-defaulting Underwriters or by any other party or parties, the Representatives or the Company shall have the right to postpone the First Closing Date for not more than seven business days in order that the necessary changes in the Registration Statement, the Time of Sale Disclosure Package, the Prospectus or in any other documents, as well as any other arrangements, may be effected.  As used herein, the term “Underwriter” includes any person substituted for an Underwriter under this Section 8.
 
(d)                              No Relief from Liability .  No action taken pursuant to this Section 8 shall relieve any defaulting Underwriter from liability, if any, in respect of such default.
 
9.                                     Termination .
 
(a)                                Right to Terminate .  You, as Representatives of the several Underwriters, shall have the right to terminate this Agreement by giving notice to the Company as hereinafter specified at any time at or prior to the First Closing Date, and the option referred to in Section 3(b), if exercised, may be cancelled at any time prior to the Second Closing Date, if (i) the Company shall have failed, refused or been unable, at or prior to such Closing Date, to perform any agreement on its part to be performed hereunder, (ii) any other condition of the Underwriters’ obligations hereunder is not fulfilled, (iii) trading on the NASDAQ Stock Market or the New York Stock Exchange shall have been wholly suspended, (iv) minimum or maximum prices for trading shall have been fixed, or maximum ranges for prices for securities shall have been required, on the NASDAQ Stock Market or the New York Stock Exchange, by such exchange or by order of the Commission or any other Governmental Authority, (v) a banking moratorium shall have been declared by federal or state authorities, or (vi) there shall have occurred any outbreak or escalation of hostilities or any change in financial markets or any calamity or crisis that, in your judgment, is material and adverse and makes it impractical or inadvisable to proceed with the completion of the sale of and payment for the Securities.  Any such termination shall be without liability of any party
 
31 

 
to any other party except that the provisions of Section 4(a)(vii) and Section 6 hereof shall at all times be effective.
 
(b)                               Notice of Termination .  If you elect to terminate this Agreement as provided in this Section, the Company shall be notified promptly by you by telephone, confirmed by letter.
 
10.                             Default by the Company .
 
(a)                                Default by the Company .  If the Company shall fail at the First Closing Date to sell and deliver the number of Securities which it is obligated to sell hereunder, then this Agreement shall terminate without any liability on the part of any Underwriter or, except as provided in Section 4(a)(vii) and Section 6 hereof, any non-defaulting party.
 
(b)                               No Relief from Liability .  No action taken pursuant to this Section 10 shall relieve the Company from liability, if any, in respect of such default.
 
11.                             Reliance on Statements of Underwriters.   In all dealings hereunder, you shall act on behalf of each of the Underwriters, and the parties hereto shall be entitled to act and rely upon any statement, request or notice of agreement on behalf of any Underwriter made or given by you jointly or by the Representatives on behalf of you as the representatives.
 
12.                             Notices .  Except as otherwise provided herein, all communications hereunder shall be in writing and, if to the Underwriters, shall be sent via facsimile or be mailed via overnight delivery service or hand delivered via courier to the Representatives c/o Piper Jaffray & Co., 800 Nicollet Mall, Minneapolis, Minnesota 55402, to the attention of Equity Capital Markets and separately, General Counsel, and c/o Stifel, Nicolaus & Company, Incorporated, One Montgomery Street, Suite 3700, San Francisco, California 94104, to the attention of General Counsel; and if to the Company, shall be mailed or delivered to it at 420 South Fairview Avenue, Suite 200, Santa Barbara, CA 93117, Attention: Joel Smith, Esq.  Any party to this Agreement may change such address for notices by sending to the parties to this Agreement written notice of a new address for such purpose.
 
13.                             Persons Entitled to Benefit of Agreement .  This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and assigns and the controlling persons, officers and directors referred to in Section 6.  Nothing in this Agreement is intended or shall be construed to give to any other person, firm or corporation any legal or equitable remedy or claim under or in respect of this Agreement or any provision herein contained.  The term “successors and assigns” as herein used shall not include any purchaser, as such purchaser, of any of the Securities from any of the several Underwriters.
 
14.                             Absence of Fiduciary Relationship .  The Company acknowledges and agrees that: (a) the Representatives have been retained solely to act as an underwriter in connection with the sale of the Securities and that no fiduciary, advisory or agency relationship between the Company and the Representatives have been created in respect of any of the transactions contemplated by this Agreement, irrespective of whether the Representatives have advised or are advising the Company on other matters; (b) the price and other terms of the Securities set forth in
 
32 

 
this Agreement were established by the Company following discussions and arms-length negotiations with the Representatives and the Company is capable of evaluating and understanding and understands and accepts the terms, risks and conditions of the transactions contemplated by this Agreement; (c) it has been advised that the Representatives and their affiliates are engaged in a broad range of transactions which may involve interests that differ from those of the Company and that the Representatives have no obligation to disclose such interest and transactions to the Company by virtue of any fiduciary, advisory or agency relationship; (d) it has been advised that the Representatives are acting, in respect of the transactions contemplated by this Agreement, solely for the benefit of the Representatives and the other Underwriters, and not on behalf of the Company; (e) it waives to the fullest extent permitted by law, any claims it may have against the Representatives for breach of fiduciary duty or alleged breach of fiduciary duty in respect of any of the transactions contemplated by this Agreement and agrees that the Representatives shall have no liability (whether direct or indirect) to the Company in respect of such a fiduciary duty claim on behalf of or in right of the Company, including stockholders, employees or creditors of the Company.
 
15.                             Governing Law; Waiver of Jury Trial .  This Agreement shall be governed by and construed in accordance with the laws of the State of New York.  The Company (on its behalf and, to the extent permitted by applicable law, on behalf of its stockholders and affiliates) and each of the Underwriters hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.
 
16.                             Counterparts .  This Agreement may be executed in one or more counterparts and, if executed in more than one counterpart, the executed counterparts shall each be deemed to be an original and all such counterparts shall together constitute one and the same instrument.
 
17.                             General Provisions.   This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may not be amended or modified unless in writing by all of the parties hereto, and no condition herein (express or implied) may be waived unless waived in writing by each party whom the condition is meant to benefit.  The Section headings herein are for the convenience of the parties only and shall not affect the construction or interpretation of this Agreement.

[Signature Page Follows]
 
33 

Please sign and return to the Company the enclosed duplicates of this Agreement whereupon this Agreement will become a binding agreement between the Company and the several Underwriters in accordance with its terms.

 	Very truly yours,	
 	 	
 	Sientra, Inc.	

 	By	 	
 	Name:	
 	Title:	
 
[Signature Page to Underwriting Agreement]

 
Confirmed as of the date first
above mentioned, on behalf of
themselves and the other several
Underwriters named in Schedule I
hereto.
 
PIPER JAFFRAY & CO.

By	 	 	
Name:	 	
Title:	 	

STIFEL, NICOLAUS & COMPANY, INCORPORATED

By	 	 	
Name:	 	
Title:	 	
 
[Signature Page to Underwriting Agreement]

 
SCHEDULE I

Underwriter	Number of Firm Shares (1)	
Piper Jaffray & Co.	 	
Stifel, Nicolaus & Company, Incorporated	 	
Leerink Partners LLC	 	
William Blair & Company, L.L.C.	 	
Total	 	 	 	

 
_________________
 
(1)                               The Underwriters may purchase up to an additional [   ·    ] Option Shares, to the extent the option described in Section 3(b) of the Agreement is exercised, in the proportions and in the manner described in the Agreement.

 
SCHEDULE II
 
List of Individuals and Entities Executing Lock-Up Agreements
 
·                   Officers
·                   Non-Employee Directors
·                   All Other Holders of at Least 1% of the Company’s Voting Securities

 
SCHEDULE III
 
Certain Permitted Free Writing Prospectuses

 
SCHEDULE IV
 
Pricing Information

 
SCHEDULE V
 
Written Testing-the-Waters Communications

 
EXHIBIT A
 
Form of Lock-Up Agreement
 
[    ·    ] , 2014
 
Piper Jaffray & Co.
Stifel, Nicolaus & Company, Incorporated
As representatives of the underwriters named
in Schedule I to the Purchase Agreement
referred to below
 
c/o Piper Jaffray & Co.
      800 Nicollet Mall, Suite 800
      Minneapolis, MN 55402
 
c/o Stifel, Nicolaus & Company, Incorporated
      One Montgomery Street, Suite 3700
      San Francisco, CA 94104
 
Ladies and Gentlemen:
 
            As an inducement to the underwriters (the “Underwriters” ) to execute a purchase agreement (the “Purchase Agreement” ) providing for a public offering (the “Offering” ) of common stock (the “Common Stock” ), of Sientra, Inc., a Delaware corporation, and any successor (by merger or otherwise) thereto (the “Company” ), the undersigned hereby agrees that without, in each case, the prior written consent of Piper Jaffray & Co. ( “Piper Jaffray” ) and Stifel, Nicolaus & Company, Incorporated ( “Stifel,” and together with Piper Jaffray, the “Representatives” ) during the period specified in the second succeeding paragraph (the “Lock-Up Period” ), the undersigned will not: (1) offer, pledge, announce the intention to sell, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, make any short sale or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into, exercisable or exchangeable for or that represent the right to receive Common Stock (including without limitation, Common Stock which may be deemed to be beneficially owned by the undersigned in accordance with the rules and regulations of the Securities and Exchange Commission and securities which may be issued upon exercise of a stock option or warrant) whether now owned or hereafter acquired (the “Undersigned’s Securities” ); (2) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences of ownership of the Undersigned’s Securities, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise; (3) make any demand for or exercise any right with respect to, the registration of any Common Stock or any security convertible into or exercisable or exchangeable for Common Stock; or (4) publicly disclose the intention to do any of the foregoing.
 
A-1 

 
The undersigned agrees that the foregoing restrictions preclude the undersigned from engaging in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of the Undersigned’s Securities even if such Undersigned’s Securities would be disposed of by someone other than the undersigned.  Such prohibited hedging or other transactions would include without limitation any short sale or any purchase, sale or grant of any right (including without limitation any put or call option) with respect to any of the Undersigned’s Securities or with respect to any security that includes, relates to, or derives any significant part of its value from the Undersigned’s Securities.
 
The Lock-Up Period will commence on the date of this Lock-Up Agreement (this “ Agreement ”) and continue and include the date 180 days after the date of the final prospectus used to sell Common Stock in the Offering pursuant to the Purchase Agreement (the “ Prospectus ”).
 
If the undersigned is an officer or director of the Company, (i) each of the Representatives agrees that, at least three business days before the effective date of any release or waiver of the foregoing restrictions in connection with a transfer of shares of Common Stock, the Representatives will notify the Company of the impending release or waiver, and (ii) the Company has agreed in the Purchase Agreement to announce the impending release or waiver by issuing a press release through a major news service at least two business days before the effective date of the release or waiver.  Any release or waiver granted by the Representatives hereunder to any such officer or director shall only be effective two business days after the publication date of such press release.  The provisions of this paragraph will not apply if both (a) the release or waiver is effected solely to permit a transfer not for consideration, and (b) the transferee has agreed in writing to be bound by the same terms described in this letter that are applicable to the transferor, to the extent and for the duration that such terms remain in effect at the time of the transfer.  The undersigned further agrees that the foregoing provisions shall be equally applicable to any issuer-directed Common Stock, if any, that the undersigned may purchase in the offering.
 
Notwithstanding the foregoing, the undersigned may transfer the Undersigned’s Securities (i) as a bona fide gift or gifts, (ii) to an immediate family member or any trust, corporation, partnership, limited liability company or other business entity for the direct or indirect benefit of the undersigned or the immediate family of the undersigned, (iii) if the undersigned is a corporation, partnership, limited liability company, trust or other business entity (1) transfers to another corporation, partnership, limited liability company, trust or other business entity that is a direct or indirect affiliate (as defined in Rule 405 promulgated under the Securities Act of 1933, as amended) of the undersigned or (2) distributions of shares of Common Stock or any security convertible into or exercisable for Common Stock to limited partners, limited liability company members or stockholders of the undersigned, or to any investment fund or other entity that controls or manages the undersigned (including, for the avoidance of doubt, a fund managed by the same manager or managing member or general partner or management company or by an entity controlling, controlled by, or under common control with such manager or managing member or general partner or management company as the undersigned or who shares a common investment advisor with the undersigned), (iv) if the undersigned is a trust,
 
A-2 

 
transfers to the beneficiary of such trust, (v) transfers by testate succession or intestate succession, (vi) to a nominee or custodian or a person or entity to whom a disposition or transfer would be permissible under clauses (i) through (v) above, (vii) from an employee to the Company upon death, disability or termination of employment of such employee, (viii) in connection with transactions by any person (other than the Company) relating to shares of Common Stock acquired in open market transactions after the completion of the Offering, (ix) pursuant to the Purchase Agreement, (x) pursuant to an order of a court or regulatory agency, or (xi) with the prior written consent of the Representatives; provided, in the case of clauses (i)-(viii) that (x) such transfer shall not involve a disposition for value, (y) the transferee, trustee, donee or distributee agrees in writing with the Underwriters to be bound by the terms of this Agreement, and (z) in the case of clauses (i)-(viii), no filing by any party under Section 16(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act” ), shall be required or shall be made voluntarily in connection with such transfer.  For purposes of this Agreement, “immediate family” shall mean any relationship by blood, current or former marriage or adoption, not more remote than first cousin.
 
In addition, the foregoing restrictions shall not apply to (i) the exercise of stock options granted pursuant to the Company’s equity incentive plans, the conversion of the outstanding preferred shares of the Company into Common Stock, the conversion or exercise of warrants into Common Stock or into any other security convertible into or exercisable for Common Stock that are outstanding as of the date of the Prospectus and described therein; provided that such restrictions shall apply to any of the Undersigned’s Securities issued upon such conversion or exercise except as provided herein; (ii) forfeitures to satisfy tax withholding obligations in connection with the conversion or exercise of such options or warrants, (iii) transfers pursuant to a “change of control” of the Company (including, without limitation, the entering into any lock-up, voting or similar agreement pursuant to which the undersigned may agree to transfer, sell, tender or otherwise dispose of common stock or other such securities in connection with such transaction, or vote any common stock or other such securities in favor of any such transaction); provided that in the event that such tender offer, merger, consolidation or other such transaction is not completed, such securities held by the undersigned shall remain subject to the provisions of this Agreement (for purposes of this letter agreement, “change of control” shall mean the consummation of any bona fide third party tender offer, merger, consolidation or other similar transaction the result of which is that any “person” (as defined in Section 13(d)(3) of the Exchange Act), or group of persons, other than the Company, becomes the beneficial owner (as defined in Rules 13d-3 and 13d-5 of the Exchange Act) of a majority of total voting power of the voting stock of the Company), or (iv) the establishment of any contract, instruction or plan (a “ Plan” ) that satisfies all of the requirements of Rule 10b5-1(c)(1)(i)(B) under the Exchange Act; provided that no sales of the Undersigned’s Securities shall be made pursuant to such a Plan prior to the expiration of the Lock-Up Period, and such a Plan may only be established if no public announcement of the establishment or existence thereof and no filing with the Securities and Exchange Commission or other regulatory authority in respect thereof or transactions thereunder or contemplated thereby, by the undersigned, the Company or any other person, shall be required, and no such announcement or filing is made voluntarily, by the undersigned, the Company or any other person, prior to the expiration of the Lock-Up Period.
 
A-3 

 
            [If any record or beneficial owner of any securities of the Company is granted an early release from the restrictions described herein during the lock-up period with respect to any securities of the Company having a fair market value in excess of $1 million in the aggregate (whether in one or multiple releases), then each Major Holder (as defined below) shall also be granted an early release from its obligations hereunder on a pro rata basis with all other record or beneficial holders of similarly restricted securities of the Company based on the maximum percentage of shares held by any such record or beneficial holder being released from such holder’s lock-up agreement; provided, however, that in the case of an early release from the restrictions described herein during the lock-up period in connection with an underwritten public offering, whether or not such offering or sale is wholly or partially a secondary offering of the Company’s Common Stock (an “Underwritten Sale”), such early release shall only apply with respect to such Major Holder’s participation in such Underwritten Sale.  Notwithstanding any other provisions of this agreement, if the Representatives in their sole judgment determine that a record or beneficial owner of any securities should be granted an early release from a lock-up agreement due to circumstances of an emergency or hardship, then the Major Holders shall not have any right to be granted an early release pursuant to the terms of this paragraph.  For purposes of this agreement, each of the following persons is a “Major Holder”: each record or beneficial owner, as of the date hereof, of more than 6.5% of the outstanding shares of securities of the Company (for purposes of determining record or beneficial ownership of a stockholder, all shares of securities held by investment funds affiliated with such stockholder shall be aggregated).] 1
 
In furtherance of the foregoing, the Company and its transfer agent and registrar are hereby authorized to decline to make any transfer of shares of Common Stock if such transfer would constitute a violation or breach of this Agreement.
 
The undersigned hereby represents and warrants that the undersigned has full power and authority to enter into this Agreement and that upon request, the undersigned will execute any additional documents reasonably necessary to ensure the validity or enforcement of this Agreement. All authority herein conferred or agreed to be conferred and any obligations of the undersigned shall be binding upon the successors, assigns, heirs or legal representatives of the undersigned.
 
The undersigned understands that the undersigned shall be released from all obligations under this Agreement, and this Agreement shall be of no further force and effect, if (i) the Company notifies the Underwriters that it does not intend to proceed with the Offering, (ii) the Representatives notify the Company that the Underwriters do not intend to proceed with the Offering, (iii) the Registration Statement on Form S-1 is withdrawn, (iv) the Purchase Agreement does not become effective, or if the Purchase Agreement (other than the provisions thereof which survive termination) shall terminate or be terminated prior to payment for and delivery of the Common Stock to be sold thereunder, or (v) the Offering is not completed by March 31, 2015.

1  For non-director and non-officer 5%+ stockholders.
 
A-4 

 
The undersigned understands that the Underwriters are entering into the Purchase Agreement and proceeding with the Offering in reliance upon this Agreement.
 
This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.

 	 	Very truly yours,	
 	 	 	
IF AN INDIVIDUAL:	 	IF AN ENTITY:	

By:	 	 	 	
 	(duly authorized signature)	 	(please print complete name of entity)	

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EXHIBIT B
 
Press Release for Waivers or Releases
of Officer/Director Lock-Up Agreements

 
Sientra, Inc.
 
[Date]

Sientra, Inc. (the “Company”) announced today that Piper Jaffray and Stifel, as the representatives of the underwriters in connection with the Company’s initial public offering, are [waiving] [releasing] [a] lock-up restriction[s] with respect to an aggregate of [#] shares of the Company’s common stock held by certain [officers] [directors] of the Company.
 
This [waiver] [release] will take effect on [date that is at least 2 business days following date of this press release][, and the shares may be sold on or after such date].
 
This press release is not an offer for sale of the securities in the United States or in any other jurisdiction where such offer is prohibited, and such securities may not be offered or sold in the United States absent registration or an exemption from registration under the United States Securities Act of 1933, as amended.

 	Exhibit 3.1	
 	 	
 	State of Delaware	
 	Secretary of State	
 	Division of Corporations	
 	Delivered 08:27AM 03/27/2012	
 	FILED 08:23AM 03/27/2012	
 	SRV 120357000 - 3698337 FILE	

FOURTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
 
OF
 
SIENTRA, INC.
 
Sientra, Inc. (the “ Company ”), a corporation organized and existing under the General Corporation Law of the State of Delaware (the “ DGCL ”), does hereby certify that:
 
(a)                                The name of the Company is Sientra, Inc.  The original Certificate of Incorporation was initially filed with the Secretary of State of Delaware on August 29, 2003 under the name Juliet Medical, Inc.; an Amended and Restated Certificate of Incorporation was filed on December 29, 2006 under the name Juliet Medical, Inc.; an Amended and Restated Certificate of Incorporation was filed on April 4, 2007 under the name Juliet Medical, Inc.; a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Juliet Medical, Inc. was filed on April 10, 2007 to change the name of Company to Sientra, Inc.; a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sientra, Inc. was filed on April 2, 2009; and, a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sientra, Inc. was filed on September 28, 2010 (collectively, the Previous Amended Certificate of Incorporation ”).
 
(b)                               This Fourth Amended and Restated Certificate of Incorporation (this “ Certificate of Incorporation ”), which restates and amends the Previous Amended Certificate of Incorporation, was duly adopted in accordance with the provisions of Section 242 and 245 of the DGCL, and was approved by written consent of the stockholders of the Company pursuant to Section 228(d) of the DGCL.  Prompt notice of such action will be given to stockholders who did not consent in writing.
 
The text of the Previous Amended Certificate of Incorporation is hereby amended and restated to read in its entirety as follows:
 
FIRST:   The name of the corporation is Sientra, Inc. (the “ Company ”).
 
SECOND:   The address of its registered office in the State of Delaware is 2711 Centerville Road Suite 400, in the City of Wilmington, County of New Castle, 19808.  The name of its registered agent at such address is Corporation Service Company.
 
THIRD:   The purposes of the Company are to engage in any lawful act or activity or carry on any business for which corporations may be organized under the General Corporation Law of the State of Delaware (the “ DGCL ”) or any successor statute.
 
FOURTH:
 
A.                                 The total number of shares of all classes of stock which the Company shall have authority to issue is 54,584,907 consisting of:

 
(i)                                   29,991,820 shares of Common Stock, par value $0.01 per share (the “ Common Stock ”); and
 
(ii)                               24,593,087 shares of Preferred Stock, $0.01 par value per share (the “ Preferred Stock ”), of which (a) 1,000,000 shares have been designated Series A Preferred Stock, par value $0.01 per share (the “ Series A Preferred Stock ”), (b) 11,409,397 shares have been designated Series B Preferred Stock, par value $0.01 per share (the “ Series B Preferred Stock ”) and (c) 12,183,690 shares have been designated Series C Preferred Stock, par value $0.01 per share.
 
The relative powers, designations, preferences, special rights, privileges, restrictions and other matters relating to such Common Stock and Preferred Stock are as set forth in this Article IV.
 
B.                                  Common Stock .
 
1.                                     General .  The voting, dividend and liquidation and other rights of the holders of the Common Stock are expressly made subject to and qualified by the rights of the holders of Preferred Stock.
 
2.                                     Voting Rights .  The holders of record of Common Stock are entitled to one vote per share, and except as required by law or as otherwise expressly provided for in this Certificate of Incorporation, holders of Common Stock shall vote together with the holders of Preferred Stock as a single class on an as-converted to Common Stock basis and not as separate classes.  Subject to any additional requirement set forth in Section C(6) of Article IV, the number of authorized shares of Common Stock may be increased or decreased (but not below the number of shares of Common Stock outstanding) by the separate affirmative vote of the holders of a majority of the outstanding shares of Common Stock and Preferred Stock, voting together as a single class, irrespective of the provisions of Section 242(b)(2) of the DGCL.  No class vote of the holders of the outstanding Common Stock shall be required to approve any amendment to this Certificate of Incorporation for such increase or decrease, such right to a class vote being hereby affirmatively waived in accordance with Section 242(b)(2) of the DGCL.
 
3.                                     Dividends .  Dividends may be declared and paid on the Common Stock, from funds lawfully available therefor if, as and when determined by the Board of Directors in their sole discretion, subject to provisions of law, any provision of this Certificate of Incorporation, as amended from time to time, and subject to the relative rights and preferences of any shares of Preferred Stock authorized, issued and outstanding hereunder.
 
4.                                     Liquidation .  Upon the dissolution or liquidation of the Company, whether voluntary or involuntary, holders of Common Stock will be entitled to receive, all assets of the Company available for distribution to its stockholders, subject to any preferential rights of any series of Preferred Stock then outstanding.
 
C.                                  Preferred Stock .
 
All references to a section in this Section C of Article IV shall refer to the applicable section of this Section C of Article IV.  The following terms used herein shall have the following definitions:
 
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“ Conversion Price ” shall mean initially, with respect to each share of the Series A Preferred Stock, $1.00, with respect to each share of the Series B Preferred Stock, $7.45 and, with respect to each share of the Series C Preferred Stock, $5.335, provided , that such Conversion Price is subject to adjustment from time to time as set forth herein.
 
“ Conversion Rate ” shall have the meaning set forth in Section 4(a).
 
“ Corporate Reorganization ” shall mean any (i) merger, consolidation or reorganization or other similar transaction or series of related transactions other than a merger, consolidation or reorganization or other similar transaction or series of related transactions in which the stockholders of the Company immediately prior to such merger, consolidation or reorganization or other similar transaction or series of related transactions continue to hold at least 51% of the combined voting power of the voting securities of the Company or such surviving or acquiring entity outstanding immediately after such merger, consolidation or reorganization or other similar transaction or series of related transactions (but excluding from any of the foregoing any merger effected solely for the purpose of reincorporating in another state or any transaction or series of transactions entered into principally for bona fide equity financing purposes in which the Company issues new securities primarily for cash, the cancellation or conversion of indebtedness of the Company, or the combination thereof for the purpose of financing the operations and business of the Company); (ii) sale, exchange, conveyance, lease, exclusive license, transfer or other disposition of all or substantially all of the assets of the Company or assets of one or more direct or indirect subsidiaries of the Company constituting all or substantially all of the assets of the Company (determined on a consolidated basis with all of the Company’s direct and indirect subsidiaries), other than to a wholly-owned subsidiary of the Company, in a single transaction or series of related transactions; or (iii) sale, exchange or transfer of shares of capital stock of the Company, in a single transaction or series of related transactions, representing at least 50% of the voting power of the voting securities of the Company (but excluding a Qualified IPO).
 
“ Independent Director ” shall mean a person who is a member of the Board of Directors of the Company and who is not an officer, employee or stockholder of the Company or an affiliate of an officer, employee or stockholder of the Company.
 
“ Investor Majority ” shall mean the affirmative vote by written consent of the holders of at least 65% of all outstanding shares of Preferred Stock on an as-converted basis (assuming conversion of all such Preferred Stock into Common Stock pursuant to Section 4).
 
“ Liquidation Preference ” means (i) $1.00 for each share of Series A Preferred Stock plus any accrued or declared but unpaid dividends on such share, (ii) $7.45 for each share of Series B Preferred Stock plus any accrued or declared but unpaid dividends on such share, and (iii) $5.335 for each share of Series C Preferred Stock plus any accrued or declared but unpaid dividends on such share (each of (i), (ii) and (iii) subject to adjustment for Recapitalizations).
 
“ Original Issue Date ” shall mean the date on which the Series C Preferred Stock was first issued by the Company pursuant to the Series C SPA.
 
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“ Purchase Price ” shall mean (i) $1.00 for each share of Series A Preferred Stock, (ii) $7.45 for each share of Series B Preferred Stock, and (iii) $5.335 for each share of Series C Preferred Stock (each of (i), (ii) and (iii) subject to adjustment for Recapitalizations).
 
“ Qualified Board Approval ” shall mean resolutions duly approved by (i) at least majority of the Board of Directors and (ii) at least a majority of the Preferred Directors.
 
“ Qualified IPO ” shall mean a firm commitment underwritten public offering of shares of the Company’s Common Stock at a price per share to the public of at least 200% of the Series C Purchase Price resulting in aggregate gross proceeds to the Company of not less than $35,000,000.
 
“ Recapitalization ” shall mean any stock dividend, stock split, reverse stock split, combination of shares, reorganization, recapitalization, reclassification or other similar event.
 
“ Series C SPA ” shall mean that certain Series C Preferred Stock Purchase Agreement, dated as of October 21, 2011, by and among the Company and the Purchasers identified on Attachment 1 thereto, as the same may be amended from time to time in accordance with its terms.
 
“ Super Investor Majority ” shall mean the affirmative vote by written consent of the holders of at least 65% of all then outstanding shares of Preferred Stock of the Company on an as-converted basis (assuming conversion of all such Preferred Stock into Common Stock pursuant to Section 4), including the consent of all stockholders that hold in excess of 19% of the then outstanding shares of preferred stock of the Company.
 
1.                                     Dividends .
 
(a)                                The Company shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Company unless the holders of the Series C Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series C Preferred Stock in an amount equal to 8% of the Series C Purchase Price per share per year (prorated for the number of days elapsed) from and after the Original Issue Date (to the extent not previously paid).  The foregoing dividend shall not be cumulative.
 
(b)                               Upon the payment or setting aside of the preferential dividend pursuant to Section 1(a), the Company shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Company unless the holders of the Series B Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series B Preferred Stock in an amount equal to 8% of the Series B Purchase Price per share of Series B Preferred Stock per year (prorated for the number of days elapsed) from and after the Original Issue Date (to the extent not previously paid).  The foregoing dividend shall not be cumulative.
 
(c)                                Upon the payment or setting aside of the preferential dividends pursuant to Section 1(a) and Section 1(b), the Company shall not declare, pay or set aside any dividends on shares of any other class or series of capital stock of the Company unless the holders of the
 
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Series A Preferred Stock then outstanding shall first receive, or simultaneously receive, a dividend on each outstanding share of Series A Preferred Stock in an amount equal to 8% of the Series A Purchase Price per share per year (prorated for the number of days elapsed) from and after the Original Issue Date (to the extent not previously paid).  The foregoing dividend shall not be cumulative.
 
(d)                              After the payment or setting aside for payment to the holders of the Series C Preferred Stock, Series B Preferred Stock and Series A Preferred Stock of the full amounts specified in Section 1(a), Section 1(b) and Section 1(c) above, for all past dividend periods, if applicable, and the then current dividend period, if the Board of Directors shall elect to declare additional dividends out of funds legally available therefor for the dividend in question, such additional dividends shall be declared solely on the Common Stock and shall be distributed among the holders of Common Stock pro rata based on the number of shares of Common Stock held by each such holder.  However, no dividends shall be paid or made on any Common Stock unless and until all dividends are paid to the holders of Preferred Stock in accordance with the priorities set forth in Sections 1(a), 1(b) and 1(c) above.
 
(e)                                Dividends are to be paid only upon the determination by the Company’s Board of Directors to pay such dividends, subject to and in accordance with the terms of this Certificate of Incorporation.  Dividends shall be paid only to the extent assets are legally available therefor, and any amounts for which assets are not legally available shall be paid promptly as assets become legally available therefor.
 
(f)                                 Notwithstanding anything otherwise provided in the Previous Amended Certificate of Incorporation, any and all dividend rights (whether or not earned, declared or accrued) of the holders of the Series B Preferred Stock and Series A Preferred Stock (pursuant to Section C(1) of Article IV of the Previous Amended Certificate of Incorporation) prior to the Original Issue Date are hereby irrevocably waived and canceled by the holders of the Series B Preferred Stock and Series A Preferred Stock and extinguished, effective upon the closing of the transactions contemplated by the Series C SPA.
 
2.                                     Liquidation, Dissolution or Winding-Up; Certain Mergers, Consolidations and Asset Sales .
 
(a)                                In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company or any Corporate Reorganization (collectively, each a “Liquidation Event”), the holders of the Series C Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of any other capital stock of the Company by reason of their ownership of such stock, an amount per share for each share of Series C Preferred Stock held by them equal to the Series C Liquidation Preference.  If the funds of the Company legally available for payment of the Series C Liquidation Preference are insufficient to effect full payment of the Series C Liquidation Preference, then the aggregate Series C Liquidation Preference payable on all shares of Series C Preferred Stock shall be distributed pro rata to the holders of the Series C Preferred Stock in proportion to the number of shares of Series C Preferred Stock held by them.
 
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(b)                               After the payment or setting aside for payment to the holders of the Series C Preferred Stock of the full amounts specified in Section 2(a) above, in the event of any Liquidation Event, the holders of the Series B Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of any other capital stock of the Company by reason of their ownership of such stock, an amount per share for each share of Series B Preferred Stock held by them equal to the Series B Liquidation Preference.  If the funds of the Company legally available for payment of the Series B Liquidation Preference are insufficient to effect full payment of the Series B Liquidation Preference, then the aggregate Series B Liquidation Preference payable on all shares of Series B Preferred Stock shall be distributed pro rata to the holders of the Series B Preferred Stock in proportion to the number of shares of Series B Preferred Stock held by them.
 
(c)                                After the payment or setting aside for payment to the holders of the Series C Preferred Stock and Series B Preferred Stock of the full amounts specified in Section 2(a) and Section 2(b) above, in the event of any Liquidation Event, the holders of the Series A Preferred Stock shall be entitled to receive, prior and in preference to any distribution of any of the assets of the Company to the holders of any other capital stock of the Company by reason of their ownership of such stock, an amount per share for each share of Series A Preferred Stock held by them equal to the Series A Liquidation Preference.  If the funds of the Company legally available for payment of the Series A Liquidation Preference are insufficient to effect full payment of the Series A Liquidation Preference, then the aggregate Series A Liquidation Preference payable on all shares of Series A Preferred Stock shall be distributed pro rata to the holders of the Series A Preferred Stock in proportion to the number of shares of Series A Preferred Stock held by them.
 
(d)                              After the payment or setting aside for payment to the holders of the Series C Preferred Stock, Series B Preferred Stock and Series A Preferred Stock of the full amounts specified in Section 2(a), Section 2(b) and Section 2(c) above, the remaining assets of the Company available for distribution to stockholders shall be distributed solely among the holders of Common Stock pro rata based on the number of shares of Common Stock held by each such holder.
 
(e)                                Any securities to be delivered pursuant to this Section 2 shall be valued as follows:
 
(i)                                   securities not subject to investment letter or other similar restrictions on free marketability:
 
(A)                           if traded on a securities exchange, the value shall be deemed to be the average of the closing prices of the securities on such exchange over the 30-day period ending three (3) days prior to the closing of the distribution;
 
(B)                            if actively traded over-the-counter, the value shall be deemed to be the average of the closing bid or sale prices (whichever are applicable) over the 30- day period ending three (3) days prior to the closing of the distribution; and
 
(C)                            if there is no active public market, the value shall be the fair market value thereof, as mutually determined by the Company and the Investor Majority.
 
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(ii)                               The method of valuation of securities subject to investment letter or other restrictions on free marketability shall be to make an appropriate discount from the market value determined as above in Section 2(e) to reflect the approximate fair market value thereof, as mutually determined by the Company and the Investor Majority.
 
(f)                                 This Section 2(f) shall only apply to Contingent Liquidation Events (as defined below).  A “Contingent Liquidation Event” is any Liquidation Event in which all of the following conditions occur: (x) a portion of the consideration payable to the stockholders of the Company is placed into escrow and/or is payable to the stockholders of the Company subject to contingencies; (y) a portion of such consideration is not placed in escrow and not subject to any contingencies (the “ Initial Consideration ”); and (z) the aggregate amount of the Initial Consideration is less than or equal to an amount equal to the sum of (1) the total aggregate preference then outstanding for all Preferred Stock (the “ Total Preference ”) and (2) the Common Matching Amount (as defined below).  In the event of a Contingent Liquidation Event, then:
 
(i)                                   The Initial Consideration shall be allocated among the holders of Preferred Stock in accordance with Sections 2(a)-(c) and (e) as if the Initial Consideration were the only consideration payable in connection with the Contingent Liquidation Event.  Upon the allocation and payment of the Initial Consideration pursuant to the terms of this Section, the Preferred Stock shall no longer be convertible into Common Stock.
 
(ii)                               Following the payment of Initial Consideration, each and every time that any or all additional consideration becomes payable to the stockholders of the Company, the stockholders shall be paid out of the available funds as follows, (each such payment a “ Subsequent Distribution ”):
 
(A)                           Unless and until the payment or setting aside for payment of the Total Preference to the holders of Preferred Stock, each Subsequent Distribution shall be allocated to holders of Preferred Stock in accordance with Sections 2(a)-(c) and (e) as if the Initial Consideration, any previously paid Subsequent Distribution and any currently payable Subsequent Distribution were the only consideration payable in connection with such Contingent Liquidation Event.  Each Subsequent Distribution and the Initial Consideration payable to the holders of Preferred Stock pursuant to this Section (2)(f)(ii)(A) a “ Preferred Distribution ”. At any point in time at which the total amount of Preferred Distribution equals (or would exceed but for the operation of this Section (2)(f)(ii)(A)) the Total Preference then a final Preferred Distribution shall be made in appropriate amounts so that all holders of Preferred Stock shall have received, per Sections 2(a)-(c) and (e), in total, exactly (and not more than) one hundred percent of the value of the respective preferences payable in respect of the Preferred Stock.
 
(B)                            After the payment or setting aside for payment to the holders of Preferred Stock of the final Preferred Distribution as set forth in Section (2)(f)(ii)(A), then each Subsequent Distribution shall be paid solely to the holders of the Common Stock in accordance with Sections 2(d) and (e).  Each such payment pursuant to this Section (2)(f)(ii)(B) is a “Common Distribution”.  At any point in time at which the total amount of Common Distributions equals, or would exceed but for the operation of this Section (2)(f)(ii)(B), the Common Matching Amount (as defined below) then a final Common Distribution shall be made in appropriate amounts so that all holders of Common Stock shall have received, per Section 2(d)
 
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and (e), in total, exactly (and not more than) one hundred percent of their pro rata share (of Common Distributions based on the number of shares of Common Stock outstanding and without giving effect to any conversion of Preferred Stock) of the Common Matching Amount (as defined below).  The “ Common Matching Amount ” is equal to the Total Preference multiplied by a fraction the numerator of which is the number of shares of Common Stock outstanding and the denominator of which is the number of shares of Preferred Stock outstanding (in each case, as outstanding at the effective time of the Contingent Liquidation Event).
 
(C)                            After the payment or setting aside for payment to the holders of the Preferred Stock and the Common Stock the full amounts specified in Sections (2)(f)(i), (2)(f)(ii)(A) and (2)(f)(ii)(B) above, all Subsequent Distributions shall be made to the holders of all classes of the Company’s stock, pro rata, on an as if converted-to-common stock basis after giving effect to the conversion adjustments specified in Sections 4(b)-(d).
 
(g)                               After taking into account the payment or setting aside for payment to the holders of Preferred Stock, the amounts specified in Sections 2(f)(i) and 2(f)(ii) above, the amount a holder of Preferred Stock shall be entitled to receive with respect to a Liquidation Event shall be and shall not exceed the greater of (i) such holder’s Liquidation Preference or (ii) the amount such holder would have received if such holder’s Preferred Stock was deemed to have converted to Common Stock immediately prior to such Liquidation Event.
 
3.                                     Voting .
 
(a)                                General Voting Rights .  Each holder of outstanding shares of Preferred Stock shall be entitled to 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 adjusted from time to time pursuant to Section 4 as of the record date for such stockholder vote, at each meeting of stockholders of the Company (and written actions of stockholders in lieu of meetings) with respect to any and all matters presented to the stockholders of the Company for their action or consideration.  Except as required by law or as otherwise expressly provided for in this Certificate of Incorporation, holders of Preferred Stock and of any other outstanding series of stock shall vote together with the holders of Common Stock as a single class on an as-converted to Common Stock basis and not as separate classes.  Except as required by law or as otherwise expressly provided for in this Certificate of Incorporation there shall be no series voting.
 
(b)                               Voting for the Election of Directors .  The Board of Directors shall consist of six members.  As long as at least 500,000 shares of Preferred Stock remain outstanding, the holders of outstanding shares of Preferred Stock, voting together as a separate class, shall be entitled to elect three directors of the Company (the “ Preferred Directors ”).  The holders of outstanding shares of Common Stock shall be entitled to elect one director of the Company at each annual election of directors.  The holders of outstanding shares of Preferred Stock and Common Stock, voting together on an as converted basis, shall be entitled to elect the remaining members of the Board of Directors of the Company, two of whom must be Independent Directors.  In the case of any vacancy (other than a vacancy caused by removal) in the office of a director occurring among the directors elected by the holders of a class or series of stock pursuant to this Section 3(b), the remaining directors so elected by that class or series may (or, if there are no such directors remaining, the holders of a majority of the shares of that class or
 
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series may by affirmative vote) elect a successor to hold office for the unexpired term of the director whose place shall be vacant.  Any director who shall have been elected by the holders of a class or series of stock or by any directors so elected as provided in the immediately preceding sentence hereof may be removed during the aforesaid term of office, either with or without cause, by, and only by, the affirmative vote of the holders of the shares of the class or series of stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders, and any vacancy thereby created may be filled by the holders of that class or series of stock represented at the meeting or pursuant to unanimous written consent.
 
4.                                     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 on or prior to the consummation of a Corporate Reorganization, 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 dividing the Purchase Price applicable to such share of Preferred Stock by the Conversion Price applicable to such share of Preferred Stock at the time of conversion (such quotient referred to as the “ Conversion Rate ”).  Such Conversion Price and Conversion Rate shall be subject to adjustment as provided below.
 
(b)                               Fractional Shares .  When calculating the number of shares of Common Stock into which shares of Preferred Stock shall be converted, the Company shall calculate to the nearest whole share of Common Stock for each holder after aggregating the total number of shares of Preferred Stock being converted at any one time by any holder thereof (rather than on a per share or per series basis), rounding down for any fractional shares of Common Stock into which the shares of Preferred Stock would otherwise convert.  In lieu of any fractional shares to which the holder would otherwise be entitled the Company shall pay the holder an amount in cash equal to such fraction multiplied by the fair market value of a share of Common Stock at the time of such conversion, as determined in good faith by the Board of Directors of the Company.
 
(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 Company to indemnify the Company against any claim that may be made against the Company 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 Company if the Company serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Preferred Stock represented by such certificate or certificates and, if applicable, any event on which such conversion is contingent.  Such notice shall state such holder’s name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued.  If required by the Company, certificates surrendered for conversion shall be endorsed or
 
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accompanied by a written instrument or instruments of transfer, in form satisfactory to the Company, duly executed by the registered holder or his or its attorney duly authorized in writing.  The date of receipt of such certificates (or lost certificate affidavit and agreement) and notice by the transfer agent (or by the Company if the Company serves as its own transfer agent) shall be the conversion date (the “ Conversion Date ”), 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 Company shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such holder of Preferred Stock or to his or its nominees, (A) a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, (B) cash, as provided in Section 4(b ), in lieu of any fractions of a share of Common Stock issuable upon such conversion, (C) all declared or accrued but unpaid dividends on the shares of Preferred Stock converted and (D) a certificate or certificates for the number of shares of Preferred Stock representing the remainder of shares of Preferred Stock not converted, to the extent that such shares of Preferred Stock were tendered to the Company.
 
(ii)                               The Company shall at all times when the Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued shares of Common Stock, solely 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 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 Company shall take such corporate action as may be necessary to increase its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient for such purposes, including, without limitation, engaging in best efforts to obtain the requisite stockholder approval of any necessary amendment to the Certificate of Incorporation.  Before taking any action that would cause an adjustment reducing the applicable Conversion Price below the then existing Conversion Price, the Company will take any corporate action which may be necessary in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock at such adjusted Conversion Price.
 
(iii)                           Upon any conversion, no adjustment to the Conversion Price shall be made for any accrued or declared but unpaid dividends on the Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion.
 
(iv)                           All shares of Preferred Stock that 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 on the Conversion Date, except only the right of the holders thereof to receive shares of Common Stock in exchange therefor, to receive payment in lieu of any fraction of a share otherwise issuable upon such conversion as provided in Section 4(b) and to receive payment of any dividend accrued or declared but unpaid thereon (which dividend may, at the Company’s election, be paid in cash, shares of Common Stock or a combination thereof).  Any shares of Preferred Stock so converted shall be retired and cancelled and shall not be reissued, and the Company (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 the applicable Preferred Stock accordingly.
 
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(v)                               The Company shall pay any and all issue and other taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Preferred Stock pursuant to this Section 4.  The Company 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 Company the amount of any such tax or has established, to the satisfaction of the Company, that such tax has been paid.
 
(d)                              Adjustments to Conversion Price for Diluting Issues :
 
(i)                                   Special Definitions .  For purposes of this Section 4(d), the following definitions shall apply:
 
(A)                           “ Options ” shall mean rights, options or warrants to subscribe for, purchase or otherwise acquire Common Stock, or Convertible Securities (other than as provided in Sections 4(d)(i)(C)(IV) and (V)).
 
(B)                            “ Convertible Securities ” shall mean any evidences of indebtedness, shares or other securities, other than Options, directly or indirectly convertible into or exchangeable for Common Stock.
 
(C)                            “ Additional Shares of Common Stock ” shall mean all shares of Common Stock issued (or, pursuant to Section 4(d)(iii), deemed to be issued) by the Company after the Original Issue Date, other than:
 
(I)                                 shares of Common Stock issued or issuable as a dividend or other distribution on Preferred Stock;
 
(II)                           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 Section 4(e), 4(f), 4(g) and 4(h);
 
(III)                     shares of Common Stock issued or issuable upon conversion of shares of Preferred Stock issued and outstanding as of the closing of the transactions contemplated by the Series C SPA;
 
(IV)                     shares of Common Stock or Options or restricted stock awards or other rights therefor issued to employees, officers, directors, consultants, contractors, or advisors of the Company pursuant to any compensatory or incentive plan or arrangement adopted, approved or ratified by a Qualified Board Approval;
 
(V)                           shares of Common Stock issuable directly or pursuant to the exercise of Options or other rights granted in connection with any loan, equipment lease, technology license, vendor or purveyor or customer relationship or similar non-equity financing transaction approved by the Board of Directors;
 
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(VI)                     shares of Common Stock issued to the public in a firm commitment underwritten public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended;
 
(VII)               shares of Common Stock issued pursuant to the acquisition by the Company of another corporation or entity by consolidation, corporate reorganizations, or merger, or purchase of all or substantially all of the assets of such corporation or entity as approved by a Qualified Board Approval;
 
(VIII)         up to 12,183,690 shares of Series C Preferred Stock or any Common Stock issued upon conversion of such shares of Series C Preferred Stock issued pursuant to the Series C SPA; and
 
(IX)                     any securities issued or issuable upon conversion, exercise or exchange of any other securities that are also covered by Section 4(d)(i)(C)(I)-(VIII).
 
(ii)                               No Adjustment of Conversion Price .  No adjustment in the number of shares of Common Stock into which the Series C Preferred Stock is convertible shall be made (a) unless the consideration per share (determined pursuant to Section 4(d)(v)) for an Additional Share of Common Stock issued or deemed to be issued by the Company is less than the applicable Conversion Price in effect on the date of, and immediately prior to, the issue of such Additional Shares, or (b) if prior to or subsequent to such issuance, the Company receives written notice from the holders of at least 51% of the shares of Series C Preferred Stock then outstanding, voting separately as a single class, agreeing that no such adjustment shall be made as the result of the issuance of Additional Shares of Common Stock.  No adjustment in the number of shares of Common Stock into which the Series B Preferred Stock is convertible shall be made (a) unless the consideration per share (determined pursuant to Section 4(d)(v)) for an Additional Share of Common Stock issued or deemed to be issued by the Company is less than the applicable Conversion Price in effect on the date of, and immediately prior to, the issue of such Additional Shares, or (b) if prior to or subsequent to such issuance, the Company receives written notice from the holders of at least 51% of the shares of Series B Preferred Stock then outstanding, voting separately as a single class, agreeing that no such adjustment shall be made as the result of the issuance of Additional Shares of Common Stock.  No adjustment in the number of shares of Common Stock into which the Series A Preferred Stock is convertible shall be made (a) unless the consideration per share (determined pursuant to Section 4(d)(v)) for an Additional Share of Common Stock issued or deemed to be issued by the Company is less than the applicable Conversion Price in effect on the date of, and immediately prior to, the issue of such Additional Shares, or (b) if prior to or subsequent to such issuance, the Company receives written notice from the holders of at least 51% of the shares of Series A Preferred Stock then outstanding, voting separately as a single class, agreeing that no such adjustment shall be made as the result of the issuance of Additional Shares of Common Stock.
 
(iii)                           Issue of Securities Deemed Issue of Additional Shares of Common Stock .
 
(A)                           If the Company at any time or from time to time after the Original Issue Date shall issue any Options or Convertible Securities (excluding Options or
 
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Convertible Securities which, upon exercise, conversion or exchange thereof, would entitle the holder thereof to receive shares of Common Stock which are specifically excepted from the definition of Additional Shares of Common Stock by Section 4(d)(i) above) or shall fix a record date for the determination of holders of any class of securities entitled to receive any such Options or Convertible Securities, then the maximum number of shares of Common Stock (as set forth in the instrument ·relating thereto, assuming the satisfaction of any conditions to exercisability, convertibility or exchangeability, but without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or, in the case of Convertible Securities and Options therefor, issuable upon 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, provided that Additional Shares of Common Stock shall not be deemed to have been issued unless the consideration per share (determined pursuant to Section 4(d)(v)) of such Additional Shares of Common Stock would be less than the applicable Conversion Price in effect on the date of and immediately prior to such issue, or such record date, as the case may be, and provided further that in any such case in which Additional Shares of Common Stock are deemed to be issued:
 
(B)                            No further adjustment in the Conversion Price shall be made upon the subsequent issue of Convertible Securities or shares of Common Stock upon the exercise of such Options or conversion or exchange of such Convertible Securities.
 
(C)                            If the terms of any Option or Convertible Security, the issuance of which resulted in an adjustment to a Conversion Price pursuant to the terms of Section 4(d)(iv) below, are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Options or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase or decrease in the number of shares of Common Stock issuable upon the exercise, conversion or exchange of any such Option or Convertible Security or (2) any increase or decrease in the consideration payable to the Company upon such exercise, conversion or exchange, then, effective upon such increase or decrease becoming effective, such Conversion Price 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 obtained had such revised terms been in effect upon the original date of issuance of such Option or Convertible Security.  Notwithstanding the foregoing, no readjustment pursuant to this clause (C) shall have the effect of increasing the applicable Conversion Price to an amount which exceeds the lower of (i) the applicable Conversion Price in effect immediately prior to the original adjustment made as a result of the issuance of such Option or Convertible Security, or (ii) such Conversion Price that would have resulted from any issuances of Additional Shares of Common Stock (other than deemed issuances of Additional Shares of Common Stock as a result of the issuance of such Option or Convertible Security) between the original adjustment date and such readjustment date.
 
(D)                           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 shares of Common Stock which are
 
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specifically excepted from the definition of Additional Shares of Common Stock by Section 4(d)(i)(C) above), the issuance of which did not result in an adjustment to a Conversion Price pursuant to the terms of Section 4(d)(iv) below (either because the consideration per share (determined pursuant to Section 4(d)(v) hereof) of the Additional Shares of Common Stock subject thereto was equal to or greater than the applicable Conversion Price then in effect, or because such Option or Convertible Security was issued before the Original Issue Date), are revised as a result of an amendment to such terms or any other adjustment pursuant to the provisions of such Option or Convertible Security (but excluding automatic adjustments to such terms pursuant to anti-dilution or similar provisions of such Option or Convertible Security) to provide for either (1) any increase 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 Company upon such exercise, conversion or exchange, then such Option or Convertible Security, as so amended or adjusted, and the Additional Shares of Common Stock subject thereto (determined in the manner provided in Section 4(d)(iii)(A) above) shall be deemed to have been issued effective upon such increase or decrease becoming effective.
 
(E)                             Upon the expiration or termination of any unexercised Option or unconverted or unexchanged Convertible Security (or portion thereof) which resulted (either upon its original issuance or upon a revision of its terms) in an adjustment to the applicable Conversion Price pursuant to the terms of Section 4(d)(iv), the applicable Conversion Price shall be readjusted to such Conversion Price as would have obtained had such Option or Convertible Security (or portion thereof) never been issued.
 
(F)                              If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Company upon such exercise, conversion and/or exchange, is calculable at the time such Option or Convertible Security is issued or amended but is subject to adjustment based upon subsequent events, any adjustment to the applicable Conversion Price provided for in this Section 4(d)(iii) shall be effected at the time of such issuance or amendment based on such number of shares or amount of consideration without regard to any provisions for subsequent adjustments (and any subsequent adjustments shall be treated as provided in clauses (C) and (D) of this Section 4(d)(iii)).  If the number of shares of Common Stock issuable upon the exercise, conversion and/or exchange of any Option or Convertible Security, or the consideration payable to the Company upon such exercise, conversion and/or exchange, cannot be calculated at all at the time such Option or Convertible Security is issued or amended, any adjustment to the applicable Conversion Price that would result under the terms of this Section 4(d)(iii) at the time of such issuance or amendment shall instead be effected at the time such number of shares and/or amount of consideration is first calculable (even if subject to subsequent adjustments), assuming for purposes of calculating such adjustment to the applicable Conversion Price that such issuance or amendment took place at the time such calculation can first be made.
 
(iv)                           Adjustment of Conversion Price Upon Issuance of Additional Shares of Common Stock .  In the event the Company shall at any time after the Original Issue Date issue Additional Shares of Common Stock (including Additional Shares of Common Stock deemed to be issued pursuant to Section 4(d)(iii), but excluding shares issued as a stock split or combination as provided in Section 4(e) or upon a dividend or distribution as provided in Section
 
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4(f)), without consideration or for a consideration per share less than the applicable Conversion Price in effect immediately prior to such issue, then such Conversion Price for the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, shall be adjusted, concurrently with such issue, to a value (calculated to the nearest whole cent) determined as follows:
 
(P1 x Q1) + (P2 x Q2)
(Q1 + Q2)
 
where:
 
P1 =                   the Conversion Price in effect immediately prior to such issuance of Additional Shares of Common Stock;
 
Q1 =                the aggregate number of shares of Common Stock outstanding immediately prior to such issuance of Additional Shares of Common Stock;
 
P2 =       the average price per share received by the Company for the Additional Shares of Common Stock; and
 
Q2 =                the number of Additional Shares of Common Stock;
 
provided , that , for the purpose of this Section 4(d)(iv), (A) all shares of Common Stock issuable upon conversion of Preferred Stock outstanding immediately prior to such issuance of Additional Shares shall be deemed to be outstanding and (B) the maximum Conversion Rate based on the determination of adjusted Conversion Price pursuant to this Section 4(d)(iv) shall not be more than two (2) shares of Common Stock for each share of the applicable Preferred Stock (subject to appropriate adjustment for Recapitalizations).
 
(v)                               Determination of Consideration .  For purposes of this Section 4(d), the consideration received by the Company for the issue of any Additional Shares of Common Stock shall be computed as follows:
 
(A)                           Property other than Cash : In the event that Additional Shares of Common Stock are issued for consideration that does not consist solely of cash, such consideration shall be computed at the fair market value thereof at the time of such issue, as determined in good faith by the Board of Directors; and
 
(B)                            Options and Convertible Securities .  The consideration per share received by the Company for Additional Shares of Common Stock deemed to have been issued pursuant to Section 4(d)(iii), relating to Options and Convertible Securities, shall be determined by dividing:
 
(x)                               the total amount, if any, received or receivable by the Company 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 Company upon the exercise of such Options or the conversion or
 
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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
 
(y)                               the maximum number of shares of Common Stock (as set forth in the instruments relating thereto, without regard to any provision contained therein for a subsequent adjustment of such number) issuable upon the exercise of such Options or the conversion or exchange of such Convertible Securities, or in the case of Options for Convertible Securities, the exercise of such Options for Convertible Securities and the conversion or exchange of such Convertible Securities.
 
(vi)                           Multiple Closing Dates .  In the event the Company shall issue on more than one date Additional Shares of Common Stock that are a part of one transaction or a series of related transactions and that would result in an adjustment to the applicable Conversion Price pursuant to Section 4(d)(iv), and such issuance dates occur within a period of no more than 120 days, then, upon the final such issuance, the Conversion Price shall be readjusted to give effect to all such issuances as if they occurred on the date of the first such issuance (and without giving effect to any adjustments as a result of any such subsequent issuances within such period).
 
(vii)                       No Adjustment .  For avoidance of doubt, the holders of the Series B Preferred Stock and Series A Preferred Stock shall not be entitled to adjustments to their respective Conversion Price for the issuance of up to 12,183,690 shares of Series C Preferred Stock, effective upon the closing of the transactions contemplated by the Series C SPA.
 
(e)                                Adjustment for Stock Splits and Combinations .  If the Company shall at any time or from time to time after the Original Issue Date effect a subdivision of the outstanding Common Stock, the Conversion Price for the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, then in effect immediately before that subdivision shall be proportionately decreased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be increased in proportion to such increase in the aggregate number of shares of Common Stock outstanding.  If the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares Common Stock, the Conversion Price for the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, then in effect immediately before the combination shall be proportionately increased so that the number of shares of Common Stock issuable on conversion of each share of such series shall be decreased in proportion to such decrease in the aggregate number of shares of Common Stock outstanding.  Any adjustment under this paragraph 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 Company at any time, or from time to time after the 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 on Common Stock payable in additional shares of Common Stock, then and in each such event the Conversion Price for the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, then in effect 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
 
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of business on such record date, by multiplying the Conversion Price for the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, then in effect by a fraction:
 
(1)                               the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and
 
(2)                               the denominator of which shall be the total number of shares of Common Stock issued and outstanding 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 , 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 for the Series A Preferred Stock, Series B Preferred Stock or the Series C Preferred Stock, as applicable, shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for the Series A Preferred Stock, Series B Preferred Stock or the Series C Preferred Stock, as applicable, shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions; and provided further , that no such adjustment shall be made if the holders of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, simultaneously receive an identical dividend or other distribution of shares of Common Stock in a number equal to the number of shares of Common Stock that they would have received if all outstanding shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, had been converted into Common Stock immediately prior to such event.
 
(g)                               Adjustments for Other Dividends and Distributions .  In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company (other than a distribution of shares of Common Stock in respect of shares of Common Stock) or in other property and the provisions of Section 1 do not apply to such dividend or distribution, then and in each such event provision shall be made so that the holders of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Company that they would have received had the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock been converted into Common Stock on the date of such event and had they thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this paragraph with respect to the rights of the holders of the Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable; and provided further , that no such adjustment shall be made if the holders of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, simultaneously receive a dividend or other distribution of such securities or other property in an amount equal to the amount of such securities or other property that they would have received if all outstanding shares of Series A Preferred Stock, Series B Preferred
 
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Stock or Series C Preferred Stock, as applicable, had been converted into Common Stock immediately prior to such event.
 
(h)                               Adjustment for Merger or Reorganization, etc .  Subject to Section 2, if there shall occur any reorganization, recapitalization, reclassification, consolidation or merger involving the Company 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 Sections 4(d) , 4(f) or 4(g)), then, following any such reorganization, recapitalization, reclassification, consolidation or merger, each share of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock shall thereafter be convertible in lieu of the Common Stock into a security which it was convertible prior to such event into the kind and amount of shares of capital stock or other securities or property to which a holder of the number of shares of Common Stock of the Company issuable upon conversion of one share of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, as applicable, 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) shall be made in the application of the provisions in this Section 4 set forth with respect to the rights and interests thereafter of the holders of the Preferred Stock to the end that the provisions set forth in this Section 4 (including provisions with respect to changes in and other adjustments of the Conversion Price of each 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 the Preferred Stock.  For the avoidance of doubt, nothing in this Section 4(h) shall be construed as preventing the holders of Preferred Stock from seeking any appraisal rights to which they are otherwise entitled under the DGCL in connection with a merger triggering an adjustment hereunder, nor shall this Section 4(h) be deemed conclusive evidence of the fair value of the shares of Preferred Stock in any such appraisal proceeding.
 
(i)                                   Certificate as to Adjustments .  Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 4, the Company shall compute such adjustment or readjustment in accordance with the terms hereof and furnish, as promptly as reasonably practicable but in any event not later than twenty (20) days thereafter, to each holder of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock, as applicable, a certificate setting forth such adjustment or readjustment and identifying the shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock to which it applies and referencing the facts upon which such adjustment or readjustment is based.  The Company shall, upon the reasonable written request at any time of any holder of Preferred Stock furnish or cause to be furnished to such holder a similar certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price then in effect with respect to such holder’s shares, and (iii) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of such holder’s shares of Series A Preferred Stock, Series B Preferred Stock or Series C Preferred Stock.
 
(j)                                   Notice of Record Date .  In the event:
 
(i)                             that the Company shall take a record of the holders of its Common Stock (or other capital stock or securities at the time issuable upon conversion of the Preferred
 
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Stock) for the purpose of entitling or enabling them to receive any dividend or other distribution, or to receive any right to subscribe for or purchase any shares of capital stock of any class or any other securities, or to receive any other security or, if a record is not to be taken, that the Company declares a dividend (or any other distribution) on its Common Stock in Common Stock or other securities of the Company;
 
(ii)                               that the Company subdivides or combines its outstanding shares of Common Stock;
 
(iii)                           of any reclassification of the Common Stock of the Company (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Company into or with another corporation, or of the sale of all or substantially all of the assets of the Company; or
 
(iv)                           of a Liquidation Event;
 
then, at least fifteen (15) days prior to the date on which such event is expected to become effective, or at least fifteen (15) days prior to the stockholders’ meeting called to approve such transaction, whichever is earlier, the Company shall cause to be filed at its principal office or at the office of the transfer agent of the Preferred Stock, and shall cause to be mailed to the holders of the Preferred Stock at their last addresses as shown on the records of the Company or such transfer agent a notice stating:
 
(A)                           the record date of such dividend, distribution, subdivision or combination, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or
 
(B)                            the date on which such reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Corporate Reorganization is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution, liquidation, winding-up or Corporate Reorganization, and
 
(C)                            the material terms and conditions of the impending transaction and the applicable provisions of this Certificate of Incorporation with respect to such transaction.  The Company shall thereafter give prompt notice of any material changes to the material terms and conditions of such transaction.
 
5.                                     Mandatory Conversion .
 
(a)                                All outstanding shares of Preferred Stock shall automatically be converted into shares of Common Stock, at the then effective Conversion Rate, upon the earlier to occur of (i) the closing of a Qualified IPO, (ii) the consent of an Investor Majority (which may provide for a conversion upon the happening of a future event, such as consummation of an initial public offering) related to an initial public offering with a per share price greater than the Series C Purchase Price, (iii) the consent of an Investor Majority in connection with any mandatory
 
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conversion in which the current fair market value of the Company’s Common Stock exceeds the Series C Purchase Price, or (iv) upon the consent of a Super Investor Majority.  The date of a conversion pursuant to this Section is referred to herein as the “ Mandatory Conversion Date .”
 
(b)                               All holders of record of shares of Preferred Stock shall be given written notice of the Mandatory Conversion Date, and the place designated for mandatory conversion of all such shares of Preferred Stock pursuant to this Section 5.  Such notice need not be given in advance of the occurrence of a Mandatory Conversion Date.  Such notice shall be sent by first class or registered mail, hand delivery, or overnight courier to each record holder of Preferred Stock at such holder’s address last shown on the records of the transfer agent (or the records of the Company, if it serves as its own transfer agent).  Upon receipt of such notice, each holder of shares of Preferred Stock shall surrender his or its certificate or certificates for all such shares (or, if such holder alleges that such certificate has been lost, stolen or destroyed, a lost certificate affidavit and agreement reasonably acceptable to the Company to indemnify the Company against any claim that may be made against the Company on account of the alleged loss, theft or destruction of such certificate) to the Company 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 5.  On the Mandatory Conversion Date, all rights with respect to the Preferred Stock and set forth in this Certificate of Incorporation, 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 (or lost certificate affidavit and agreement) therefor, to receive certificates for the number of shares of Common Stock into which such Preferred Stock has been converted, together with cash as provided in Section 4(b) in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion as provided in Section 4(b) and payment of any accrued or declared but unpaid dividends on such Preferred Stock (which dividends may, at the Company’s election, be paid in cash, shares of Common Stock or a combination thereof).  If so required by the Company, certificates surrendered for conversion shall be endorsed or accompanied by written instrument or instruments of transfer, in form satisfactory to the Company, duly executed by the registered holder or by his or its attorney duly authorized in writing.  As soon as practicable after the Mandatory Conversion Date and the surrender of the certificate or certificates (or lost certificate affidavit and agreement) for Preferred Stock, the Company shall cause to be issued and delivered to such holder, or on his 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 together with cash as provided in Section 4(b) in respect of any fraction of a share of Common Stock otherwise issuable upon such conversion and payment of any accrued or declared but unpaid dividends on such Preferred Stock (which dividends may, at the Company’s election, be paid in cash, shares of Common Stock or a combination thereof).
 
(c)                                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 the 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.  The Company may thereafter take such appropriate action (without the need
 
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for stockholder action) as may be necessary to reduce the authorized Preferred Stock accordingly.
 
6.                                     Negative Covenants .
 
(a)                                In addition to any other vote or consent required by this Certificate of Incorporation or by law, so long as at least twenty percent (20%) of the shares of Preferred Stock are outstanding (after giving effect to the issuance of Series C Preferred Stock pursuant to the Series C SPA, and as adjusted for any Recapitalizations), the Company shall not (either directly or indirectly by amendment, merger, recapitalization, consolidation or otherwise), without the affirmative vote of the Investor Majority:
 
(i)                                   amend, alter or repeal any provision of its certificate of incorporation or by-laws;
 
(ii)                               issue shares of capital stock, including any Common Stock or Preferred Stock, or increase the authorized number of shares of Common Stock or Preferred Stock, except for the purposes of (a) issuing shares upon exercise of outstanding Options to purchase Common Stock; (b) issuing shares upon the conversion of shares of Preferred Stock; or (c) issuing shares in connection with a Recapitalization;
 
(iii)                           reduce or increase the size of the Board of Directors or change the procedures by which members of the Board of Directors are elected or appointed from the size and procedures in place as of the Original Issue Date;
 
(iv)                           declare and pay a dividend or redeem or repurchase any shares of the Company’s capital stock or options to purchase capital stock, other than (a) the redemption of or payment of dividends on shares of Preferred Stock, or (b) the repurchase of capital stock from employees of the Company upon a termination of employment pursuant to agreements to repurchase such capital stock, provided, that, any dividend payable pursuant to Section 1(d) shall require a Super Investor Majority;
 
(v)                               authorize, create or designate, or incur any obligation to issue or issue shares of, whether by reclassification or otherwise, any class or series of stock or any other equity or debt securities convertible into equity securities of the Company ranking on par with or senior to the Series C Preferred Stock, with respect to voting rights, dividends, conversion, distributions upon liquidation of the Company or redemption rights;
 
(vi)                           take any action to effect a Liquidation Event or reclassification or recapitalization of the Company’s outstanding capital stock that is a Corporate Reorganization;
 
(vii)                       other than in the ordinary course of business, sell, exchange, convey, lease, exclusively license, transfer or otherwise dispose of the assets or intellectual property of the Company, in a single transaction or series of related transactions;
 
(viii)                   incur indebtedness for borrowed money (including operating and capital leases but excluding CRO expenses, inventory build-up, trade debt, leases and other day-to-day operating items) in excess of $500,000 in the aggregate and including any direct or
 
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indirect guarantee of the payment or performance of the indebtedness of any other party, other than indebtedness incurred pursuant to debt facilities approved by the Board of Directors;
 
(ix)                           take any action that will result in taxation of holders of Preferred Stock under Section 305 of the Internal Revenue Code of 1986, as amended;
 
(x)                               enter into any transactions, contracts, agreements or understandings with any stockholder, officer, director or Affiliate, unless approved by the Board of Directors, including a majority of disinterested directors (“ Affiliate ” means a specified person or entity who or that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such specified person or entity);
 
(xi)                           amend, alter or change the rights, preferences, or privileges of the Preferred Stock in a manner that adversely affects the Preferred Stock; or
 
(xii)                       enter into an agreement or commitment with respect to any of the foregoing actions or transactions.
 
(b)                               In addition to any other vote or consent required by this Certificate of Incorporation or by law, so long as at least twenty percent (20%) of the number of shares of Series C Preferred Stock issued pursuant to the Series C SPA are outstanding (as adjusted for any Recapitalizations), the Company shall not, (either directly or indirectly by amendment, merger, recapitalization, consolidation or otherwise), without the affirmative vote of Abingworth LLP, OrbiMed Private Investments III, LP, OrbiMed Associates III, LP and Clarus Lifesciences I, L.P., amend, alter or change the rights, preferences, or privileges of the Series C Preferred Stock so as to adversely affect the Series C Preferred Stock, provided that the Investors so voting are then holding shares of Series C Preferred Stock, including without limitation any amendment to the definition of “Super Investor Majority” (and the terms defined therein).
 
FIFTH:   The Company is to have perpetual existence.
 
SIXTH:   For the management of the business and for the conduct of the affairs of the Company, and in further definition and not in limitation of the powers of the Company and of its directors and of its stockholders or any class thereof, as the case may be, conferred by the State of Delaware, it is further provided that:
 
A.                                 The management of the business and the conduct of the affairs of the Company shall be vested in its Board of Directors.  In addition to the powers and authority expressly conferred upon them by statute or by this Certificate of Incorporation or the By-Laws of the Company as in effect from time to time, 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 Company.  No election of directors need be by written ballot except as and to the extent provided in the By-Laws.
 
B.                                  After the original or other By-Laws of the Company have been adopted, amended or repealed, as the case may be, in accordance with the provisions of Section 109 of the DGCL, and, after the Company has received any payment for any of its stock, the power to adopt, amend, or repeal the By-Laws of the Company may be exercised by the Board of Directors of the
 
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Company; subject to the right of the stockholders entitled to vote thereon to alter and repeal By-Laws made by the Board of Directors.
 
C.  The books of the Company may be kept at such place within or without the State of Delaware as the By-Laws of the Company may provide or as may be designated from time to time by the Board of Directors of the Company.
 
SEVENTH:   The Company shall, to the fullest extent permitted under the law of the State of Delaware, as the same may be amended and supplemented from time to time, indemnify and advance expenses to any person who is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit, proceeding or claim, whether civil, criminal, administrative or investigative, by reason of the fact that such person is or was a director or officer of the Company or while a director or officer of the Company is or was (at the request of the Company) serving as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, against any and all expenses (including attorney’s fees and expenses), judgments, fines, penalties liabilities, and amounts paid in settlement incurred in connection with the investigation, preparation to defend or defense of such action, suit, proceeding or claim; provided , however , that except with respect to proceedings to enforce rights to indemnification, the By-Laws of the Company may provide that the Company shall indemnify any director, officer or such person in connection with a proceeding (or part thereof) initiated by such director, officer or such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Company.  The Company, by action of its Board of Directors, may provide indemnification or advance expenses to employees and agents of the Company or other persons only on such terms and conditions and to the extent determined by the Board of Directors in its sole and absolute discretion.  The indemnification provided for herein shall not be deemed exclusive of any other rights to which those indemnified may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in their official capacity and as to action in another capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee, or agent and shall inure to the benefit of the heirs and legal representatives of such person.  Any person seeking indemnification under this Article 7 shall be deemed to have met the standard of conduct required for such indemnification unless the contrary shall be established.  Any repeal or modification of this Article 7 shall not adversely affect any right or protection of a director or officer of the Company with respect to any acts or omissions of such director or officer occurring prior to such repeal or modification.
 
EIGHTH:   No director of the Company shall be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director except to the extent that exemption from liability or limitation thereof is not permitted under the DGCL as in effect at the time such liability or limitation thereof is determined.  No amendment, modification or repeal of this Article 8 shall apply to or have any effect on the liability or alleged liability of any director of the Company for or with respect to any acts or omissions of such director occurring prior to such amendment, modification or repeal.  If the DGCL is amended after approval by the stockholders of this Article 8 to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Company shall be eliminated or limited to the fullest extent permitted by the DGCL, as so amended.
 
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NINTH:  Whenever a compromise or arrangement is proposed between the Company and its creditors or any class of them and/or between the Company 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 Company or of any creditor or stockholder thereof or on the application of any receiver or receivers appointed for the Company under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for the Company under the provisions of Section 279 of Title 8 of the Delaware Code, order a meeting of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Company, as the case may be, to be summoned in such manner as the said court directors.  If a majority in number representing three-fourths (3/4) in value of the creditors or class of creditors, and/or of the stockholders or class of stockholders of the Company, as the case may be, agree to any compromise or arrangement and to any reorganization of the Company as 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 Company, as the case may be, and also on the Company.
 
TENTH: Subject to Section C(6) of Article IV, from time to time any of the provisions of this Certificate of Incorporation may be amended, altered or repealed, and other provisions authorized by the laws of the State of Delaware at the time in force may be added or inserted in the manner and at the time prescribed by said laws, and all rights at any time conferred upon the stockholders of the Company by this Certificate of Incorporation are granted subject to the provisions of this Article X.
 
IN WITNESS WHEREOF, the Company has caused this certificate to be signed by Hani Zeini, its President, and its corporate seal to be affixed hereto, this 27th day of March, 2012.

 	/s/ Hani Zeini	
 	President	
 
[Signature Page to Fourth Amended and Restated Certificate of Incorporation]

 

State of Delaware	 	
Secretary of State	 	
Division of Corporations	 	
Delivered 03:43 PM 01/10/2013	 	
FILED 02:57 PM 01/10/2013	 	
SRV 130035579 – 3698337 FILE	 	
 
CERTIFICATE OF AMENDMENT
 
OF THE
 
FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
 
SIENTRA, INC.
 
a Delaware Corporation
 
Sientra, Inc., (the “ Corporation ”) a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware,
 
DOES HEREBY CERTIFY:
 
FIRST:                                                 The original Certificate of Incorporation was initially filed with the Secretary of State of Delaware on August 29, 2003 under the name Juliet Medical, Inc.; an Amended and Restated Certificate of Incorporation was filed on December 29, 2006 under the name Juliet Medical, Inc.; an Amended and Restated Certificate of Incorporation was filed on April 4, 2007 under the name Juliet Medical, Inc.; a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Juliet Medical, Inc. was filed on April 10, 2007 to change the name of Company to Sientra, Inc.; a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sientra, Inc. was filed on April 2, 2009; a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sientra, Inc. was filed on September 28, 2010; and a Fourth Amended and Restated Certificate of Incorporation of Sientra, Inc., was filed on March 27, 2012 (the “ Fourth Restated Certificate ”).
 
SECOND:                           The section A of the first paragraph of Article FOURTH of the Fourth Restated Certificate as presently in effect be, and hereby is, amended and restated to read in its entirety as follows:
 
“A.                          The total number of shares of all classes of stock which the Company shall have authority to issue is 54,793,087 consisting of:
 
(i)                                   30,200,000 shares of Common Stock, par value $0.01 per share (the “ Common Stock ”); and
 
(ii)                               24,593,087 shares of Preferred Stock, $0.01 par value per share (the “ Preferred Stock ”), of which (a) 1,000,000 shares have been designated Series A Preferred Stock, par value $0.01 per share (the “ Series A Preferred Stock ”), (b) 11,409,397 shares have been designated Series B Preferred Stock, par value $0.01 per share (the “ Series B Preferred Stock ”) and (c) 12,183,690 shares have been designated Series C Preferred Stock, par value $0.01 per share (the “ Series C Preferred Stock ”).
 
The relative powers, designations, preferences, special rights, privileges, restrictions and other matters relating to such Common Stock and Preferred Stock are as set forth in this Article IV.”
 
-1- 

 
THIRD:                                           This Certificate of Amendment of the Fourth Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Sections 141, 228 and 242 of the General Corporation Law of the State of Delaware, by approval of the Board of Directors of the Corporation and by the affirmative vote of the holders of at least a majority of the outstanding stock of the Corporation entitled to vote.
 
-2- 

 
IN WITNESS WHEREOF, the undersigned has caused this Certificate of Amendment of the Fourth Amended and Restated Certificate of Incorporation to be duly executed as of the 10th day of January, 2013.

 	SIENTRA, Inc.	

 	By:	   /s/ Hani Zeini	
 	 	   Hani Zeini	
 	 	   President and Chief Executive Officer	
 
[Signature page to Certificate of Amendment to Fourth Amended and Restated Certificate of
Incorporation]

 

 	State of Delaware	
 	Secretary of State	
 	Division of Corporations	
 	Delivered 01:50 PM 05/13/2013	
 	FILED 01:47 PM 05/13/2013	
 	SRV 130568954 - 3698337 FILE	
 
CERTIFICATE OF AMENDMENT
 
OF THE
 
FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
 
SIENTRA, INC.
 
a Delaware Corporation

SIENTRA, INC. , a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the “ Corporation ”), hereby certifies that:
 
FIRST:   The name of the Corporation is Sientra, Inc.
 
SECOND:   The original Certificate of Incorporation was initially filed with the Secretary of State of Delaware on August 29, 2003 under the name Juliet Medical, Inc.; an Amended and Restated Certificate of Incorporation was filed on September 18, 2006; and Amended and Restated Certificate of Incorporation was filed on December 29, 2006 under the name Juliet Medical, Inc.; an Amended and Restated Certificate of Incorporation was filed on April 4, 2007 under the name Juliet Medical, Inc.; a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Juliet Medical, Inc. was filed on April 10, 2007 to change the name of Company to Sientra, Inc.; a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sientra, Inc. was filed on April 2, 2009; a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sientra, Inc. was filed on September 28, 2010; a Fourth Amended and Restated Certificate of Incorporation of Sientra, Inc., was filed on March 27, 2012 (the “ Fourth Restated Certificate ”); and a Certificate of Amendment to the Fourth Restated Certificate was filed on January 10, 2013.
 
THIRD: The Board of Directors of the Corporation, acting in accordance with the provisions of Sections 141 and 242 of the General Corporation Law of the State of Delaware, adopted resolutions amending its Fourth Restated Certificate as follows:
 
Subsection (g) shall be added to Section C(1) of Article FOURTH and shall read in its entirety as follows:
 
(g)                               A distribution to the Company’s stockholders may be made without regard to the preferential dividends arrears amount or any preferential rights amount (each as determined under applicable law).
 
FOURTH: This Certificate of Amendment of the Fourth Restated Certificate was duly adopted in accordance with the provisions of Sections 141, 228 and 242 of the General Corporation Law of the State of Delaware, by approval of the Board of Directors of the Corporation and by the affirmative vote of the holders of at least a majority of the outstanding stock of the Corporation entitled to vote.
 
[Remainder of this page left blank]

 
IN WITNESS WHEREOF , the undersigned have caused this Certificate of Amendment of the Fourth Amended and Restated Certificate of Incorporation to be duly executed as of the     10      day of May, 2013.

 	SIENTRA, INC.	

 	By:	   /s/ Hani Zeini	
 	 	Hani Zeini, President and Chief Executive Officer	

 
CERTIFICATE OF AMENDMENT
TO THE
FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
 
SIENTRA, INC.
 
Pursuant to Section 242 of the Delaware General Corporation Law it is hereby certified that:
 
1.                                     The name of the corporation (hereinafter, the “Corporation”) is Sientra, Inc.  The original Certificate of Incorporation was initially filed as Juliet Medical, Inc. with the Secretary of State of Delaware on August 29, 2003.
 
2.                                     The Fourth Amended and Restated Certificate of Incorporation of the Corporation, as currently in effect, is hereby amended by deleting Paragraph C, Subsection 3(b) of Article Fourth in its entirety and replacing it with the following:
 
(b)       “ Voting for the Election of Directors .  The Board of Directors shall consist of seven members.  As long as at least 500,000 shares of Preferred Stock remain outstanding, the holders of outstanding shares of Series A Preferred Stock, Series B Preferred Stock and Series C Preferred Stock, voting together as a separate class, shall be entitled to elect three directors of the Company (the “ Preferred Directors ”) at each annual election of directors.  The holders of outstanding shares of Common Stock shall be entitled to elect one director of the Company at each annual election of directors.  The holders of outstanding shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock and Common Stock, voting together on an as converted basis, shall be entitled to elect three independent directors of the Company at each annual election of directors.  In the case of any vacancy (other than a vacancy caused by removal) in the office of a director occurring among the directors elected by the holders of a class or Series of stock pursuant to this Section 3(b), the remaining directors so elected by that class or Series may (or, if there are no such directors remaining, the holders of a majority of the shares of that class or Series may by affirmative vote) elect a successor to hold office for the unexpired term of the director whose place shall be vacant.  Any director who shall have been elected by the holders of a class or Series of stock or by any directors so elected as provided in the immediately preceding sentence hereof may be removed during the aforesaid term of office, either with or without cause, by, and only by, the affirmative vote of the holders of the shares of the class or Series of stock entitled to elect such director or directors, given either at a special meeting of such stockholders duly called for that purpose or pursuant to a written consent of stockholders, and any vacancy thereby created may be filled by the holders of that class or Series of stock represented at the meeting or pursuant to unanimous written consent.”
 
3.                                     The Amendment of the Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of Section 242 of the General Corporation Law of the State of Delaware.  In lieu of a meeting and vote of the stockholders of the Corporation, this Amendment has been duly adopted by written consent by the stockholders holding the requisite amount of the outstanding capital stock of the Corporation entitled to vote, in accordance with the provisions of Section 228 General Corporation Law of the State of Delaware.

Signed on July 22, 2014	 	

 

 	By:	/s/ Hani Zeini	
 	Name:  Hani Zeini	
 	Title:  President and Chief Executive Officer	

 
CERTIFICATE OF AMENDMENT
 
TO THE
 
FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF
 
SIENTRA, INC.

Pursuant to Section 242 of the General Corporation Law of the State of Delaware (the “ DGCL ”) it is hereby certified that:
 
1.                                     The name of the corporation (hereinafter, the “ Corporation ”) is Sientra, Inc.  The original Certificate of Incorporation was initially filed with the Secretary of State of Delaware on August 29, 2003 under the name Juliet Medical, Inc.; an Amended and Restated Certificate of Incorporation was filed on September 18, 2006 under the name Juliet Medical, Inc.; an Amended and Restated Certificate of Incorporation was filed on December 29, 2006 under the name Juliet Medical, Inc.; an Amended and Restated Certificate of Incorporation was filed on April 4, 2007 under the name Juliet Medical, Inc.; a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Juliet Medical, Inc. was filed on April 10, 2007 to change the name of Company to Sientra, Inc.; a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sientra, Inc. was filed on April 2, 2009; a Certificate of Amendment to the Amended and Restated Certificate of Incorporation of Sientra, Inc. was filed on September 28, 2010; a Fourth Amended and Restated Certificate of Incorporation of Sientra, Inc., was filed on March 27, 2012 (the “ Fourth Restated Certificate ”); a Certificate of Amendment to the Fourth Restated Certificate was filed on January 10, 2013; a Certificate of Amendment to the Fourth Restated Certificate was filed on May 13, 2013; and a Certificate of Amendment to the Fourth Restated Certificate was filed on July 22, 2014.
 
2.                                     The following paragraph shall be inserted as the second paragraph under section A of Article FOURTH of the Fourth Restated Certificate as presently in effect:
 
“Effective upon the filing of the Certificate of Amendment to the Fourth Restated Certificate pursuant to the General Corporation Law of the State of Delaware (the “ Effective Time ”), each 2.75 shares of the Corporation’s Common Stock (the “ Old Common Stock” ), issued and outstanding immediately prior to the Effective Time, will be automatically reclassified as and converted into one share of Common Stock, par value $0.01 per share, of the Corporation (the “ New Common Stock ”) (the “ Reverse Stock Split ”). Any stock certificate that, immediately prior to the Effective Time, represented shares of the Old Common Stock will, from and after the Effective Time, automatically and without the necessity of presenting the same for exchange, represent the number of shares of the New Common Stock as equals the product obtained by dividing the number of shares of Old Common Stock represented by such certificate immediately prior to the Effective Time by 2.75. No fractional share of Common Stock shall be issued as a result of the Reverse Stock Split, but shall instead pay to any stockholder who would be entitled to receive a fractional share as a result of the actions set forth herein a sum in cash equal to the fair market value of the shares constituting such fractional share as determined by the Board of Directors of the Company.”
 
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3.                                     This Amendment to the Fourth Amended and Restated Certificate of Incorporation herein certified has been duly adopted in accordance with the provisions of Sections 141, 228 and 242 of the DGCL, by approval of the Board of Directors of the Corporation and by the affirmative vote of the holders of at least a majority of the outstanding stock of the Corporation entitled to vote.
 
-2- 

 
Signed on October 17, 2014

 	SIENTRA, Inc.	

 	By:	/s/ Hani Zeini	
 	Name:	Hani Zeini	
 	Title:	President and Chief Executive Officer	

[Signature page to Certificate of Amendment to Fourth Amended and Restated
Certificate of Incorporation]

Exhibit 3.2
 
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF
SIENTRA, INC.

Sientra, Inc., a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:
 
FIRST:         The name of this corporation is Sientra, Inc.
 
SECOND:    The corporation’s Certificate of Incorporation was originally filed with the Secretary of State of the State of Delaware on August 29, 2003.
 
THIRD:        The Certificate of Incorporation of said corporation shall be amended and restated in its entirety to read in full as follows:
 
ARTICLE I.
 
NAME
 
The name of this corporation is Sientra, Inc. (the “ Company ”).
 
ARTICLE II.
 
REGISTERED OFFICE AND AGENT
 
The address of the registered office of the Company in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington, County of New Castle, 19808.  The name of the registered agent of the Company in the State of Delaware at such address is Corporation Service Company.
 
ARTICLE III.
 
PURPOSE
 
The purpose of the Company 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 ”) or any successor statute.
 
ARTICLE IV.
 
CAPITAL STOCK
 
A.        The Company is authorized to issue two classes of stock to be designated, respectively, “ Common Stock ” and “ Preferred Stock .”  The total number of shares of all classes of stock which the Company is authorized to issue is 210,000,000.  200,000,000 shares shall be Common Stock, each having a par value of $0.01.  10,000,000 shares shall be Preferred Stock, each having a par value of $0.01.
 
1. 

 
B.        The Preferred Stock may be issued from time to time by the Company for such consideration as may be fixed by the Board of Directors of the Company (the “ Board of Directors ”).  The Board of Directors is hereby expressly authorized to provide for the issue of any or all of the unissued and undesignated shares of the Preferred Stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designation, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, of such series of Preferred Stock as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such shares and as may be permitted by the DGCL.  The powers, designation, preferences and relative, participating, optional or other special rights, and the qualifications, limitations or restrictions thereof, of each series of Preferred Stock, if any, may differ from those of any and all other series at any time outstanding.  The Board of Directors is also expressly authorized to increase or decrease the number of shares of any series subsequent to the issuance of shares of that series, but not below the number of shares of such series then outstanding.  In case the number of shares of any series shall be decreased in accordance with the foregoing sentence, the shares constituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.  The number of authorized shares of Preferred Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the voting power of the stock of the Company entitled to vote thereon, without a separate vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such holders is required pursuant to the terms of any certificate of designation filed with respect to any series of Preferred Stock.
 
C.        Each outstanding share of Common Stock shall entitle the holder thereof to one vote on each matter properly submitted to the stockholders of the Company 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 Amended and Restated Certificate of Incorporation (this “ Certificate of Incorporation ”) (including any certificate of designation filed with respect 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 of Preferred Stock are entitled, either separately or together as a class with the holders of one or more other series of Preferred Stock, to vote thereon pursuant to this Certificate of Incorporation (including any certificate of designation filed with respect to any series of Preferred Stock) or pursuant to the DGCL.
 
ARTICLE V.
 
BOARD OF DIRECTORS
 
For the management of the business and for the conduct of the affairs of the Company, and in further definition, limitation and regulation of the powers of the Company, of its directors and of its stockholders or any class thereof, as the case may be, it is further provided that:
 
A.        The management of the business and the conduct of the affairs of the Company shall be vested in its Board of Directors.  The number of directors that shall constitute the Board of Directors shall be fixed from time to time exclusively by resolutions adopted by a majority of the authorized number of directors constituting the Board of Directors.
 
2. 

 
B.        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 into three classes designated as Class I, Class II and Class III, respectively.  Each class shall consist, as nearly as possible, of one-third of the total number of such directors.  The Board of Directors is authorized to assign members of the Board of Directors already in office to such classes at the time the classification becomes effective. At the first annual meeting of stockholders following the date the Common Stock is first publicly traded (the “ IPO Date ”), the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years.  At the second annual meeting of stockholders following the IPO Date, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years.  At the third annual meeting of stockholders following the IPO Date, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years.  At each succeeding annual meeting of stockholders, successors to the directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.
 
Notwithstanding the foregoing provisions of this section, e ach director shall serve until his or her successor is duly elected and qualified or until his or her death, resignation, disqualification or removal from office.  If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any such additional director of any class elected to fill a newly created directorship resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the number of directors remove or shorten the term of any incumbent director.
 
C.        Subject to the rights of any series of Preferred Stock that may be designated from time to time to elect additional directors under specified circumstances, neither the Board of Directors nor any individual director may be removed without cause.  Subject to any limitation imposed by law, any individual director or directors may be removed only for cause and only by the affirmative vote of the holders of at least 66 2/3% of the voting power of all then-outstanding shares of capital stock of the Company entitled to vote generally at an election of directors, voting together as a single class.
 
D.        Subject to the rights of the holders of any series of Preferred Stock that may be designated from time to time, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors, shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by the stockholders, except as otherwise provided by law, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, and not by the stockholders.  Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified.
 
E.        Subject to the rights of the holders of any series of Preferred Stock that may be designated from time to time, the Board of Directors is expressly empowered to adopt, amend or repeal the Amended and Restated Bylaws of the Company (the “ Bylaws ”).  Any adoption,
 
3. 

 
amendment or repeal of the Bylaws by the Board of Directors shall require the approval of a majority of the authorized number of directors.   The stockholders shall also have power to adopt, amend or repeal the Bylaws, subject to any restrictions which may be set forth in this Certificate of Incorporation (including any certificate of designation that may be filed from time to time); provided, however, that, in addition to any vote of the holders of any class or series of stock of the Company required by law or by this Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of the capital stock of the Company entitled to vote generally at an election of directors, voting together as a single class.
 
F.         The directors of the Company need not be elected by written ballot unless the Bylaws so provide.
 
G.        No action shall be taken by the stockholders of the Company except at an annual or special meeting of stockholders called in accordance with the Bylaws.  No action shall be taken by the stockholders of the Company by written consent or electronic transmission.
 
H.        Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of the stockholders of the Company shall be given in the manner provided in the Bylaws.
 
ARTICLE VI.
 
LIMITATION OF DIRECTOR LIABILITY
 
A.        The liability of a director of the Company for monetary damages shall be eliminated to the fullest extent under applicable law.  If the DGCL is amended to authorize corporate action further eliminating or limiting the personal liability of directors, then the liability of a director of the Company shall be eliminated to the fullest extent permitted by the DGCL, as so amended.
 
B.        Neither the amendment nor repeal of this Article VI, nor the adoption of any provision of this Certificate of Incorporation, nor, to the fullest extent permitted by the DGCL, any modification of law shall eliminate, reduce or otherwise adversely affect any right or protection of a current or former director of the Company existing at the time of such amendment, repeal, adoption or modification.
 
ARTICLE VII.
 
AMENDMENT OF THE CERTIFICATE OF INCORPORATION
 
A.        The Company reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in whole or in part, in the manner now or hereafter prescribed by statute, except as provided in Section B of this Article VII, and all rights conferred upon the stockholders herein are granted subject to this reservation.
 
B.        Notwithstanding any other provisions of this Certificate of Incorporation or any provision of law which might otherwise permit a lesser vote or no vote, but in addition to any
 
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affirmative vote of the holders of any particular class or series of the Company required by law or by this Certificate of Incorporation or any certificate of designation filed with respect to a series of Preferred Stock that may be designated from time to time, subject to the rights of the holders of any series of Preferred Stock, the affirmative vote of the holders of at least 66 2/3% of the voting power of all of the then-outstanding shares of capital stock of the Company entitled to vote generally at an election of directors, voting together as a single class, shall be required to amend, alter, change or repeal Articles V, VI or VII of this Certificate of Incorporation.
 
ARTICLE VIII.
 
MISCELLANEOUS
 
A.        If any provision or provisions of this Certificate of Incorporation shall be held to be invalid, illegal or unenforceable as applied to any circumstance for any reason whatsoever: (i) the validity, legality and enforceability of such provisions in any other circumstance and of the remaining provisions of this Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid illegal or unenforceable) shall not in any way be affected or impaired thereby and (ii) to the fullest extent possible, the provisions of this Certificate of Incorporation (including, without limitation, each portion of any paragraph of this Certificate of Incorporation containing any such provision held to be invalid, illegal or unenforceable) shall be construed so as to permit the Company to protect its directors, officers, employees and agents from personal liability in respect of their good faith service or for the benefit of the Company to the fullest extent permitted by law.
 
B.        Unless the Company consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Company, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director or officer of the Company to the Company or the Company’s stockholders, creditors or other constituents, (iii) any action asserting a claim against the Company or any director or officer of the Company arising pursuant to any provision of the DGCL or this Certificate of Incorporation or the Bylaws (as either may be amended and/or restated from time to time), or (iv) any action asserting a claim against the Company or any director or officer of the Company governed by the internal affairs doctrine, in each such case subject to said court having personal jurisdiction over the indispensable parties named as defendants therein; provided, that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state court sitting in the State of Delaware.  To the fullest extent permitted by law, any person purchasing or otherwise acquiring any interest in shares of capital stock of the Company shall be deemed to have notice of and consents to the provisions of this Article VIII(B).
 
* * * *
 
FOURTH:    This Certificate of Incorporation has been duly adopted and approved by the Board of Directors.
 
FIFTH:         This Certificate of Incorporation has been duly adopted and approved by
 
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written consent of the stockholders in accordance with sections 228, 242 and 245 of the DGCL and written notice of such action has been given as provided in section 228 of the DGCL.
 
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IN WITNESS WHEREOF , Sientra, Inc. has caused this Amended and Restated Certificate of Incorporation to be signed by this ____ day of _________, 2014.

 	SIENTRA, INC.	

 	By:	 	
 	Name:	
 	Title:	

Exhibit 3.4
 
AMENDED AND RESTATED 
BYLAWS
OF
SIENTRA, INC.
 
ARTICLE I
 
OFFICES
 
Section 1.                                Registered Office.   The registered office of the corporation in the State of Delaware shall be in the City of Wilmington, County of New Castle.
 
Section 2.                                Other Offices.   The corporation shall also have and maintain an office or principal place of business at such place as may be fixed by the corporation’s Board of Directors (the “ Board of Directors ”), and may also have offices at such other places, both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the corporation may require.
 
ARTICLE II
 
CORPORATE SEAL
 
Section 3.                                Corporate Seal.   The Board of Directors may adopt a corporate seal.  The corporate seal shall consist of a die bearing the name of the corporation and the inscription, “Corporate Seal-Delaware.”  Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.
 
ARTICLE III
 
STOCKHOLDERS’ MEETINGS
 
Section 4.                                Place of Meetings.   Meetings of the stockholders of the corporation may be held at such place, either within or without the State of Delaware, as may be determined from time to time by the Board of Directors. The Board of Directors may, in its sole discretion, determine that the meeting shall not be held at any place, but may instead be held solely by means of remote communication as provided under the General Corporation Law of the State of Delaware (the “ DGCL ”).
 
Section 5.                                Annual Meetings.
 
(a)                               The annual meeting of the stockholders of the corporation, for the purpose of election of directors and for such other business as may properly come before it, shall be held on such date and at such time as may be designated from time to time by the Board of Directors.  Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders:  (i) pursuant to the corporation’s notice of meeting of stockholders (with respect to business other than nominations); (ii) brought specifically by or at the direction of the Board of

 
Directors; or (iii) by any stockholder of the corporation who was a stockholder of record at the time of giving the stockholder’s notice provided for in Section 5(b) of these Amended and Restated Bylaws (the “ Bylaws ”), who is entitled to vote at the meeting and who complied with the notice procedures set forth in this Section 5. For the avoidance of doubt, clause (iii) above shall be the exclusive means for a stockholder to make nominations and submit other business (other than matters properly included in the corporation’s notice of meeting of stockholders and proxy statement under Rule 14a-8 under the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (the “ 1934 Act ”)) before an annual meeting of stockholders.
 
(b)                              At an annual meeting of the stockholders, only such business shall be conducted as is a proper matter for stockholder action under Delaware law and as shall have been properly brought before the meeting.
 
i.                                                   For nominations for the election to the Board of Directors to be properly brought before an annual meeting by a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, the stockholder must deliver written notice to the Secretary at the principal executive offices of the corporation on a timely basis as set forth in Section 5(b)(iii) of these Bylaws and must update and supplement such written notice on a timely basis as set forth in Section 5(c) of these Bylaws. Such stockholder’s notice shall set forth:  (A) as to each nominee such stockholder proposes to nominate at the meeting: (1) the name, age, business address and residence address of such nominee; (2) the principal occupation or employment of such nominee; (3) the class and number of shares of each class of capital stock of the corporation which are owned of record and beneficially by such nominee; (4) the date or dates on which such shares were acquired and the investment intent of such acquisition; (5) with respect to each nominee for election or re-election to the Board of Directors, include a completed and signed questionnaire, representation and agreement required by Section 5(e) of these Bylaws; and (6) such other information concerning such nominee as would be required to be disclosed in a proxy statement soliciting proxies for the election of such nominee as a director in an election contest (even if an election contest is not involved), or that is otherwise required to be disclosed pursuant to Section 14 of the 1934 Act and the rules and regulations promulgated thereunder (including such person’s written consent to being named as a nominee and to serving as a director if elected); and (B) the information required by Section 5(b)(iv) of these Bylaws. The corporation may require any proposed nominee to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as an independent director of the corporation or that could be material to a reasonable stockholder’s understanding of the independence, or lack thereof, of such proposed nominee.
 
ii.                                               Other than proposals sought to be included in the corporation’s proxy materials pursuant to Rule 14(a)-8 under the 1934 Act, for business other than nominations for the election to the Board of Directors to be properly brought before an annual  meeting by a stockholder pursuant to clause (iii) of Section 5(a) of these Bylaws, the stockholder must deliver written notice to the Secretary at the principal executive offices of the corporation on a timely basis as set forth in Section 5(b)(iii) of these Bylaws, and must update and supplement such written notice on a timely basis as set forth in Section 5(c) of these Bylaws.  Such stockholder’s notice shall set forth:  (A) as to each matter such 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
 
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(including any anticipated benefit of such business to any Proponent (as defined below) other than solely as a result of its ownership of the corporation’s capital stock, that is material to any Proponent individually, or to the Proponents in the aggregate) in such business of any Proponent; and (B) the information required by Section 5(b)(iv) of these Bylaws.
 
iii.                                           To be timely, the written notice required by Section 5(b)(i) or 5(b)(ii) of these Bylaws must be received by the Secretary at the principal executive offices of the corporation not later than the close of business on the 90 th  day nor earlier than the close of business on the 120 th  day prior to the first anniversary of the preceding year’s annual meeting; provided, however, that, subject to the last sentence of this Section 5(b)(iii), in the event that the date of the annual meeting is advanced more than 30 days prior to or delayed by more than 30 days after the anniversary of the preceding year’s annual meeting, notice by the stockholder to be timely must be so received not earlier than the close of business on the 120 th  day prior to such annual meeting and not later than the close of business on the later of the 90 th  day prior to such annual meeting or the 10 th  day following the day on which public announcement of the date of such meeting is first made.  In no event shall an adjournment or a postponement of an annual meeting for which notice has been given, or the public announcement thereof has been made, commence a new time period for the giving of a stockholder’s notice as described above.
 
iv.                                           The written notice required by Section 5(b)(i) or 5(b)(ii) of these Bylaws shall also set forth, as of the date of the notice and as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (each, a “ Proponent ” and collectively, the “ Proponents ”): (A) the name and address of each Proponent, as they appear on the corporation’s books; (B) the class, series and number of shares of the corporation that are owned beneficially and of record by each Proponent; (C) a description of any agreement, arrangement or understanding (whether oral or in writing) with respect to such nomination or proposal between or among any Proponent and any of its affiliates or associates, and any others (including their names) acting in concert, or otherwise under the agreement, arrangement or understanding, with any of the foregoing; (D) a representation that the Proponents are holders of record or beneficial owners, as the case may be, of shares of the corporation entitled to vote at the meeting and intend to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice (with respect to a notice under Section 5(b)(i) of these Bylaws) or to propose the business that is specified in the notice (with respect to a notice under Section 5(b)(ii) of these Bylaws); (E) a representation as to whether the Proponents intend to deliver a proxy statement and form of proxy to holders of a sufficient number of holders of the corporation’s voting shares to elect such nominee or nominees (with respect to a notice under Section 5(b)(i) of these Bylaws) or to carry such proposal (with respect to a notice under Section 5(b)(ii) of these Bylaws); (F) to the extent known by any Proponent, the name and address of any other stockholder supporting the proposal on the date of such stockholder’s notice; and (G) a description of all Derivative Transactions (as defined below) by each Proponent during the previous 12-month period, including the date of the transactions and the class, series and number of securities involved in, and the material economic terms of, such Derivative Transactions.
 
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For purposes of Sections 5 and 6 of these Bylaws, a “ Derivative Transaction ” means any agreement, arrangement, interest or understanding entered into by, or on behalf or for the benefit of, any Proponent or any of its affiliates or associates, whether record or beneficial:
 
(w)                           the value of which is derived in whole or in part from the value of any class or series of shares or other securities of the corporation;
 
(x)                               which otherwise provides any direct or indirect opportunity to gain or share in any gain derived from a change in the value of securities of the corporation;
 
(y)                               the effect or intent of which is to mitigate loss, manage risk or benefit of security value or price changes; or
 
(z)                                which provides the right to vote or increase or decrease the voting power of, such Proponent, or any of its affiliates or associates, with respect to any securities of the corporation,
 
which agreement, arrangement, interest or understanding may include, without limitation, any option, warrant, debt position, note, bond, convertible security, swap, stock appreciation right, short position, profit interest, hedge, right to dividends, voting agreement, performance-related fee or arrangement to borrow or lend shares (whether or not subject to payment, settlement, exercise or conversion in any such class or series), and any proportionate interest of such Proponent in the securities of the corporation held by any general or limited partnership, or any limited liability company, of which such Proponent is, directly or indirectly, a general partner or managing member.
 
(c)                                A stockholder providing written notice required by Section 5(b)(i) or (ii) of these Bylaws shall update and supplement such notice in writing, if necessary, so that the information provided or required to be provided in such notice is true and correct in all material respects as of (i) the record date for the meeting and (ii) the date that is five business days prior to the meeting and, in the event of any adjournment or postponement thereof, five business days prior to such adjourned or postponed meeting.  In the case of an update and supplement pursuant to clause (i) of this Section 5(c), such update and supplement shall be received by the Secretary at the principal executive offices of the corporation not later than five business days after the record date for the meeting.  In the case of an update and supplement pursuant to clause (ii) of this Section 5(c), such update and supplement shall be received by the Secretary at the principal executive offices of the corporation not later than two business days prior to the date for the meeting, and, in the event of any adjournment or postponement thereof, two business days prior to such adjourned or postponed meeting.
 
(d)                              Notwithstanding anything in Section 5(b)(iii) of these Bylaws to the contrary, in the event that the number of directors in an Expiring Class (as defined below) is increased and there is no public announcement of the appointment of a director to such class, or, if no appointment was made, of the vacancy in such class, made by the corporation at least 10 days before the last day a stockholder may deliver a notice of nomination in accordance with Section 5(b)(iii) of these Bylaws, a stockholder’s notice required by this Section 5 and which complies with the requirements in Section 5(b)(i) of these Bylaws, other than the timing
 
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requirements in Section 5(b)(iii) of these Bylaws, shall also be considered timely, but only with respect to nominees for any new positions in such Expiring Class created by such increase, if it shall be received by the Secretary at the principal executive offices of the corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the corporation.  For purposes of this Section 5, an “ Expiring Class ” shall mean a class of directors whose term shall expire at the next annual meeting of stockholders.
 
(e)                                To be eligible to be a nominee for election or re-election as a director of the corporation pursuant to a nomination under clause (iii) of Section 5(a) of these Bylaws, such proposed nominee or a person on such proposed nominee’s behalf must deliver (in accordance with the time periods prescribed for delivery of notice under Section 5(b)(iii) or 5(d) of these Bylaws, as applicable) to the Secretary at the principal executive offices of the corporation a written questionnaire with respect to the background and qualification of such proposed nominee and the background of any other person or entity on whose behalf the nomination is being made (which questionnaire shall be provided by the Secretary upon written request) and a written representation and agreement (in the form provided by the Secretary upon written request) that such person: (i) is not and will not become a party to (A) any agreement, arrangement or understanding with, and has not given any commitment or assurance to, any person or entity as to how such person, if elected as a director of the corporation, will act or vote on any issue or question (a “ Voting Commitment ”) that has not been disclosed to the corporation in the questionnaire or (B) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the corporation, with such person’s fiduciary duties under applicable law; (ii) is not and will not become a party to any agreement, arrangement or understanding with any person or entity other than the corporation with respect to any direct or indirect compensation, reimbursement or indemnification in connection with service or action as a director of the corporation that has not been disclosed therein; and (iii) in such person’s individual capacity and on behalf of any person or entity on whose behalf the nomination is being made, would be in compliance, if elected as a director of the corporation, and will comply with, all applicable publicly disclosed corporate governance, conflict of interest, confidentiality and stock ownership and trading policies and guidelines of the corporation.
 
(f)                                 A person shall not be eligible for election or re-election as a director unless the person is nominated either in accordance with clause (ii) of Section 5(a) of these Bylaws, or in accordance with clause (iii) of Section 5(a) of these Bylaws.  Except as otherwise required by law, the chairman 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 these Bylaws and, if any proposed nomination or business is not in compliance with these Bylaws, or the Proponent does not act in accordance with the representations in Sections 5(b)(iv)(D) and 5(b)(iv)(E) of these Bylaws, to declare that such proposal or nomination shall not be presented for stockholder action at the meeting and shall be disregarded, notwithstanding that proxies in respect of such nominations or such business may have been solicited or received.
 
(g)                               Notwithstanding the foregoing provisions of this Section 5, in order to include information with respect to a stockholder proposal in the proxy statement and form of proxy for a stockholders’ meeting, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations thereunder. Nothing in these Bylaws
 
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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 1934 Act; provided, however, that any references in these Bylaws to the 1934 Act or the rules and regulations thereunder are not intended to and shall not limit the requirements applicable to proposals and/or nominations to be considered pursuant to Section 5(a)(iii) of these Bylaws.
 
(h)                              For purposes of Sections 5 and 6 of these Bylaws,
 
i.                                                   “ public announcement ” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the 1934 Act; and
 
ii.                                               “ affiliates ” and “ associates ” shall have the meanings set forth in Rule 405 under the Securities Act of 1933, as amended.
 
Section 6.                                Special Meetings.
 
(a)                               Special meetings of the stockholders of the corporation may be called, for any purpose as is a proper matter for stockholder action under Delaware law, by (i) the Chairman of the Board of Directors, (ii) the Chief Executive Officer, or (iii) the Board of Directors pursuant to a resolution adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption).
 
(b)                              The Board of Directors shall determine the time and place, if any, of such special meeting. Upon determination of the time and place, if any, of the meeting, the Secretary shall cause a notice of meeting to be given to the stockholders entitled to vote, in accordance with the provisions of Section 7 of these Bylaws. No business may be transacted at such special meeting otherwise than specified in the notice of meeting.
 
(c)                                Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the corporation who is a stockholder of record at the time of giving notice provided for in this paragraph, who shall be entitled to vote at the meeting and who delivers written notice to the Secretary of the corporation setting forth the information required by Section 5(b)(i) of these Bylaws. In the event the corporation calls a special meeting of stockholders for the purpose of electing one or more directors to the Board of Directors, any such stockholder of record 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 written notice setting forth the information required by Section 5(b)(i) of these Bylaws shall be received by the Secretary at the principal executive offices of the corporation not later than the close of business on the later of the 90th day prior to such meeting or the 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 of Directors to be elected at such meeting.  The stockholder shall also update and supplement such information as required under Section 5(c) of these Bylaws.  In no event shall an adjournment or a postponement of a special
 
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meeting for which notice has been given, or the public announcement thereof has been made, commence a new time period for the giving of a stockholder’s notice as described above.
 
(d)                              Notwithstanding the foregoing provisions of this Section 6, a stockholder must also comply with all applicable requirements of the 1934 Act and the rules and regulations thereunder with respect to matters set forth in this Section 6. Nothing in these Bylaws 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 1934 Act; provided, however, that any references in these Bylaws to the 1934 Act or the rules and regulations thereunder are not intended to and shall not limit the requirements applicable to nominations for the election to the Board of Directors to be considered pursuant to Section 6(c) of these Bylaws.
 
Section 7.                                Notice of Meetings.   Except as otherwise provided by law, notice, given in writing or by electronic transmission, of each meeting of stockholders shall be given not less than 10 nor more than 60 days before the date of the meeting to each stockholder entitled to vote at such meeting, such notice to specify the place, if any, date and hour, in the case of special meetings, the purpose or purposes of the meeting, 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 any such meeting.  If mailed, notice is deemed given when deposited in the United States mail, postage prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the corporation.  If sent via electronic transmission, notice is deemed given as of the sending time recorded at the time of transmission.  Notice of the time, place, if any, and purpose of any meeting of stockholders may be waived in writing, signed by the person entitled to notice thereof, or by electronic transmission by such person, either before or after such meeting, and will be waived by any stockholder by his attendance thereat in person, by remote communication, if applicable, or by proxy, except when the stockholder 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.  Any stockholder so waiving notice of such meeting shall be bound by the proceedings of any such meeting in all respects as if due notice thereof had been given.
 
Section 8.                                Quorum.   At all meetings of stockholders, except where otherwise provided by statute or by the corporation’s Amended and Restated Certificate of Incorporation (the “ Certificate of Incorporation ”), or by these Bylaws, the presence, in person, by remote communication, if applicable, or by proxy duly authorized, of the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum for the transaction of business.  In the absence of a quorum, any meeting of stockholders may be adjourned, from time to time, either by the chairman of the meeting or by vote of the holders of a majority of the shares represented thereat, but no other business shall be transacted at such meeting.  The stockholders present at a duly called or convened meeting, at which a quorum is present, may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum.  Except as otherwise provided by statute or by applicable stock exchange rules, or by the Certificate of Incorporation or these Bylaws, in all matters other than the election of directors, the affirmative vote of the majority of shares present in person, by remote communication, if applicable, or represented by proxy at the meeting and entitled to vote generally on the subject matter shall be the act of the stockholders.  Except as otherwise provided by statute, the Certificate of Incorporation or these Bylaws, directors shall be
 
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elected by a plurality of the votes of the shares present in person, by remote communication, if applicable, or represented by proxy at the meeting and entitled to vote generally on the election of directors.  Where a separate vote by a class or classes or series is required, except where otherwise provided by the statute or by the Certificate of Incorporation or these Bylaws, a majority of the outstanding shares of such class or classes or series, present in person, by remote communication, if applicable, or represented by proxy duly authorized, shall constitute a quorum entitled to take action with respect to that vote on that matter. Except where otherwise provided by statute or by the Certificate of Incorporation or these Bylaws, the affirmative vote of the majority (plurality, in the case of the election of directors) of shares of such class or classes or series present in person, by remote communication, if applicable, or represented by proxy at the meeting shall be the act of such class or classes or series.
 
Section 9.                                Adjournment and Notice of Adjourned Meetings.   Any meeting of stockholders, whether annual or special, may be adjourned from time to time either by the chairman of the meeting or by the vote of a majority of the shares present in person, by remote communication, if applicable, or represented by proxy at the meeting.  When a meeting is adjourned to another time or place, if any, notice need not be given of the adjourned meeting if the time and place, if any, thereof are announced at the meeting at which the adjournment is taken.  At the adjourned meeting, the corporation may transact any business which might have been transacted at the original meeting.  If the adjournment is for more than 30 days or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
 
Section 10.                        Voting Rights.   For the purpose of determining those stockholders entitled to vote at any meeting of the stockholders, except as otherwise provided by law, only persons in whose names shares stand on the stock records of the corporation on the record date, as provided in Section 12 of these Bylaws, shall be entitled to vote at any meeting of stockholders.  Every person entitled to vote shall have the right to do so either in person, by remote communication, if applicable, or by an agent or agents authorized by a proxy granted in accordance with Delaware law.  An agent so appointed need not be a stockholder.  No proxy shall be voted after three years from its date of creation unless the proxy provides for a longer period.
 
Section 11.                        Joint Owners of Stock.   If shares or other securities having voting power stand of record in the names of two or more persons, whether fiduciaries, members of a partnership, joint tenants, tenants in common, tenants by the entirety, or otherwise, or if two or more persons have the same fiduciary relationship respecting the same shares, unless the Secretary is given written notice to the contrary and is furnished with a copy of the instrument or order appointing them or creating the relationship wherein it is so provided, their acts with respect to voting shall have the following effect: (a) if only one votes, his act binds all; (b) if more than one votes, the act of the majority so voting binds all; or (c) if more than one votes, but the vote is evenly split on any particular matter, each faction may vote the securities in question proportionally, or may apply to the Delaware Court of Chancery for relief as provided in the DGCL, Section 217(b).  If the instrument filed with the Secretary shows that any such tenancy is held in unequal interests, a majority or even-split for the purpose of clause (c) of this Section 11 shall be a majority or even-split in interest.
 
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Section 12.                        List of Stockholders.   The Secretary shall prepare and make, at least 10 days before every meeting of stockholders, a complete list of the stockholders entitled to vote at said meeting, arranged in alphabetical order, showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, (a) on a reasonably accessible electronic network, provided that the information required to gain access to such list is provided with the notice of the meeting, or (b) during ordinary business hours, at the principal place of business of the corporation.  In the event that the corporation determines to make the list available on an electronic network, the corporation may take reasonable steps to ensure that such information is available only to stockholders of the corporation.  The list shall be open to examination of any stockholder during the time of the meeting as provided by law.
 
Section 13.                        Action Without Meeting.   No action shall be taken by the stockholders except at an annual or special meeting of stockholders called in accordance with these Bylaws, and no action shall be taken by the stockholders by written consent or electronic transmission.
 
Section 14.                        Organization.
 
(a)                               At every meeting of stockholders, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the President, or, if the President is absent, a chairman of the meeting chosen by a majority in interest of the stockholders entitled to vote, present in person or by proxy, shall act as chairman.  The Secretary, or, in his or her absence, an Assistant Secretary directed to do so by the President, shall act as secretary of the meeting.
 
(b)                              The Board of Directors of the corporation shall be entitled to make such rules or regulations for the conduct of meetings of stockholders as it shall deem necessary, appropriate or convenient.  Subject to such rules and regulations of the Board of Directors, if any, the chairman of the meeting shall have the right and authority to prescribe such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are necessary, appropriate or convenient for the proper conduct of the meeting, including, without limitation, establishing an agenda or order of business for the meeting, rules and procedures for maintaining order at the meeting and the safety of those present, limitations on participation in such meeting to stockholders of record of the corporation and their duly authorized and constituted proxies and such other persons as the chairman shall permit, restrictions on entry to the meeting after the time fixed for the commencement thereof, limitations on the time allotted to questions or comments by participants and regulation of the opening and closing of the polls for balloting on matters which are to be voted on by ballot.  The date and time of the opening and closing of the polls for each matter upon which the stockholders will vote at the meeting shall be announced at the meeting.  Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with rules of parliamentary procedure.
 
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ARTICLE IV
 
DIRECTORS
 
Section 15.                        Number and Term of Office.   The authorized number of directors of the corporation shall be fixed in accordance with the Certificate of Incorporation.  Directors need not be stockholders unless so required by the Certificate of Incorporation.  If for any cause, the directors shall not have been elected at an annual meeting, they may be elected as soon thereafter as convenient at a special meeting of the stockholders called for that purpose in the manner provided in these Bylaws.
 
Section 16.                        Powers.   The powers of the corporation shall be exercised, its business conducted and its property controlled by the Board of Directors, except as may be otherwise provided by statute or by the Certificate of Incorporation.
 
Section 17.                        Classes of Directors.
 
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 into three classes designated as Class I, Class II and Class III, respectively.  Each class shall consist, as nearly as possible, of one-third of the total number of such directors.  Initially, directors shall be assigned to each class in accordance with a resolution or resolutions adopted by the Board of Directors.  At the first annual meeting of stockholders following the date the Common Stock is first publicly traded (the “ IPO Date ”), the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three years.  At the second annual meeting of stockholders following such IPO Date, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three years.  At the third annual meeting of stockholders following such IPO Date, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three years.  At each succeeding annual meeting of stockholders, successors to the directors shall be elected for a full term of three years to succeed the directors of the class whose terms expire at such annual meeting.
 
Notwithstanding the foregoing provisions of this Section 17, each director shall serve until his successor is duly elected and qualified or until his earlier death, resignation, disqualification or removal from office.  If the number of directors is changed, any increase or decrease shall be apportioned among the classes so as to maintain the number of directors in each class as nearly equal as possible, and any such additional director of any class elected to fill a newly created directorship resulting from an increase in such class shall hold office for a term that shall coincide with the remaining term of that class, but in no case shall a decrease in the number of directors remove or shorten the term of any incumbent director.
 
Section 18.                        Vacancies.
 
(a)                               Unless otherwise provided in the Certificate of Incorporation, and subject to the rights of the holders of any series of Preferred Stock, any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other causes and any newly created directorships resulting from any increase in the number of directors shall, unless
 
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the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled only by the affirmative vote of a majority of the directors then in office, even though less than a quorum of the Board of Directors, or by a sole remaining director, and not by the stockholders, provided, however , that whenever the holders of any class or classes of stock or series thereof are entitled to elect one or more directors by the provisions of the Certificate of Incorporation, vacancies and newly created directorships of such class or classes or series shall, unless the Board of Directors determines by resolution that any such vacancies or newly created directorships shall be filled by stockholders, be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected, and not by the stockholders.  Any director elected in accordance with the preceding sentence shall hold office for the remainder of the full term of the director for which the vacancy was created or occurred and until such director’s successor shall have been elected and qualified.  A vacancy in the Board of Directors shall be deemed to exist under this Bylaw in the case of the death, removal or resignation of any director.
 
Section 19.                        Resignation.   Any director may resign at any time by delivering his or her notice in writing or by electronic transmission to the Secretary, such resignation to specify whether it will be effective at a particular time.  If no such specification is made, it shall be deemed effective at the time of delivery to the Secretary.  When one or more directors shall resign from the Board of Directors, effective at a future date, a majority of the directors then in office, including those who have so resigned, shall have power to fill such vacancy or vacancies, the vote thereon to take effect when such resignation or resignations shall become effective, and each director so chosen shall hold office for the unexpired portion of the term of the director whose place shall be vacated and until his successor shall have been duly elected and qualified.
 
Section 20.                        Removal.
 
(a)                               Subject to the rights of any series of Preferred Stock to elect additional directors under specified circumstances, neither the Board of Directors nor any individual director may be removed without cause.
 
(b)                              Subject to any limitation imposed by law, any individual director or directors may be removed only for cause and only by the affirmative vote of the holders of at least 66 2/3% of the voting power of all then outstanding shares of capital stock of the corporation entitled to vote generally at an election of directors.
 
Section 21.                        Duties of Chairman of the Board of Directors.   The Chairman of the Board of Directors, when present, shall preside at all meetings of the stockholders and the Board of Directors.  The Chairman of the Board of Directors shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.
 
Section 22.                        Meetings.
 
(a)                               Regular Meetings.   Unless otherwise restricted by the Certificate of Incorporation, regular meetings of the Board of Directors may be held at any time or date and at any place within or without the State of Delaware which has been designated by the Board of
 
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Directors and publicized among all directors, either orally or in writing, by telephone, including a voice-messaging system or other system designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means.  No further notice shall be required for regular meetings of the Board of Directors.
 
(b)                              Special Meetings.  Unless otherwise restricted by the Certificate of Incorporation, special meetings of the Board of Directors may be held at any time and place within or without the State of Delaware whenever called by the Chairman of the Board, the Chief Executive Officer or a majority of the authorized number of directors.
 
(c)                                Meetings by Electronic Communications Equipment.  Any member of the Board of Directors, or of any committee thereof, may participate in a meeting 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 by such means shall constitute presence in person at such meeting.
 
(d)                              Notice of Special Meetings.  Notice of the time and place of all special meetings of the Board of Directors shall be orally or in writing, by telephone, including a voice messaging system or other system or technology designed to record and communicate messages, facsimile, telegraph or telex, or by electronic mail or other electronic means, during normal business hours, at least 24 hours before the date and time of the meeting. If notice is sent by U.S. mail, it shall be sent by first class mail, charges prepaid, at least three days before the date of the meeting.  Notice of any meeting may be waived in writing, or by electronic transmission, at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends the 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.
 
(e)                                Waiver of Notice.  The transaction of all business at any meeting of the Board of Directors, or any committee thereof, however called or noticed, or wherever held, shall be as valid as though it had been transacted at a meeting duly held after regular call and notice, if a quorum be present and if, either before or after the meeting, each of the directors not present who did not receive notice shall sign a written waiver of notice or shall waive notice by electronic transmission.  All such waivers shall be filed with the corporate records or made a part of the minutes of the meeting.
 
Section 23.                        Quorum and Voting.
 
(a)                               Unless the Certificate of Incorporation requires a greater number, and except with respect to questions related to indemnification arising under Section 45 of these Bylaws for which a quorum shall be one-third of the exact number of directors fixed from time to time, a quorum of the Board of Directors shall consist of a majority of the exact number of directors fixed from time to time by the Board of Directors in accordance with the Certificate of Incorporation; provided, however, at any meeting whether a quorum be present or otherwise, a majority of the directors present may adjourn from time to time until the time fixed for the next regular meeting of the Board of Directors, without notice other than by announcement at the meeting.
 
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(b)                              At each meeting of the Board of Directors at which a quorum is present, all questions and business shall be determined by the affirmative vote of a majority of the directors present, unless a different vote be required by law, the Certificate of Incorporation or these Bylaws.
 
Section 24.                        Action without Meeting.   Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all members of the Board of Directors or committee, as the case may be, consent thereto in writing or by electronic transmission, and such writing or writings or transmission or transmissions are filed with the minutes of proceedings of the Board of Directors or committee.  Such filing shall be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic form.
 
Section 25.                        Fees and Compensation.   Directors shall be entitled to such compensation for their services as may be approved by the Board of Directors, including, if so approved, by resolution of the Board of Directors, a fixed sum and expenses of attendance, if any, for attendance at each regular or special meeting of the Board of Directors and at any meeting of a committee of the Board of Directors.  Nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity as an officer, agent, employee, or otherwise and receiving compensation therefor.
 
Section 26.                        Committees.
 
(a)                               Executive Committee.   The Board of Directors may appoint an Executive Committee to consist of one or more members of the Board of Directors.  The Executive Committee, to the extent permitted by law and provided in the resolution of the Board of Directors shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the corporation, and may authorize the seal of the corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to (i) approving or adopting, or recommending to the stockholders, any action or matter (other than the election or removal of directors) expressly required by the DGCL to be submitted to stockholders for approval, or (ii) adopting, amending or repealing any Bylaw of the corporation.
 
(b)                              Other Committees.   The Board of Directors may, from time to time, appoint such other committees as may be permitted by law.  Such other committees appointed by the Board of Directors shall consist of one or more members of the Board of Directors and shall have such powers and perform such duties as may be prescribed by the resolution or resolutions creating such committees, but in no event shall any such committee have the powers denied to the Executive Committee in these Bylaws.
 
(c)                                Term.   The Board of Directors, subject to any requirements of any outstanding series of Preferred Stock and the provisions of subsections (a) or (b) of this Section 26, may at any time increase or decrease the number of members of a committee or terminate the existence of a committee.  The membership of a committee member shall terminate on the date of his death or voluntary resignation from the committee or from the Board of
 
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Directors.  The Board of Directors may at any time for any reason remove any individual committee member and the Board of Directors may fill any committee vacancy created by death, resignation, removal or increase in the number of members of the committee.  The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee, and, in addition, in the absence or disqualification of any member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.
 
(d)                              Meetings.   Unless the Board of Directors shall otherwise provide, regular meetings of the Executive Committee or any other committee appointed pursuant to this Section 26 shall be held at such times and places as are determined by the Board of Directors, or by any such committee, and when notice thereof has been given to each member of such committee, no further notice of such regular meetings need be given thereafter.  Special meetings of any such committee may be held at any place which has been determined from time to time by such committee, and may be called by any director who is a member of such committee, upon notice to the members of such committee of the time and place of such special meeting given in the manner provided for the giving of notice to members of the Board of Directors of the time and place of special meetings of the Board of Directors.  Notice of any special meeting of any committee may be waived in writing or by electronic transmission at any time before or after the meeting and will be waived by any director by attendance thereat, except when the director attends such special 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.  Unless otherwise provided by the Board of Directors in the resolutions authorizing the creation of the committee, a majority of the authorized number of members of any such committee shall constitute a quorum for the transaction of business, and the act of a majority of those present at any meeting at which a quorum is present shall be the act of such committee.
 
Section 27.                        Lead Independent Director.  The Chairman of the Board of Directors, or if the Chairman is not an independent director, one of the independent directors, may be designated by the Board of Directors as lead independent director (“ Lead Independent Director ”) to serve until replaced by the Board of Directors.  The Lead Independent Director will: with the Chairman of the Board of Directors, establish the agenda for regular Board meetings and serve as chairman of Board of Directors meetings in the absence of the Chairman of the Board of Directors; establish the agenda for meetings of the independent directors; coordinate with the committee chairs regarding meeting agendas and informational requirements; preside over meetings of the independent directors; preside over any portions of meetings of the Board of Directors at which the evaluation or compensation of the Chief Executive Officer is presented or discussed; preside over any portions of meetings of the Board of Directors at which the performance of the Board of Directors is presented or discussed; and perform such other duties as may be established or delegated by the Chairman of the Board of Directors .
 
Section 28.                        Organization.   At every meeting of the directors, the Chairman of the Board of Directors, or, if a Chairman has not been appointed or is absent, the Lead Independent Director, or if the Lead Independent Director is absent, the Chief Executive Officer (if a director), or, if a Chief Executive Officer is absent, the President (if a director), or if the
 
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President is absent, the most senior Vice President (if a director), or, in the absence of any such person, a chairman of the meeting chosen by a majority of the directors present, shall preside over the meeting.  The Secretary, or in his absence, any Assistant Secretary or other officer or director directed to do so by the Chairman, shall act as secretary of the meeting.
 
ARTICLE V
 
OFFICERS
 
Section 29.                        Officers Designated.   The officers of the corporation shall include, if and when designated by the Board of Directors, the Chairman of the Board of Directors, the Chief Executive Officer, the President, one or more Vice Presidents, the Secretary, the Chief Financial Officer and the Treasurer.  The Board of Directors may also appoint one or more Assistant Secretaries and Assistant Treasurers and such other officers and agents with such powers and duties as it shall deem necessary.  The Board of Directors may assign such additional titles to one or more of the officers as it shall deem appropriate.  Any one person may hold any number of offices of the corporation at any one time unless specifically prohibited therefrom by law.  The salaries and other compensation of the officers of the corporation shall be fixed by or in the manner designated by the Board of Directors.
 
Section 30.                        Tenure and Duties of Officers.
 
(a)                               General.   All officers shall hold office at the pleasure of the Board of Directors and until their successors shall have been duly elected and qualified, unless sooner removed.  Any officer elected or appointed by the Board of Directors may be removed at any time by the Board of Directors.  If the office of any officer becomes vacant for any reason, the vacancy may be filled by the Board of Directors.
 
(b)                              Duties of Chief Executive Officer.   The Chief Executive Officer shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors or the Lead Independent Director has been appointed and is present.  Unless an officer has been appointed Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation. To the extent that a Chief Executive Officer has been appointed and no President has been appointed, all references in these Bylaws to the President shall be deemed references to the Chief Executive Officer.  The Chief Executive Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.
 
(c)                                Duties of President.   The President shall preside at all meetings of the stockholders and at all meetings of the Board of Directors, unless the Chairman of the Board of Directors, the Lead Independent Director, or the Chief Executive Officer has been appointed and is present.  Unless another officer has been appointed Chief Executive Officer of the corporation, the President shall be the chief executive officer of the corporation and shall, subject to the control of the Board of Directors, have general supervision, direction and control of the business and officers of the corporation.  The President shall perform other duties commonly incident to
 
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the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.
 
(d)                              Duties of Vice Presidents.   The Vice Presidents may assume and perform the duties of the President in the absence or disability of the President or whenever the office of President is vacant.  The Vice Presidents shall perform other duties commonly incident to their office and shall also perform such other duties and have such other powers as the Board of Directors or the Chief Executive Officer, or, if the Chief Executive Officer has not been appointed or is absent, the President shall designate from time to time.
 
(e)                                Duties of Secretary.   The Secretary shall attend all meetings of the stockholders and of the Board of Directors and shall record all acts and proceedings thereof in the minute book of the corporation.  The Secretary shall give notice in conformity with these Bylaws of all meetings of the stockholders and of all meetings of the Board of Directors and any committee thereof requiring notice.  The Secretary shall perform all other duties provided for in these Bylaws and other duties commonly incident to the office and shall also perform such other duties and have such other powers, as the Board of Directors shall designate from time to time.  The President may direct any Assistant Secretary or other officer to assume and perform the duties of the Secretary in the absence or disability of the Secretary, and each Assistant Secretary shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.
 
(f)                                 Duties of Chief Financial Officer.   The Chief Financial Officer shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President.  The Chief Financial Officer, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation.  The Chief Financial Officer shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.  To the extent that a Chief Financial Officer has been appointed and no Treasurer has been appointed, all references in these Bylaws to the Treasurer shall be deemed references to the Chief Financial Officer.  The President may direct the Treasurer, if any, or any Assistant Treasurer, or the Controller or any Assistant Controller to assume and perform the duties of the Chief Financial Officer in the absence or disability of the Chief Financial Officer, and each Treasurer and Assistant Treasurer and each Controller and Assistant Controller shall perform other duties commonly incident to the office and shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.
 
(g)                               Duties of Treasurer.   Unless another officer has been appointed Chief Financial Officer of the corporation, the Treasurer shall be the chief financial officer of the corporation and shall keep or cause to be kept the books of account of the corporation in a thorough and proper manner and shall render statements of the financial affairs of the corporation in such form and as often as required by the Board of Directors or the President, and, subject to the order of the Board of Directors, shall have the custody of all funds and securities of the corporation.  The Treasurer shall perform other duties commonly incident to the office and
 
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shall also perform such other duties and have such other powers as the Board of Directors or the President shall designate from time to time.
 
Section 31.                        Delegation of Authority.   The Board of Directors may from time to time delegate the powers or duties of any officer to any other officer or agent, notwithstanding any provision hereof.
 
Section 32.                        Resignations.   Any officer may resign at any time by giving notice in writing or by electronic transmission to the Board of Directors or to the President or to the Secretary.  Any such resignation shall be effective when received by the person or persons to whom such notice is given, unless a later time is specified therein, in which event the resignation shall become effective at such later time.  Unless otherwise specified in such notice, the acceptance of any such resignation shall not be necessary to make it effective.  Any resignation shall be without prejudice to the rights, if any, of the corporation under any contract with the resigning officer.
 
Section 33.                        Removal.   Any officer may be removed from office at any time, either with or without cause, by the affirmative vote of a majority of the directors in office at the time, or by the unanimous written consent of the directors in office at the time, or by any committee or by the Chief Executive Officer or by other superior officers upon whom such power of removal may have been conferred by the Board of Directors.
 
ARTICLE VI
 
EXECUTION OF CORPORATE INSTRUMENTS AND VOTING OF SECURITIES OWNED BY THE CORPORATION
 
Section 34.                        Execution of Corporate Instruments.   The Board of Directors may, in its discretion, determine the method and designate the signatory officer or officers, or other person or persons, to execute on behalf of the corporation any corporate instrument or document, or to sign on behalf of the corporation the corporate name without limitation, or to enter into contracts on behalf of the corporation, except where otherwise provided by law or these Bylaws, and such execution or signature shall be binding upon the corporation.
 
All checks and drafts drawn on banks or other depositaries on funds to the credit of the corporation or in special accounts of the corporation shall be signed by such person or persons as the Board of Directors shall authorize so to do.
 
Unless authorized or ratified by the Board of Directors or within the agency power of an officer, no officer, agent or employee shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable for any purpose or for any amount.
 
Section 35.                        Voting of Securities Owned by the Corporation.   All stock and other securities of other corporations owned or held by the corporation for itself, or for other parties in any capacity, shall be voted, and all proxies with respect thereto shall be executed, by the person authorized so to do by resolution of the Board of Directors, or, in the absence of such
 
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authorization, by the Chairman of the Board of Directors, the Chief Executive Officer, the President, or any Vice President.
 
ARTICLE VII
 
SHARES OF STOCK
 
Section 36.                        Form and Execution of Certificates.   The shares of the corporation shall be represented by certificates, or shall be uncertificated if so provided by resolution or resolutions of the Board of Directors.  Certificates for the shares of stock of the corporation, if any, shall be in such form as is consistent with the Certificate of Incorporation and applicable law.  Every holder of stock represented by certificate in the corporation shall be entitled to have a certificate signed by or in the name of the corporation by the Chairman of the Board of Directors, the Chief Executive Officer, or the President or any Vice President and by the Chief Financial Officer, Treasurer or Assistant Treasurer or the Secretary or Assistant Secretary, certifying the number of shares owned by him in the corporation.  Any or all of the signatures on the certificate may be facsimiles. 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 with the same effect as if he were such officer, transfer agent, or registrar at the date of issue.
 
Section 37.                        Lost Certificates.   A new certificate or certificates shall be issued in place of any certificate or certificates theretofore issued by the corporation alleged to have been lost, stolen, or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen, or destroyed.  The corporation may require, as a condition precedent to the issuance of a new certificate or certificates, the owner of such lost, stolen, or destroyed certificate or certificates, or the owner’s legal representative, to agree to indemnify the corporation in such manner as it shall require or to give the corporation a surety bond in such form and amount as it may direct as indemnity against any claim that may be made against the corporation with respect to the certificate alleged to have been lost, stolen, or destroyed.
 
Section 38.                        Transfers.
 
(a)                               Transfers of record of shares of stock of the corporation shall be made only upon its books by the holders thereof, in person or by attorney duly authorized, and, in the case of stock represented by certificate, upon the surrender of a properly endorsed certificate or certificates for a like number of shares.
 
(b)                              The corporation shall have power to enter into and perform any agreement with any number of stockholders of any one or more classes of stock of the corporation to restrict the transfer of shares of stock of the corporation of any one or more classes owned by such stockholders in any manner not prohibited by the DGCL.
 
Section 39.                        Fixing Record Dates.
 
(a)                               In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the
 
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resolution fixing the record date is adopted by the Board of Directors, and which record date shall, subject to applicable law, not be more than 60 nor less than 10 days before the date of such meeting.  If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which notice is given, or if notice is waived, at the close of business on the day next preceding the day on which the meeting is held.  A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
 
(b)                              In order that the corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights or the stockholders entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall be not more than 60 days prior to such action.  If no record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.
 
Section 40.                        Registered Stockholders.   The corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware.
 
ARTICLE VIII
 
OTHER SECURITIES OF THE CORPORATION
 
Section 41.                        Execution of Other Securities.   All bonds, debentures and other corporate securities of the corporation, other than stock certificates (covered in Section 36 of these Bylaws), may be signed by the Chairman of the Board of Directors, the Chief Executive Officer, President or any Vice President, or such other person as may be authorized by the Board of Directors, and the corporate seal impressed thereon or a facsimile of such seal imprinted thereon and attested by the signature of the Secretary or an Assistant Secretary, or the Chief Financial Officer or Treasurer or an Assistant Treasurer; provided, however, that where any such bond, debenture or other corporate security shall be authenticated by the manual signature, or where permissible facsimile signature, of a trustee under an indenture pursuant to which such bond, debenture or other corporate security shall be issued, the signatures of the persons signing and attesting the corporate seal on such bond, debenture or other corporate security may be the imprinted facsimile of the signatures of such persons.  Interest coupons appertaining to any such bond, debenture or other corporate security, authenticated by a trustee as aforesaid, shall be signed by the Treasurer or an Assistant Treasurer of the corporation or such other person as may be authorized by the Board of Directors, or bear imprinted thereon the facsimile signature of such person.  In case any officer who shall have signed or attested any bond, debenture or other corporate security, or whose facsimile signature shall appear thereon or on any such interest
 
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coupon, shall have ceased to be such officer before the bond, debenture or other corporate security so signed or attested shall have been delivered, such bond, debenture or other corporate security nevertheless may be adopted by the corporation and issued and delivered as though the person who signed the same or whose facsimile signature shall have been used thereon had not ceased to be such officer of the corporation.
 
ARTICLE IX
 
DIVIDENDS
 
Section 42.                        Declaration of Dividends.   Dividends upon the capital stock of the corporation, subject to the provisions of the Certificate of Incorporation and applicable law, if any, may be declared by the Board of Directors pursuant to law at any regular or special meeting.  Dividends may be paid in cash, in property, or in shares of the capital stock, subject to the provisions of the Certificate of Incorporation and applicable law.
 
Section 43.                        Dividend Reserve.   Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the Board of Directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the Board of Directors shall think conducive to the interests of the corporation, and the Board of Directors may modify or abolish any such reserve in the manner in which it was created.
 
ARTICLE X
 
FISCAL YEAR
 
Section 44.                        Fiscal Year.   The fiscal year of the corporation shall be fixed by resolution of the Board of Directors.
 
ARTICLE XI
 
INDEMNIFICATION
 
Section 45.                        Indemnification of Directors, Officers, Employees and Other Agents.
 
(a)                               Directors and Officers. The corporation shall indemnify its directors and officers to the extent not prohibited by the DGCL or any other applicable law; provided, however, that the corporation may modify the extent of such indemnification by individual contracts with its directors and officers; and, provided, further, that the corporation shall not be required to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless (i) such indemnification is expressly required to be made by law, (ii) the proceeding was authorized by the Board of Directors of the corporation, (iii) such indemnification is provided by the corporation, in its sole discretion, pursuant to the powers vested in the corporation under the DGCL or any other applicable law or (iv) such indemnification is required to be made under subsection (d).
 
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(b)                              Employees and Other Agents.   The corporation shall have power to indemnify its employees and other agents as set forth in the DGCL or any other applicable law.  The Board of Directors shall have the power to delegate the determination of whether to indemnify any such employee or other agent to such officers or other persons as the Board of Directors so determines.
 
(c)                                Expenses.   The corporation shall advance to any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a director or officer, of the corporation, or 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, prior to the final disposition of the proceeding, promptly following request therefor, all expenses incurred by any director or officer in connection with such proceeding provided, however, that if the DGCL requires, an advancement of expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such indemnitee, including, without limitation, service to an employee benefit plan) 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 shall ultimately be determined by final judicial decision from which there is no further right to appeal that such indemnitee is not entitled to be indemnified for such expenses under this Section 45 or otherwise.
 
Notwithstanding the foregoing, unless otherwise determined pursuant to paragraph (e) of this Section 45, no advance shall be made by the corporation to an officer of the corporation (except by reason of the fact that such officer is or was a director of the corporation in which event this paragraph shall not apply) in any action, suit or proceeding, whether civil, criminal, administrative or investigative, if a determination is reasonably and promptly made (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 acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation.
 
(d)                              Enforcement.  Without the necessity of entering into an express contract, all rights to indemnification and advances to directors and officers under this Section 45 shall be deemed to be contractual rights and be effective to the same extent and as if provided for in a contract between the corporation and the director or officer.  Any right to indemnification or advances granted by this Section 45 to a director or officer shall be enforceable by or on behalf of the person holding such right in any court of competent jurisdiction if (i) the claim for indemnification or advances is denied, in whole or in part, or (ii) no disposition of such claim is made within 90 days of request therefor.  To the extent permitted by law, the claimant in such enforcement action, if successful in whole or in part, shall be entitled to be paid also the expense of prosecuting the claim.  In connection with any claim for indemnification, the corporation shall be entitled to raise as a defense to any such action that the claimant has not met the standards of conduct that make it permissible under the DGCL or any other applicable law for the corporation to indemnify the claimant for the amount claimed.  In connection with any claim by an officer of
 
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the corporation (except in any action, suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that such officer is or was a director of the corporation) for advances, the corporation shall be entitled to raise a defense as to any such action clear and convincing evidence that such person acted in bad faith or in a manner that such person did not believe to be in or not opposed to the best interests of the corporation, or with respect to any criminal action or proceeding that such person acted without reasonable cause to believe that his conduct was lawful.  Neither the failure of the corporation (including its Board of Directors, independent legal counsel or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because the officer or director has met the applicable standard of conduct set forth in the DGCL or any other applicable law, nor an actual determination by the corporation (including its Board of Directors, independent legal counsel or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that claimant has not met the applicable standard of conduct.  In any suit brought by a director or officer to enforce a right to indemnification or to an advancement of expenses hereunder, the burden of proving that the director or officer is not entitled to be indemnified, or to such advancement of expenses, under this Section 45 or otherwise shall be on the corporation.
 
(e)                                Non-Exclusivity of Rights.  The rights conferred on any person by this Bylaw shall not be exclusive of any other right which such person may have or hereafter acquire under any applicable statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding office.  The corporation is specifically authorized to enter into individual contracts with any or all of its directors, officers, employees or agents respecting indemnification and advances, to the fullest extent not prohibited by the DGCL, or by any other applicable law.
 
(f)                                 Survival of Rights.  The rights conferred on any person by this Bylaw shall continue as to a person who has ceased to be a director or officer, or, if applicable, employee or other agent, and shall inure to the benefit of the heirs, executors and administrators of such a person.
 
(g)                               Insurance.  To the fullest extent permitted by the DGCL or any other applicable law, the corporation, upon approval by the Board of Directors, may purchase insurance on behalf of any person required or permitted to be indemnified pursuant to this Section 45.
 
(h)                              Amendments.  Any repeal or modification of this Section 45 shall only be prospective and shall not affect the rights under this Bylaw in effect at the time of the alleged occurrence of any action or omission to act that is the cause of any proceeding against any agent of the corporation.
 
(i)                                   Saving Clause.  If this Bylaw or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the corporation shall nevertheless indemnify each director and officer to the full extent not prohibited by any applicable portion of this Section 45 that shall not have been invalidated, or by any other applicable law.  If this Section 45 shall be invalid due to the application of the indemnification provisions of another
 
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jurisdiction, then the corporation shall indemnify each director and officer to the full extent under any other applicable law.
 
(j)                                  Certain Definitions.  For the purposes of this Bylaw, the following definitions shall apply:
 
i.                                         The term “ proceeding ” shall be broadly construed and shall include, without limitation, the investigation, preparation, prosecution, defense, settlement, arbitration and appeal of, and the giving of testimony in, any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative.
 
ii.                                     The term “ expenses ” shall be broadly construed and shall include, without limitation, court costs, attorneys’ fees, witness fees, fines, amounts paid in settlement or judgment and any other costs and expenses of any nature or kind incurred in connection with any proceeding.
 
iii.                                 The term the “ corporation ” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under the provisions of this Section 45 with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued.
 
iv.                                 References to a “ director ,” “ officer ,” “ employee ,” or “ agent ” of the corporation shall include, without limitation, situations where such person is serving at the request of the corporation as, respectively, a director, officer, employee, trustee or agent of another corporation, partnership, joint venture, trust or other enterprise.
 
v.                                     References to “ other enterprise ” shall include employee benefit plans; references to “ fines ” shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to “ serving at the request of the corporation ” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “ not opposed to the best interests of the corporation ” as referred to in this Section 45.
 
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ARTICLE XII
 
NOTICES
 
Section 46.                        Notices.
 
(a)                               Notice to Stockholders. Written notice to stockholders of stockholder meetings shall be given as provided in Section 7 of these Bylaws.  Without limiting the manner by which notice may otherwise be given effectively to stockholders under any agreement or contract with such stockholder, and except as otherwise required by law, written notice to stockholders for purposes other than stockholder meetings may be sent by U.S. mail or nationally recognized overnight courier, or by facsimile, telegraph or telex or by electronic mail or other electronic means.
 
(b)                              Notice to Directors.  Any notice required to be given to any director may be given by the method stated in subsection (a), as otherwise provided in these Bylaws, or by overnight delivery service, facsimile, telex or telegram, except that such notice other than one which is delivered personally shall be sent to such address as such director shall have filed in writing with the Secretary, or, in the absence of such filing, to the last known post office address of such director.
 
(c)                                Affidavit of Mailing.  An affidavit of mailing, executed by a duly authorized and competent employee of the corporation or its transfer agent appointed with respect to the class of stock affected, or other agent, specifying the name and address or the names and addresses of the stockholder or stockholders, or director or directors, to whom any such notice or notices was or were given, and the time and method of giving the same, shall in the absence of fraud, be prima facie evidence of the facts therein contained.
 
(d)                              Methods of Notice.  It shall not be necessary that the same method of giving notice be employed in respect of all recipients of notice, but one permissible method may be employed in respect of any one or more, and any other permissible method or methods may be employed in respect of any other or others.
 
(e)                                Notice to Person with whom Communication is Unlawful.  Whenever notice is required to be given, under any provision of law or of the Certificate of Incorporation or Bylaws of the corporation, to any person with whom communication is unlawful, the giving of such notice to such person shall not be required and there shall be no duty to apply to any governmental authority or agency for a license or permit to give such notice to such person.  Any action or meeting which shall be taken or held without notice to any such person with whom communication is unlawful shall have the same force and effect as if such notice had been duly given.  In the event that the action taken by the corporation is such as to require the filing of a certificate under any provision of the DGCL, the certificate shall state, if such is the fact and if notice is required, that notice was given to all persons entitled to receive notice except such persons with whom communication is unlawful.
 
(f)                                 Notice to Stockholders Sharing an Address.  Except as otherwise prohibited under the DGCL, any notice given under the provisions of the DGCL, the Certificate
 
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of Incorporation or the Bylaws shall be effective if given by a single written notice to stockholders who share an address if consented to by the stockholders at that address to whom such notice is given. Such consent shall have been deemed to have been given if such stockholder fails to object in writing to the corporation within 60 days of having been given notice by the corporation of its intention to send the single notice. Any consent shall be revocable by the stockholder by written notice to the corporation.
 
ARTICLE XIII
 
AMENDMENTS
 
Section 47.                        Amendments.   Subject to the limitations set forth in Section 45(h) of these Bylaws or the provisions of the Certificate of Incorporation, the Board of Directors is expressly empowered to adopt, amend or repeal the Bylaws of the corporation.  Any adoption, amendment or repeal of the Bylaws of the corporation by the Board of Directors shall require the approval of a majority of the authorized number of directors.  The stockholders also shall have power to adopt, amend or repeal the Bylaws of the corporation; provided, ho wever, that, in addition to any vote of the holders of any class or series of stock of the corporation required by law or by the Certificate of Incorporation, such action by stockholders shall require the affirmative vote of the holders of at least 66 2/3% 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.
 
ARTICLE XIV
 
LOANS TO OFFICERS OR EMPLOYEES
 
Section 48.                        Loans to Officers or Employees.   Except as otherwise prohibited by applicable law, the corporation may lend money to, or guarantee any obligation of, or otherwise assist any officer or other employee of the corporation or of its subsidiaries, including any officer or employee who is a director of the corporation or its subsidiaries, whenever, in the judgment of the Board of Directors, such loan, guarantee or assistance may reasonably be expected to benefit the corporation.  The loan, guarantee or other assistance may be with or without interest and may be unsecured, or secured in such manner as the Board of Directors shall approve, including, without limitation, a pledge of shares of stock of the corporation.  Nothing in these Bylaws shall be deemed to deny, limit or restrict the powers of guaranty or warranty of the corporation at common law or under any statute.
 
ARTICLE XV
 
FORUM FOR ADJUDICATION OF DISPUTES
 
Section 49.                        Forum for Adjudication of Disputes.   Unless the corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of the corporation, (b) any action asserting a claim of breach of a fiduciary duty owed by any director or officer of the corporation or the corporation’s stockholders, (c) any action
 
25 

 
asserting a claim against the corporation arising pursuant to any provision of the DGCL or the corporation’s Certificate of Incorporation or Bylaws, or (d) any action asserting a claim against the corporation governed by the internal affairs doctrine.  Any person or entity purchasing or otherwise acquiring any interest in shares of capital stock of the corporation shall be deemed to have notice of and to have consented to the provisions of this Section 49.
 
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Exhibit 4.1

	THIS CERTIFIES THAT is the owner of CUSIP DATED COUNTERSIGNED AND REGISTERED: COMPUTERSHARE TRUST COMPANY, N.A. TRANSFER AGENT AND REGISTRAR, FULLY-PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF Sientra, Inc. (hereinafter called the “Company”), transferable on the books of the Company in person or by duly authorized attorney, upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby, are issued and shall be held subject to all of the provisions of the Certificate of Incorporation, as amended, and the By-Laws, as amended, of the Company (copies of which are on file with the Company and with the Transfer Agent), to all of which each holder, by acceptance hereof, assents. This Certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Company and the facsimile signatures of its duly authorized officers. COMMON STOCK PAR VALUE $0.01 COMMON STOCK THIS CERTIFICATE IS TRANSFERABLE IN CANTON, MA, JERSEY CITY, NJ AND COLLEGE STATION, TX SEE REVERSE FOR CERTAIN DEFINITIONS Certificate Number Shares . SIENTRA, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE FACSIMILE SIGNATURE TO COME FACSIMILE SIGNATURE TO COME President Secretary By AUTHORIZED SIGNATURE 2003 DELAWARE SIENTRA, INC. ZQ|CERT#|COY|CLS|RGSTRY|ACCT#|TRANSTYPE|RUN#|TRANS# 82621J 10 5 DD-MMM-YYYY * * 000000* * * * * * * * * * * * * * * * * * * * * 000000* * * * * * * * * * * * * * * * * * * * * 000000* * * * * * * * * * * * * * * * * * * * * 000000* * * * * * * * * * * * * * * * * * * * * 000000* * * * * * * * * * * * * * ** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Alexander David Sample **** Mr. Sample **** Mr. Sample **000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares*** *000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares**** 000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****0 00000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****00 0000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000 000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****0000 00**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****00000 0**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000 **Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000* *Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000** Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**Shares****000000**S ***ZERO HUNDRED THOUSAND ZERO HUNDRED AND ZERO*** MR. SAMPLE & MRS. SAMPLE & MR. SAMPLE & MRS. SAMPLE ZQ00000000 Certificate Numbers 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 1234567890/1234567890 Total Transaction Num/No. 123456 Denom. 123456 Total 1234567 MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 PO BOX 43004, Providence, RI 02940-3004 CUSIP XXXXXX XX X Holder ID XXXXXXXXXX Insurance Value 1,000,000.00 Number of Shares 123456 DTC 12345678 123456789012345	

	The IRS requires that we report the cost basis of certain shares acquired after January 1, 2011. If your shares were covered by the legislation and you have sold or transferred the shares and requested a specific cost basis calculation method, we have processed as requested. If you did not specify a cost basis calculation method, we have defaulted to the first in, first out (FIFO) method. Please visit our website or consult your tax advisor if you need additional information about cost basis. If you do not keep in contact with us or do not have any activity in your account for the time periods specified by state law, your property could become subject to state unclaimed property laws and transferred to the appropriate state. For value received, hereby sell, assign and transfer unto Shares  Attorney Dated: 20 Signature: Signature:  Notice: The signature to this assignment must correspond with the name as written upon the face of the certificate, in every particular, without alteration or enlargement, or any change whatever. PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE (PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF ASSIGNEE) of the common stock represented by the within Certificate, and do hereby irrevocably constitute and appoint to transfer the said stock on the books of the within-named Company with full power of substitution in the premises. . SIENTRA, INC. THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH SHAREHOLDER WHO SO REQUESTS, A SUMMARY OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL RIGHTS OF EACH CLASS OF STOCK OF THE COMPANY AND THE QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS, AND THE VARIATIONS IN RIGHTS, PREFERENCES AND LIMITATIONS DETERMINED FOR EACH SERIES, WHICH ARE FIXED BY THE CERTIFICATE OF INCORPORATION OF THE COMPANY, AS AMENDED, AND THE RESOLUTIONS OF THE BOARD OF DIRECTORS OF THE COMPANY, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DETERMINE VARIATIONS FOR FUTURE SERIES. SUCH REQUEST MAY BE MADE TO THE OFFICE OF THE SECRETARY OF THE COMPANY OR TO THE TRANSFER AGENT. THE BOARD OF DIRECTORS MAY REQUIRE THE OWNER OF A LOST OR DESTROYED STOCK CERTIFICATE, OR HIS LEGAL REPRESENTATIVES, TO GIVE THE COMPANY A BOND TO INDEMNIFY IT AND ITS TRANSFER AGENTS AND REGISTRARS AGAINST ANY CLAIM THAT MAY BE MADE AGAINST THEM ON ACCOUNT OF THE ALLEGED LOSS OR DESTRUCTION OF ANY SUCH CERTIFICATE. Signature(s) Guaranteed: Medallion Guarantee Stamp THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION (Banks, Stockbrokers, Savings and Loan Associations and Credit Unions) WITH MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM, PURSUANT TO S.E.C. RULE 17Ad-15. The following abbreviations, when used in the inscription on the face of this certificate, shall be construed as though they were written out in full according to applicable laws or regulations: TEN COM - as tenants in common UNIF GIFT MIN ACT - Custodian (Cust) (Minor) TEN ENT - as tenants by the entireties under Uniform Gifts to Minors Act (State) JT TEN - as joint tenants with right of survivorship UNIF TRF MIN ACT - Custodian (until age ) and not as tenants in common (Cust) under Uniform Transfers to Minors Act (Minor) (State) Additional abbreviations may also be used though not in the above list.	

Exhibit 4.11

CONVERSION AND AMENDMENT AGREEMENT

THIS CONVERSION AND AMENDMENT AGREEMENT (this “Agreement” ) is made and entered into as of October 10, 2014, by and among SIENTRA, INC. , a Delaware corporation (the “Company” ), and the undersigned stockholders of the Company (the “Stockholders” ).
 
RECITALS
 
WHEREAS , the Company is contemplating the consummation of a firm commitment underwritten initial public offering of its common stock (the “IPO” );
 
WHEREAS , the Stockholders are holders of shares of the Company’s outstanding Series A Preferred Stock (the “Series A Preferred” ), Series B Preferred Stock (the “Series B Preferred” ), and Series C Preferred Stock (the “Series C Preferred” , together with the Series A Preferred and the Series B Preferred, the “Series Preferred” ), and/or shares of the Company’s common stock (the “Common Stock” );
 
WHEREAS , pursuant to the Company’s Fourth Amended and Restated Certificate of Incorporation, as amended and as may be amended from time to time (the “Restated Certificate” ), all outstanding shares of Series Preferred shall automatically be converted into shares of Common Stock, at the then effective Conversion Rate (as defined in the Restated Certificate), upon (A) the closing of a firm commitment underwritten public offering of the Common Stock at a price per share to the public of at least $10.67 (200% of the $5.335 per share purchase price of the Series C Preferred (the “Series C Purchase Price” )) resulting in aggregate gross proceeds to the Company of not less than $35,000,000 (a “Qualified IPO” ), (B) consent of the holders of at least 65% of all outstanding shares of Series Preferred on an as-converted basis (the “Investor Majority” ) related to an IPO with a per share price greater than the Series C Purchase Price, (C) consent of an Investor Majority in connection with any mandatory conversion in which the current fair market value of the Common Stock exceeds the Series C Purchase Price, or (D) consent of the Investor Majority, including the consent of all stockholders that hold in excess of 19% of the outstanding shares of the Series Preferred (the “Super Investor Majority” );
 
WHEREAS , the undersigned Stockholders constitute a Super Investor Majority;
 
WHEREAS , the Company and certain of the undersigned Stockholders, among others, are parties to the Amended and Restated Investor Rights Agreement, dated as of March 28, 2012 (the “Investor Rights Agreement” ), which contains certain provisions the termination of which is triggered by the closing of a Qualified IPO;
 
WHEREAS , the Company and certain of the undersigned Stockholders, among others, are parties to the Amended and Restated Voting Agreement, dated March 28, 2012 (the “Voting Agreement” ), which terminates in its entirety upon the date of the closing of a Qualified IPO or the date on which none of the Series Preferred remains outstanding;
 
WHEREAS , any provision of the Investor Rights Agreement may be amended, modified or terminated, and the observance of any provision of the Investor Rights Agreement may be waived, upon the written consent of the Company and the Investor Majority; provided, however,

 
that (A) Sections 1.1(f) and 4.2 may be amended only with the written consent of the Super Investor Majority and (B) Section 2 may be amended only with the written consent of the Company and the Holders (as defined in the Investor Rights Agreement) of at least 51% of the Registrable Securities Then Outstanding (as defined in the Investor Rights Agreement);
 
WHEREAS , the undersigned Stockholders have the requisite percentages of the applicable securities required to amend the provisions of the Investor Rights Agreement and waive certain rights of the Holders under the Investor Rights Agreement as provided herein;
 
WHEREAS , the undersigned Stockholders desire to assist the Company in proceeding with an IPO and, in connection therewith, desire to amend certain provisions of the Investor Rights Agreement, waive certain rights of the Holders under the Investor Rights Agreement and confirm the termination of the Voting Agreement; and
 
WHEREAS , in order to eliminate any uncertainty or delay with respect to the conversion of the Series Preferred in connection with the IPO, the undersigned Stockholders desire to: (A) approve the conversion, effective immediately prior to the closing of the IPO, of each share of Series Preferred then outstanding into Common Stock at the then effective applicable Conversion Rate, provided that the price per share of the Common Stock sold in the IPO to the public is approved by the Board of Directors of the Company (the “Board” ) or the Pricing Committee of the Board (an “Approved IPO” ), and (B) amend certain provisions of the Investor Rights Agreement, waive certain rights of the Holders under the Investor Rights Agreement and confirm the termination of the Voting Agreement, all as more fully set forth herein.
 
AGREEMENT
 
NOW, THEREFORE , the parties to this Agreement, for good and valuable consideration, the receipt and sufficiency of which are acknowledged and agreed, hereby agree as follows:
 
1.                                     CONVERSION.  The undersigned Stockholders constituting a Super Investor Majority with respect to all shares of Series Preferred, hereby agree and provide their written consent that, effective immediately prior to the closing of an Approved IPO, whether or not such Approved IPO constitutes a Qualified IPO, all outstanding shares of the Series Preferred shall automatically be converted into shares of Common Stock at the applicable Conversion Rate then in effect.
 
2.                                     AMENDMENT OF INVESTOR RIGHTS AGREEMENT.  The Company and the undersigned Stockholders constituting a Super Investor Majority with respect to all shares of Series Preferred held thereby, on behalf of themselves and all other holders of Series Preferred, hereby amend the Investor Rights Agreement as follows:
 
The following defined term in Section 1.1 of the Investor Rights Agreement is hereby amended in its entirety as follows:
 
“ Qualified IPO ” means an Approved IPO (as defined in that certain Conversion and Amendment Agreement dated October 10, 2014, by and among the Company and certain stockholders of the Company).
 
2. 

 
3.                                     WAIVER OF REGISTRATION RIGHTS OF INVESTOR RIGHTS AGREEMENT.  The Company and the undersigned Stockholders that are Holders of at least 51% of the Registrable Securities Then Outstanding, with respect to all shares of Registrable Securities (as defined in the Investor Rights Agreement) held thereby, on behalf of themselves and all other holders of Registrable Securities, hereby waive all registration rights (including without limitation all rights to notice) under Section 2 of the Investor Rights Agreement with respect to the filing of the registration statement for the IPO and the registration and issuance of the shares in connection with the IPO.
 
4.                                     TERMINATION OF VOTING AGREEMENT.  The Company and the undersigned Stockholders, with respect to all shares of Series Preferred held thereby, on behalf of themselves and all other parties to the Voting Agreement, hereby acknowledge that, effective immediately prior to the closing of an Approved IPO, the Voting Agreement shall terminate in its entirety and be of no further force or effect pursuant to its terms.
 
5.                                     SUNSET.  Notwithstanding anything to the contrary set forth herein, this Agreement and all obligations hereunder shall terminate at 5:00 p.m. Pacific Time on March 31, 2015, if the closing of an Approved IPO has not occurred as of such time.
 
6.                                     MISCELLANEOUS.
 
(a)                               Entire Agreement; Binding Effect .  This Agreement constitutes the entire agreement of the parties hereto related to the matters set forth in Sections 1, 2, 3, 4, and 5 hereof, and supersedes all prior agreements between such parties, whether written or oral, related to such subject matter.  The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties hereto.
 
(b)                              Amendment; Waiver .  Neither this Agreement nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the Company and each party against whom enforcement of such amendment, waiver, discharge or termination is sought.
 
(c)                                Governing Law .  This Agreement shall be governed by and construed in accordance with the laws of the State of California as applied to contracts among California residents entered into and performed entirely within California.
 
(d)                              Counterparts; Facsimile.   This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.  Facsimile signatures shall be as effective as original signatures.
 
(e)                                Further Assurances.   Each party hereto agrees to execute and deliver, or cause to be executed and delivered, such further instruments or documents or take such other actions as may be reasonably necessary to consummate the transactions contemplated by this Agreement.
 
3. 

 
IN WITNESS WHEREOF , the parties hereto have executed this CONVERSION AND AMENDMENT AGREEMENT as of the date first written above.

 	COMPANY:	

 	SIENTRA, INC.	

 	By:	/s/ Hani Zeini	
 	 	Name: Hani Zeini	
 	 	Title: President and Chief Executive Officer	
 
[SIGNATURE PAGE TO CONVERSION AND AMENDMENT AGREEMENT]

 
IN WITNESS WHEREOF , the parties hereto have executed this CONVERSION AND AMENDMENT AGREEMENT as of the date first written above.

COMMON STOCKHOLDERS

 	 	ORBIMED PRIVATE INVESTMENTS III, LP	
 	 	 	
 	 	BY:	ORBIMED CAPITAL GP III LLC,	
 	 	 	 	
 	 	ITS:	GENERAL PARTNER	
 	 	 	 	
 	 	BY:	ORBIMED ADVISORS LLC,	
 	 	 	 	
 	 	ITS:	MANAGING MEMBER	
 	 	 	 	
Date:	October 10, 2014	 	By:	/s/ Jonathan Silverstein	
 	 	Name:	Jonathan Silverstein	
 	 	Title:	Member	
 	 	 	
 	 	ORBIMED ASSOCIATES III, LP	
 	 	 	
 	 	BY:	ORBIMED ADVISORS LLC,	
 	 	 	 	
 	 	ITS:	GENERAL PARTNER	
 	 	 	 	
Date:	October 10, 2014	 	By:	/s/ Jonathan Silverstein	
 	 	Name:	Jonathan Silverstein	
 	 	Title:	Member	
 	 	 	
 	 	ORBIMED ADVISORS LLC AND AFFILIATES	

Date:	October 10, 2014	 	By:	/s/ Jonathan Silverstein	
 	 	 	Name: Jonathan Silverstein	
 	 	 	Title: Member	

Date:	October 10, 2014	 	/s/ Hani Zeini	
 	 	Hani Zeini	

 
[SIGNATURE PAGE TO CONVERSION AND AMENDMENT AGREEMENT]

 
IN WITNESS WHEREOF , the parties hereto have executed this CONVERSION AND AMENDMENT AGREEMENT as of the date first written above.

PREFERRED STOCKHOLDERS

 	 	ORBIMED PRIVATE INVESTMENTS III, LP	

 	 	BY:	ORBIMED CAPITAL GP III LLC,	
 	 	 	 	
 	 	ITS:	GENERAL PARTNER	
 	 	 	 	
 	 	BY:	ORBIMED ADVISORS LLC,	
 	 	 	 	
 	 	ITS:	MANAGING MEMBER	

Date:	October 10, 2014	 	By:	/s/ Jonathan Silverstein	
 	 	 	Name: Jonathan Silverstein	
 	 	 	Title: Member	

 	 	ORBIMED ASSOCIATES III, LP	

 	 	BY:	ORBIMED ADVISORS LLC,	
 	 	 	 	
 	 	ITS:	GENERAL PARTNER	

Date:	October 10, 2014	 	By:	/s/ Jonathan Silverstein	
 	 	 	Name: Jonathan Silverstein	
 	 	 	Title: Member	

[SIGNATURE PAGE TO CONVERSION AND AMENDMENT AGREEMENT]

 
IN WITNESS WHEREOF , the parties hereto have executed this CONVERSION AND AMENDMENT AGREEMENT as of the date first written above.

 	 	CLARUS LIFESCIENCES I, L.P.	

 	 	BY:	CLARUS VENTURES I MANAGEMENT, L.P.	
 	 	 	 	
 	 	ITS:	GENERAL PARTNER	
 	 	 	 	
 	 	BY:	CLARUS VENTURES I, LLC	
 	 	 	 	
 	 	ITS:	GENERAL PARTNER	

Date:	October 10, 2014	 	By:	/s/ Nicholas J. Simon	
 	 	 	Name:  Nicholas J. Simon	
 	 	 	Title:    Managing Director	

 
[SIGNATURE PAGE TO CONVERSION AND AMENDMENT AGREEMENT]

 
IN WITNESS WHEREOF , the parties hereto have executed this CONVERSION AND AMENDMENT AGREEMENT as of the date first written above.

 	ABINGWORTH BIOVENTURES V LP	

 	BY: ABINGWORTH LLP	
 	ITS: MANAGER	

Date:	October 10, 2014	 	By:	/s/ James Abell	
 	 	Name:	James Abell	
 	 	Title:	Partner	
 	 	 	
 	ABINGWORTH BIOVENTURES V CO-INVEST GROWTH EQUITY FUND LP	

 	BY: ABINGWORTH LLP	
 	ITS: MANAGER	

 	 	 	
Date:	October 10, 2014	 	By:	/s/ James Abell	
 	 	Name:	James Abell	
 	 	Title:	Partner	

[SIGNATURE PAGE TO CONVERSION AND AMENDMENT AGREEMENT]

Exhibit 5.1

 
 
C. Thomas Hopkins
T: + 1 310 883 6417
thopkins@cooley.com

October 20, 2014
 
Sientra, Inc.
420 South Fairview Avenue
Suite 200
Santa Barbara, California 93117
 
Ladies and Gentlemen:
 
You have requested our opinion, as counsel to Sientra, Inc., a Delaware corporation (the “ Company ”), in connection with the filing by the Company of a Registration Statement (No. 333-198837) on Form S-1 (the “ Registration Statement ”) with the Securities and Exchange Commission, including a related prospectus filed with the Registration Statement (the “ Prospectus ”), covering an underwritten public offering of up to 5,750,000 shares (the “ Shares ”) of the Company’s common stock, par value $0.01, including up to 750,000 Shares that may be sold pursuant to the exercise of an option to purchase additional shares.  All of the Shares are to be sold by the Company as described in the Registration Statement and the Prospectus.
 
In connection with this opinion, we have examined and relied upon the Registration Statement and Prospectus, the Company’s Amended and Restated Certificate of Incorporation as amended, its Bylaws, as currently in effect, the forms of the Company’s Amended and Restated Certificate of Incorporation and Amended and Restated Bylaws, filed as Exhibits 3.2 and 3.4, respectively, to the Registration Statement, each of which will be in effect upon the closing of the offering contemplated by the Registration Statement, and the originals or copies certified to our satisfaction of such records, documents, certificates, memoranda and other instruments as in our judgment are necessary or appropriate to enable us to render the opinion expressed below.
 
We have assumed the genuineness and authenticity of all documents submitted to us as originals and the conformity to originals of all documents submitted to us as copies.  As to certain factual matters, we have relied upon a certificate of an officer of the Company and have not sought independently to verify such matters.  Our opinion is expressed only with respect to the General Corporation Law of the State of Delaware.  We express no opinion as to whether the laws of any particular jurisdiction are applicable to the subject matter hereof.  We are not rendering any opinion as to compliance with any federal or state antifraud law, rule or regulation relating to securities, or to the sale or issuance thereof.
 
On the basis of the foregoing, and in reliance thereon, we are of the opinion that the Shares, when sold and issued in accordance with the Registration Statement and the Prospectus, will be validly issued, fully paid and non-assessable.

 
 
1333 2ND STREET, SUITE 400, SANTA MONICA, CA 90401  T: (310) 883-6400  F: (310) 883-6500  WWW.COOLEY.COM

 

Sientra, Inc.
October 20, 2014
Page Two
 
We consent to the reference to our firm under the caption “Legal Matters” in the Prospectus and to the filing of this opinion as an exhibit to the Registration Statement.
 
Sincerely,
 
Cooley LLP

 

By:	/s/ C. Thomas Hopkins	 	
 	C. Thomas Hopkins	

 
 
1333 2ND STREET, SUITE 400, SANTA MONICA, CA 90401  T: (310) 883-6400  F: (310) 883-6500  WWW.COOLEY.COM

Exhibit 10.3
 
SIENTRA, INC.
 
2014 EQUITY INCENTIVE PLAN
 
ADOPTED BY THE BOARD: October 10, 2014
APPROVED BY THE STOCKHOLDERS: October 10, 2014
IPO DATE/EFFECTIVE DATE: [ · ], 2014

1.             GENERAL.
 
(a)           Eligible Award Recipients.   Employees, Directors and Consultants are eligible to receive Awards.
 
(b)           Available Awards.   The Plan provides for the grant of the following Awards: (i) Incentive Stock Options; (ii) Nonstatutory Stock Options; (iii) Stock Appreciation Rights; (iv) Restricted Stock Awards; (v) Restricted Stock Unit Awards; (vi) Performance Stock Awards; (vii) Performance Cash Awards; and (viii) Other Stock Awards.
 
(c)           Purpose.   This Plan, through the granting of Awards, is intended to help the Company secure and retain the services of eligible award recipients, provide incentives for such persons to exert maximum efforts for the success of the Company and any Affiliate and provide a means by which the eligible recipients may benefit from increases in value of the Common Stock.
 
2.             ADMINISTRATION.
 
(a)           Administration by Board.   The Board will administer the Plan.  The Board may delegate administration of the Plan to a Committee or Committees, as provided in Section 2(c).
 
(b)           Powers of Board.   The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
 
(i)            To determine: (A) who will be granted Awards; (B) when and how each Award will be granted; (C) what type of Award will be granted; (D) the provisions of each Award (which need not be identical), including when a person will be permitted to exercise or otherwise receive cash or Common Stock under the Award; (E) the number of shares of Common Stock subject to, or the cash value of, an Award; and (F) the Fair Market Value applicable to a Stock Award.
 
(ii)           To construe and interpret the Plan and Awards granted under it, and to establish, amend and revoke rules and regulations for administration of the Plan and Awards.  The Board, in the exercise of these powers, may correct any defect, omission or inconsistency in the Plan or in any Award Agreement or in the written terms of a Performance Cash Award, in a manner and to the extent it will deem necessary or expedient to make the Plan or Award fully effective.
 
(iii)          To settle all controversies regarding the Plan and Awards granted under it.
 
(iv)          To accelerate, in whole or in part, the time at which an Award may be exercised or vest (or at which cash or shares of Common Stock may be issued).
 
(v)           To suspend or terminate the Plan at any time.  Except as otherwise provided in the Plan or an Award Agreement, suspension or termination of the Plan will not materially impair a
 
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Participant’s rights under his or her then-outstanding Award without his or her written consent except as provided in subsection (viii) below.
 
(vi)          To amend the Plan in any respect the Board deems necessary or advisable, including, without limitation, adopting amendments relating to Incentive Stock Options and nonqualified deferred compensation under Section 409A of the Code and/or making the Plan or Awards granted under the Plan exempt from or compliant with the requirements for Incentive Stock Options or exempt from or compliant with the requirements for nonqualified deferred compensation under Section 409A of the Code, subject to the limitations, if any, of applicable law. If required by applicable law or listing requirements, and except as provided in Section 9(a) relating to Capitalization Adjustments, the Company will seek stockholder approval of any amendment of the Plan that (A) materially increases the number of shares of Common Stock available for issuance under the Plan, (B) materially expands the class of individuals eligible to receive Awards under the Plan, (C) materially increases the benefits accruing to Participants under the Plan, (D) materially reduces the price at which shares of Common Stock may be issued or purchased under the Plan, (E) materially extends the term of the Plan, or (F) materially expands the types of Awards available for issuance under the Plan.  Except as otherwise provided in the Plan (including subsection (viii) below) or an Award Agreement, no amendment of the Plan will materially impair a Participant’s rights under an outstanding Award without the Participant’s written consent.
 
(vii)        To submit any amendment to the Plan for stockholder approval, including, but not limited to, amendments to the Plan intended to satisfy the requirements of (A) Section 162(m) of the Code regarding the exclusion of performance-based compensation from the limit on corporate deductibility of compensation paid to Covered Employees, (B) Section 422 of the Code regarding “incentive stock options” or (C) Rule 16b-3 of Exchange Act or any successor rule.
 
(viii)       To approve forms of Award Agreements for use under the Plan and to amend the terms of any one or more outstanding Awards, including, but not limited to, amendments to provide terms more favorable to the Participant than previously provided in the Award Agreement, subject to any specified limits in the Plan that are not subject to Board discretion.  A Participant’s rights under any Award will not be impaired by any such amendment unless the Company requests the consent of the affected Participant, and the Participant consents in writing.  However, a Participant’s rights will not be deemed to have been impaired by any such amendment if the Board, in its sole discretion, determines that the amendment, taken as a whole, does not materially impair the Participant’s rights.  In addition, subject to the limitations of applicable law, if any, the Board may amend the terms of any one or more Awards without the affected Participant’s consent (A) to maintain the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code, (B) to change the terms of an Incentive Stock Option, if such change results in impairment of the Award solely because it impairs the qualified status of the Award as an Incentive Stock Option under Section 422 of the Code, (C) to clarify the manner of exemption from, or to bring the Award into compliance with, Section 409A of the Code, or (D) to comply with other applicable laws or listing requirements.
 
(ix)          Generally, to exercise such powers and to perform such acts as the Board deems necessary or expedient to promote the best interests of the Company and that are not in conflict with the provisions of the Plan and/or Award Agreements.
 
(x)           To adopt such procedures and sub-plans as are necessary or appropriate (A) to permit or facilitate participation in the Plan by Employees, Directors or Consultants who are foreign nationals or employed outside the United States or (B) allow Awards to qualify for special tax treatment in a foreign jurisdiction; provided that Board approval will not be necessary for immaterial modifications to the Plan or any Award Agreement that are required for compliance with the laws of the relevant foreign jurisdiction.
 
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(xi)          To effect, with the consent of any adversely affected Participant, (A) the reduction of the exercise, purchase or strike price of any outstanding Stock Award; (B) the cancellation of any outstanding Stock Award and the grant in substitution therefore of a new (1) Option or SAR, (2) Restricted Stock Award, (3) Restricted Stock Unit Award, (4) Other Stock Award, (5) cash award and/or (6) award of other valuable consideration determined by the Board, in its sole discretion, with any such substituted award (x) covering the same or a different number of shares of Common Stock as the cancelled Stock Award and (y) granted under the Plan or another equity or compensatory plan of the Company; or (C) any other action that is treated as a repricing under generally accepted accounting principles.
 
(c)           Delegation to Committee.
 
(i)            General.  The Board may delegate some or all of the administration of the Plan to a Committee or Committees.  If administration of the Plan is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee of the Committee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee).  Any delegation of administrative powers will be reflected in resolutions, not inconsistent with the provisions of the Plan, adopted from time to time by the Board or Committee (as applicable).  The Committee may, at any time, abolish the subcommittee and/or revest in the Committee any powers delegated to the subcommittee.  The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.
 
(ii)           Section 162(m) and Rule 16b-3 Compliance.   The Committee may consist solely of two or more Outside Directors, in accordance with Section 162(m) of the Code, or solely of two or more Non-Employee Directors, in accordance with Rule 16b-3 of the Exchange Act.
 
(d)           Delegation to an Officer.   The Board may delegate to one (1) or more Officers the authority to do one or both of the following: (i) designate Employees who are not Officers to be recipients of Options and SARs (and, to the extent permitted by applicable law, other Stock Awards) and, to the extent permitted by applicable law, the terms of such Awards; and (ii) determine the number of shares of Common Stock to be subject to such Stock Awards granted to such Employees; provided, however , that the Board resolutions regarding such delegation will specify the total number of shares of Common Stock that may be subject to the Stock Awards granted by such Officer and that such Officer may not grant a Stock Award to himself or herself.  Any such Stock Awards will be granted on the form of Stock Award Agreement most recently approved for use by the Committee or the Board, unless otherwise provided for in the resolutions approving the delegation authority.  The Board may not delegate authority to an Officer who is acting solely in the capacity of an Officer (and not also as a Director) to determine the Fair Market Value (as defined below).
 
(e)           Effect of Board’s Decision. All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
 
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3.             SHARES SUBJECT TO THE PLAN.
 
(a)           Share Reserve .
 
(i)            Subject to Section 9(a) relating to Capitalization Adjustments and the “evergreen” provision in Section 3(a)(ii), the aggregate number of shares of Common Stock that may be issued pursuant to Stock Awards  will not exceed 1,027,500 shares (the “ Share Reserve ”).
 
(ii)           The Share Reserve will automatically increase on January 1st of each year, for a period of not more than ten years, commencing on January 1st of the year following the year in which the IPO Date occurs and ending on (and including) January 1, 2024, in an amount equal to 4% of the total number of shares of Company capital stock outstanding on December 31st of the preceding calendar year.  Notwithstanding the foregoing, the Board may act prior to January 1st of a given year to provide that there will be no January 1st increase in the Share Reserve for such year or that the increase in the Share Reserve for such year will be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence.
 
(iii)          For clarity, the Share Reserve is a limitation on the number of shares of Common Stock that may be issued under to the Plan. As a single share may be subject to grant more than once ( e.g. , if a share subject to a Stock Award is forfeited, it may be made subject to grant again as provided in Section 3(b) below), the Share Reserve is not a limit on the number of Stock Awards that can be granted.
 
(iv)          Shares may be issued under the terms of this Plan in connection with a merger or acquisition as permitted by NASDAQ Listing Rule 5635(c), NYSE Listed Company Manual Section 303A.08, AMEX Company Guide Section 711 or other applicable rule, and such issuance will not reduce the number of shares available for issuance under the Plan.
 
(b)           Reversion of Shares to the Share Reserve .  If a Stock Award or any portion of a Stock Award (i) expires or otherwise terminates without all of the shares covered by the Stock Award having been issued or (ii) is settled in cash ( i.e. , the Participant receives cash rather than stock), such expiration, termination or settlement will not reduce (or otherwise offset) the number of shares of Common Stock that are available for issuance under the Plan.  If any shares of Common Stock issued under a Stock Award are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required to vest such shares in the Participant, then the shares that are forfeited or repurchased will revert to and again become available for issuance under the Plan.  Any shares reacquired by the Company in satisfaction of tax withholding obligations on a Stock Award or as consideration for the exercise or purchase price of a Stock Award will again become available for issuance under the Plan.
 
(c)           Incentive Stock Option Limit.  Subject to Section 9(a) relating to Capitalization Adjustments, the aggregate maximum number of shares of Common Stock that may be issued on the exercise of Incentive Stock Options will be 3,082,500 shares of Common Stock.
 
(d)           Section 162(m) Limitations .  Subject to the provisions of Section 9(a) relating to Capitalization Adjustments, at such time as the Company may be subject to the applicable provisions of Section 162(m) of the Code, the following limitations shall apply.
 
(i)            A maximum of 1,000,000 shares of Common Stock subject to Options, SARs and Other Stock Awards whose value is determined by reference to an increase over an exercise or strike price of at least 100% of the Fair Market Value on the date the Stock Award is granted may be granted to any one Participant during any one calendar year.  Notwithstanding the foregoing, if any additional Options, SARs or Other Stock Awards whose value is determined by reference to an increase over an
 
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exercise or strike price of at least 100% of the Fair Market Value on the date the Stock Award are granted to any Participant during any calendar year, compensation attributable to the exercise of such additional Stock Awards will not satisfy the requirements to be considered “qualified performance-based compensation” under Section 162(m) of the Code unless such additional Stock Award is approved by the Company’s stockholders.
 
(ii)           A maximum of 1,000,000 shares of Common Stock subject to Performance Stock Awards may be granted to any one Participant during any one calendar year (whether the grant, vesting or exercise is contingent upon the attainment during the Performance Period of the Performance Goals).
 
(iii)          A maximum of $1,000,000 may be granted as a Performance Cash Award to any one Participant during any one calendar year.
 
(e)           Source of Shares.   The stock issuable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market or otherwise.
 
4.             ELIGIBILITY.
 
(a)           Eligibility for Specific Stock Awards .  Incentive Stock Options may be granted only to employees of the Company or a “parent corporation” or “subsidiary corporation” thereof (as such terms are defined in Sections 424(e) and 424(f) of the Code).  Stock Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants; provided, however , that Stock Awards may not be granted to Employees, Directors and Consultants who are providing Continuous Service only to any “parent” of the Company, as such term is defined in Rule 405 of the Securities Act, unless (i) the stock underlying such Stock Awards is treated as “service recipient stock” under Section 409A of the Code (for example, because the Stock Awards are granted pursuant to a corporate transaction such as a spin off transaction), or (ii) the Company, in consultation with its legal counsel, has determined that such Stock Awards are otherwise exempt from or comply with the distribution requirements of Section 409A of the Code.
 
(b)           Ten Percent Stockholders .   A Ten Percent Stockholder will not be granted an Incentive Stock Option unless the exercise price of such Option is at least 110% of the Fair Market Value on the date of grant and the Option is not exercisable after the expiration of five (5) years from the date of grant.
 
5.             PROVISIONS RELATING TO OPTIONS AND STOCK APPRECIATION RIGHTS.
 
Each Option or SAR will be in such form and will contain such terms and conditions as the Board deems appropriate.  All Options will be separately designated Incentive Stock Options or Nonstatutory Stock Options at the time of grant, and, if certificates are issued, a separate certificate or certificates will be issued for shares of Common Stock purchased on exercise of each type of Option.  If an Option is not specifically designated as an Incentive Stock Option, or if an Option is designated as an Incentive Stock Option but some portion or all of the Option fails to qualify as an Incentive Stock Option under the applicable rules, then the Option (or portion thereof) will be a Nonstatutory Stock Option. The provisions of separate Options or SARs need not be identical; provided, however , that each Award Agreement will conform to (through incorporation of provisions hereof by reference in the applicable Award Agreement or otherwise) the substance of each of the following provisions:
 
(a)           Term.   Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, no Option or SAR will be exercisable after the expiration of 10 years from the date of its grant or such shorter period specified in the Award Agreement.
 
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(b)           Exercise Price.   Subject to the provisions of Section 4(b) regarding Ten Percent Stockholders, the exercise or strike price of each Option or SAR will be not less than 100% of the Fair Market Value of the Common Stock subject to the Option or SAR on the date the Award is granted.  Notwithstanding the foregoing, an Option or SAR may be granted with an exercise or strike price lower than 100% of the Fair Market Value of the Common Stock subject to the Award if such Award is granted pursuant to an assumption of or substitution for another option or stock appreciation right pursuant to a Corporate Transaction and in a manner consistent with the provisions of Section 409A of the Code and, if applicable, Section 424(a) of the Code.  Each SAR will be denominated in shares of Common Stock equivalents.
 
(c)           Purchase Price for Options.   The purchase price of Common Stock acquired pursuant to the exercise of an Option may be paid, to the extent permitted by applicable law and as determined by the Board in its sole discretion, by any combination of the methods of payment set forth below.  The Board will have the authority to grant Options that do not permit all of the following methods of payment (or otherwise restrict the ability to use certain methods) and to grant Options that require the consent of the Company to use a particular method of payment.  The permitted methods of payment are as follows:
 
(i)            by cash, check, bank draft or money order payable to the Company;
 
(ii)           pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of the stock subject to the Option, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds;
 
(iii)          by delivery to the Company (either by actual delivery or attestation) of shares of Common Stock;
 
(iv)          if an Option is a Nonstatutory Stock Option, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price; provided, however , that the Company will accept cash or other payment from the Participant to the extent of any remaining balance of the aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued.  Shares of Common Stock will no longer be subject to an Option and will not be exercisable thereafter to the extent that (A) shares issuable upon exercise are used to pay the exercise price pursuant to the “net exercise,” (B) shares are delivered to the Participant as a result of such exercise, and (C) shares are withheld to satisfy tax withholding obligations; or
 
(v)           in any other form of legal consideration that may be acceptable to the Board and specified in the applicable Award Agreement.
 
(d)           Exercise and Payment of a SAR.   To exercise any outstanding SAR, the Participant must provide written notice of exercise to the Company in compliance with the provisions of the Stock Appreciation Right Agreement evidencing such SAR.  The appreciation distribution payable on the exercise of a SAR will be not greater than an amount equal to the excess of (A) the aggregate Fair Market Value (on the date of the exercise of the SAR) of a number of shares of Common Stock equal to the number of Common Stock equivalents in which the Participant is vested under such SAR (with respect to which the Participant is exercising the SAR on such date), over (B) the aggregate strike price of the number of Common Stock equivalents with respect to which the Participant is exercising the SAR on such date.  The appreciation distribution may be paid in Common Stock, in cash, in any combination of the two or in any other form of consideration, as determined by the Board and contained in the Award Agreement evidencing such SAR.
 
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(e)           Transferability of Options and SARs.   The Board may, in its sole discretion, impose such limitations on the transferability of Options and SARs as the Board will determine.  In the absence of such a determination by the Board to the contrary, the following restrictions on the transferability of Options and SARs will apply:
 
(i)            Restrictions on Transfer .  An Option or SAR will not be transferable except by will or by the laws of descent and distribution (or pursuant to subsections (ii) and (iii) below), and will be exercisable during the lifetime of the Participant only by the Participant.  The Board may permit transfer of the Option or SAR in a manner that is not prohibited by applicable tax and securities laws. Except as explicitly provided in the Plan, neither an Option nor a SAR may be transferred for consideration.
 
(ii)           Domestic Relations Orders .  Subject to the approval of the Board or a duly authorized Officer, an Option or SAR may be transferred pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2).  If an Option is an Incentive Stock Option, such Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.
 
(iii)          Beneficiary Designation .  Subject to the approval of the Board or a duly authorized Officer, a Participant may, by delivering written notice to the Company, in a form approved by the Company (or the designated broker), designate a third party who, on the death of the Participant, will thereafter be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise.  In the absence of such a designation, the executor or administrator of the Participant’s estate will be entitled to exercise the Option or SAR and receive the Common Stock or other consideration resulting from such exercise.  However, the Company may prohibit designation of a beneficiary at any time, including due to any conclusion by the Company that such designation would be inconsistent with the provisions of applicable laws.
 
(f)            Vesting Generally.   The total number of shares of Common Stock subject to an Option or SAR may vest and therefore become exercisable in periodic installments that may or may not be equal.  The Option or SAR may be subject to such other terms and conditions on the time or times when it may or may not be exercised (which may be based on the satisfaction of Performance Goals or other criteria) as the Board may deem appropriate.  The vesting provisions of individual Options or SARs may vary.  The provisions of this Section 5(f) are subject to any Option or SAR provisions governing the minimum number of shares of Common Stock as to which an Option or SAR may be exercised.
 
(g)           Termination of Continuous Service.   Except as otherwise provided in the applicable Award Agreement, or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates (other than for Cause and other than upon the Participant’s death or Disability), the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Award as of the date of termination of Continuous Service) within the period of time ending on the earlier of (i) the date which occurs ninety (90) days following the termination of the Participant’s Continuous Service and (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR will terminate.
 
(h)           Extension of Termination Date.   Except as otherwise provided in the applicable Award Agreement, if the exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause and other than upon the Participant’s death or Disability) would be prohibited at any time solely because the issuance of shares of Common Stock would violate the registration requirements under the Securities Act, then the Option or SAR will terminate on the earlier of (i) the expiration of a total period of time (that need not be consecutive) equal to the applicable post-
 
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termination exercise period after the termination of the Participant’s Continuous Service during which the exercise of the Option or SAR would not be in violation of such registration requirements, and (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement.  In addition, unless otherwise provided in a Participant’s applicable Award Agreement, if the sale of any Common Stock received upon exercise of an Option or SAR following the termination of the Participant’s Continuous Service (other than for Cause) would violate the Company’s insider trading policy, then the Option or SAR will terminate on the earlier of (i) the expiration of a period of days or months (that need not be consecutive) equal to the applicable post-termination exercise period after the termination of the Participant’s Continuous Service during which the sale of the Common Stock received upon exercise of the Option or SAR would not be in violation of the Company’s insider trading policy, or (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement.
 
(i)            Disability of Participant.   Except as otherwise provided in the applicable Award Agreement, or other agreement between the Participant and the Company, if a Participant’s Continuous Service terminates as a result of the Participant’s Disability, the Participant may exercise his or her Option or SAR (to the extent that the Participant was entitled to exercise such Option or SAR as of the date of termination of Continuous Service), but only within such period of time ending on the earlier of (i) the date 12 months following such termination of Continuous Service, and (ii) the expiration of the term of the Option or SAR as set forth in the applicable Award Agreement.  If, after termination of Continuous Service, the Participant does not exercise his or her Option or SAR within the applicable time frame, the Option or SAR (as applicable) will terminate.
 
(j)            Death of Participant.   Except as otherwise provided in the applicable Award Agreement, or other agreement between the Participant and the Company, if (i) a Participant’s Continuous Service terminates as a result of the Participant’s death, or (ii) the Participant dies within the period (if any) specified in the applicable Award Agreement for exercisability after the termination of the Participant’s Continuous Service (for a reason other than death), then the Option or SAR may be exercised (to the extent the Participant was entitled to exercise such Option or SAR as of the date of death) by the Participant’s estate, by a person who acquired the right to exercise the Option or SAR by bequest or inheritance or by a person designated to exercise the Option or SAR upon the Participant’s death, but only within the period ending on the earlier of (i) the date 18 months following the date of death, and (ii) the expiration of the term of such Option or SAR as set forth in the applicable Award Agreement.  If, after the Participant’s death, the Option or SAR is not exercised within the applicable time frame, the Option or SAR will terminate.
 
(k)           Termination for Cause.   Except as explicitly provided otherwise in a Participant’s Award Agreement or other individual written agreement between the Company or any Affiliate and the Participant, if a Participant’s Continuous Service is terminated for Cause, the Option or SAR will terminate upon the date on which the event giving rise to the termination for Cause first occurred, and the Participant will be prohibited from exercising his or her Option or SAR from and after the date on which the event giving rise to the termination for Cause first occurred (or, if required by law, the date of termination of Continuous Service).  If a Participant’s Continuous Service is suspended pending an investigation of the existence of Cause, all of the Participant’s rights under the Option or SAR will also be suspended during the investigation period.
 
(l)            Non-Exempt Employees .  If an Option or SAR is granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, the Option or SAR will not be first exercisable for any shares of Common Stock until at least 6 months following the date of grant of the Option or SAR (although the Award may vest prior to such date). Consistent with the provisions of the Worker Economic Opportunity Act, (i) if such non-exempt Employee dies or suffers a Disability, (ii) upon a Corporate Transaction in which such Option or SAR is not assumed, continued, or
 
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substituted, (iii) upon a Change in Control, or (iv) upon the non-exempt Employee’s retirement (as such term may be defined in the non-exempt Employee’s applicable Award Agreement, in another agreement between the non-exempt Employee and the Company, or, if no such definition, in accordance with the Company’s then current employment policies and guidelines), the vested portion of any Options and SARs may be exercised earlier than 6 months following the date of grant.  The foregoing provision is intended to operate so that any income derived by a non-exempt Employee in connection with the exercise or vesting of an Option or SAR will be exempt from his or her regular rate of pay. To the extent permitted and/or required for compliance with the Worker Economic Opportunity Act to ensure that any income derived by a non-exempt Employee in connection with the exercise, vesting or issuance of any shares under any other Stock Award will be exempt from such employee’s regular rate of pay, the provisions of this paragraph will apply to all Stock Awards and are hereby incorporated by reference into such Stock Award Agreements.
 
6.             PROVISIONS OF STOCK AWARDS OTHER THAN OPTIONS AND SARS.
 
(a)           Restricted Stock Awards.   Each Restricted Stock Award Agreement will be in such form and will contain such terms and conditions as the Board deems appropriate.  To the extent consistent with the Company’s bylaws, at the Board’s election, shares of Common Stock may be (x) held in book entry form subject to the Company’s instructions until any restrictions relating to the Restricted Stock Award lapse, or (y) evidenced by a certificate, which certificate will be held in such form and manner as determined by the Board.  The terms and conditions of Restricted Stock Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Award Agreements need not be identical.  Each Restricted Stock Award Agreement will conform to (through incorporation of the provisions hereof by reference in the agreement or otherwise) the substance of each of the following provisions:
 
(i)            Consideration . A Restricted Stock Award may be awarded in consideration for (A) cash, check, bank draft or money order payable to the Company, (B) past services to the Company or an Affiliate, or (C) any other form of legal consideration (including future services) that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.
 
(ii)           Vesting .  Shares of Common Stock awarded under the Restricted Stock Award Agreement may be subject to forfeiture to the Company in accordance with a vesting schedule to be determined by the Board.
 
(iii)          Termination of Participant’s Continuous Service .  If a Participant’s Continuous Service terminates, the Company may receive through a forfeiture condition or a repurchase right, any or all of the shares of Common Stock held by the Participant that have not vested as of the date of termination of Continuous Service under the terms of the Restricted Stock Award Agreement.
 
(iv)          Transferability .  Rights to acquire shares of Common Stock under the Restricted Stock Award Agreement will be transferable by the Participant only upon such terms and conditions as are set forth in the Restricted Stock Award Agreement, as the Board will determine in its sole discretion, so long as Common Stock awarded under the Restricted Stock Award Agreement remains subject to the terms of the Restricted Stock Award Agreement.
 
(v)           Dividends.  A Restricted Stock Award Agreement may provide that any dividends paid on Restricted Stock will be subject to the same vesting and forfeiture restrictions as apply to the shares subject to the Restricted Stock Award to which they relate.
 
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(b)           Restricted Stock Unit Awards.  Each Restricted Stock Unit Award Agreement will be in such form and will contain such terms and conditions as the Board deems appropriate.  The terms and conditions of Restricted Stock Unit Award Agreements may change from time to time, and the terms and conditions of separate Restricted Stock Unit Award Agreements need not be identical.  Each Restricted Stock Unit Award Agreement will conform to (through incorporation of the provisions hereof by reference in the Agreement or otherwise) the substance of each of the following provisions:
 
(i)            Consideration.   At the time of grant of a Restricted Stock Unit Award, the Board will determine the consideration, if any, to be paid by the Participant upon delivery of each share of Common Stock subject to the Restricted Stock Unit Award.  The consideration to be paid (if any) by the Participant for each share of Common Stock subject to a Restricted Stock Unit Award may be paid in any form of legal consideration that may be acceptable to the Board, in its sole discretion, and permissible under applicable law.
 
(ii)           Vesting.  At the time of the grant of a Restricted Stock Unit Award, the Board may impose such restrictions on or conditions to the vesting of the Restricted Stock Unit Award as it, in its sole discretion, deems appropriate.
 
(iii)          Payment .  A Restricted Stock Unit Award may be settled by the delivery of shares of Common Stock, their cash equivalent, any combination thereof or in any other form of consideration, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.
 
(iv)          Additional Restrictions.  At the time of the grant of a Restricted Stock Unit Award, the Board, as it deems appropriate, may impose such restrictions or conditions that delay the delivery of the shares of Common Stock (or their cash equivalent) subject to a Restricted Stock Unit Award to a time after the vesting of such Restricted Stock Unit Award.
 
(v)           Dividend Equivalents.  Dividend equivalents may be credited in respect of shares of Common Stock covered by a Restricted Stock Unit Award, as determined by the Board and contained in the Restricted Stock Unit Award Agreement.  At the sole discretion of the Board, such dividend equivalents may be converted into additional shares of Common Stock covered by the Restricted Stock Unit Award in such manner as determined by the Board.  Any additional shares covered by the Restricted Stock Unit Award credited by reason of such dividend equivalents will be subject to all of the same terms and conditions of the underlying Restricted Stock Unit Award Agreement to which they relate.
 
(vi)          Termination of Participant’s Continuous Service.  Except as otherwise provided in the applicable Restricted Stock Unit Award Agreement, such portion of the Restricted Stock Unit Award that has not vested will be forfeited upon the Participant’s termination of Continuous Service.
 
(c)           Performance Awards.
 
(i)            Performance Stock Awards.  A Performance Stock Award is a Stock Award (covering a number of shares not in excess of that set forth in Section 3(d) above) that is payable (including that may be granted, vest or exercised) contingent upon the attainment during a Performance Period of certain Performance Goals. A Performance Stock Award may, but need not, require the completion of a specified period of Continuous Service. The length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively  determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole
 
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discretion. In addition, to the extent permitted by applicable law and the applicable Award Agreement, the Board may determine that cash may be used in payment of Performance Stock Awards.
 
(ii)                               Performance Cash Awards.   A Performance Cash Award is a cash award (for a dollar value not in excess of that set forth in Section 3(d)(iii) above) that is payable contingent upon the attainment during a Performance Period of certain Performance Goals. A Performance Cash Award may also require the completion of a specified period of Continuous Service. At the time of grant of a Performance Cash Award, the length of any Performance Period, the Performance Goals to be achieved during the Performance Period, and the measure of whether and to what degree such Performance Goals have been attained will be conclusively determined by the Committee (or, if not required for compliance with Section 162(m) of the Code, the Board), in its sole discretion. The Board may specify the form of payment of Performance Cash Awards, which may be cash or other property, or may provide for a Participant to have the option for his or her Performance Cash Award, or such portion thereof as the Board may specify, to be paid in whole or in part in cash or other property.
 
(iii)                           Board Discretion.  The Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for a Performance Period.  Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement or the written terms of a Performance Cash Award.
 
(iv)                           Section 162(m) Compliance.   Unless otherwise permitted in compliance with the requirements of Section 162(m) of the Code with respect to an Award intended to qualify as “performance-based compensation” thereunder, the Committee will establish the Performance Goals applicable to, and the formula for calculating the amount payable under, the Award no later than the earlier of (A) the date 90 days after the commencement of the applicable Performance Period, and (B) the date on which 25% of the Performance Period has elapsed, and in any event at a time when the achievement of the applicable Performance Goals remains substantially uncertain. Prior to the payment of any compensation under an Award intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the Committee will certify in writing the extent to which any Performance Goals and any other material terms under such Award have been satisfied (other than in cases where such Performance Goals relate solely to the increase in the value of the Common Stock). Notwithstanding satisfaction of, or completion of any Performance Goals, the number of shares of Common Stock, Options, cash or other benefits granted, issued, retainable and/or vested under an Award on account of satisfaction of such Performance Goals may be reduced by the Committee on the basis of such further considerations as the Committee, in its sole discretion, will determine.
 
(d)                               Other Stock Awards .  Other forms of Stock Awards valued in whole or in part by reference to, or otherwise based on, Common Stock, including the appreciation in value thereof ( e.g. , options or stock rights with an exercise price or strike price less than 100% of the Fair Market Value of the Common Stock at the time of grant) may be granted either alone or in addition to Stock Awards provided for under Section 5 and the preceding provisions of this Section 6.  Subject to the provisions of the Plan, the Board will have sole and complete authority to determine the persons to whom and the time or times at which such Other Stock Awards will be granted, the number of shares of Common Stock (or the cash equivalent thereof) to be granted pursuant to such Other Stock Awards and all other terms and conditions of such Other Stock Awards.
 
7.                                     COVENANTS OF THE COMPANY.
 
(a)                               Availability of Shares.   The Company will keep available at all times the number of shares of Common Stock reasonably required to satisfy then-outstanding Stock Awards.
 
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(b)                               Securities Law Compliance.   The Company will seek to obtain from each regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Stock Awards and to issue and sell shares of Common Stock upon exercise of the Stock Awards; provided, however, that this undertaking will not require the Company to register under the Securities Act the Plan, any Stock Award or any Common Stock issued or issuable pursuant to any such Stock Award.  If, after reasonable efforts and at a reasonable cost, the Company is unable to obtain from any such regulatory commission or agency the authority that counsel for the Company deems necessary for the lawful issuance and sale of Common Stock under the Plan, the Company will be relieved from any liability for failure to issue and sell Common Stock upon exercise of such Stock Awards unless and until such authority is obtained. A Participant will not be eligible for the grant of an Award or the subsequent issuance of cash or Common Stock pursuant to the Award if such grant or issuance would be in violation of any applicable securities law.
 
(c)                                No Obligation to Notify or Minimize Taxes.  The Company will have no duty or obligation to any Participant to advise such holder as to the time or manner of exercising such Stock Award.  Furthermore, the Company will have no duty or obligation to warn or otherwise advise such holder of a pending termination or expiration of an Award or a possible period in which the Award may not be exercised.  The Company has no duty or obligation to minimize the tax consequences of an Award to the holder of such Award.
 
8.                                     MISCELLANEOUS.
 
(a)                               Use of Proceeds from Sales of Common Stock.  Proceeds from the sale of shares of Common Stock pursuant to Stock Awards will constitute general funds of the Company.
 
(b)                               Corporate Action Constituting Grant of Awards.   Corporate action constituting a grant by the Company of an Award to any Participant will be deemed completed as of the date of such corporate action, unless otherwise determined by the Board, regardless of when the instrument, certificate, or letter evidencing the Award is communicated to, or actually received or accepted by, the Participant.  In the event that the corporate records ( e.g. , Board consents, resolutions or minutes) documenting the corporate action constituting the grant contain terms ( e.g. , exercise price, vesting schedule or number of shares) that are inconsistent with those in the Award Agreement as a result of a clerical error in the papering of the Award Agreement, the corporate records will control and the Participant will have no legally binding right to the incorrect term in the Award Agreement.
 
(c)                                Stockholder Rights.   No Participant will be deemed to be the holder of, or to have any of the rights of a holder with respect to, any shares of Common Stock subject to a Stock Award unless and until (i) such Participant has satisfied all requirements for exercise of, or the issuance of shares of Common Stock under, the Stock Award pursuant to its terms, and (ii) the issuance of the Common Stock subject to such Stock Award has been entered into the books and records of the Company.
 
(d)                               No Employment or Other Service Rights.   Nothing in the Plan, any Award Agreement or any other instrument executed thereunder or in connection with any Award granted pursuant thereto will confer upon any Participant any right to continue to serve the Company or an Affiliate in the capacity in effect at the time the Award was granted or will affect the right of the Company or an Affiliate to terminate (i) the employment of an Employee with or without notice and with or without cause, including, but not limited to, Cause, (ii) the service of a Consultant pursuant to the terms of such Consultant’s agreement with the Company or an Affiliate, or (iii) the service of a Director pursuant to the bylaws of the Company or an Affiliate, and any applicable provisions of the corporate law of the state in which the Company or the Affiliate is incorporated, as the case may be.
 
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(e)                                Change in Time Commitment .  In the event a Participant’s regular level of time commitment in the performance of his or her services for the Company and any Affiliates is reduced (for example, and without limitation, if the Participant is an Employee of the Company and the Employee has a change in status from a full-time Employee to a part-time Employee or takes an extended leave of absence) after the date of grant of any Award to the Participant, the Board has the right in its sole discretion to (i) make a corresponding reduction in the number of shares or cash amount subject to any portion of such Award that is scheduled to vest or become payable after the date of such change in time commitment, and (ii) in lieu of or in combination with such a reduction, extend the vesting or payment schedule applicable to such Award. In the event of any such reduction, the Participant will have no right with respect to any portion of the Award that is so reduced or extended.
 
(f)                                  Incentive Stock Option Limitations.   To the extent that the aggregate Fair Market Value (determined at the time of grant) of Common Stock with respect to which Incentive Stock Options are exercisable for the first time by any Optionholder during any calendar year (under all plans of the Company and any Affiliates) exceeds $100,000 (or such other limit established in the Code) or otherwise does not comply with the rules governing Incentive Stock Options, the Options or portions thereof that exceed such limit (according to the order in which they were granted) or otherwise do not comply with such rules will be treated as Nonstatutory Stock Options, notwithstanding any contrary provision of the applicable Option Agreement(s).
 
(g)                               Investment Assurances.   The Company may require a Participant, as a condition of exercising or acquiring Common Stock under any Stock Award, (i) to give written assurances satisfactory to the Company as to the Participant’s knowledge and experience in financial and business matters and/or to employ a purchaser representative reasonably satisfactory to the Company who is knowledgeable and experienced in financial and business matters and that he or she is capable of evaluating, alone or together with the purchaser representative, the merits and risks of exercising the Stock Award, and (ii) to give written assurances satisfactory to the Company stating that the Participant is acquiring Common Stock subject to the Stock Award for the Participant’s own account and not with any present intention of selling or otherwise distributing the Common Stock.  The foregoing requirements, and any assurances given pursuant to such requirements, will be inoperative if (i) the issuance of the shares upon the exercise of a Stock Award or acquisition of Common Stock under the Stock Award has been registered under a then currently effective registration statement under the Securities Act, or (ii) as to any particular requirement, a determination is made by counsel for the Company that such requirement need not be met in the circumstances under the then applicable securities laws.  The Company may, upon advice of counsel to the Company, place legends on stock certificates issued under the Plan as such counsel deems necessary or appropriate in order to comply with applicable securities laws, including, but not limited to, legends restricting the transfer of the Common Stock.
 
(h)                               Withholding Obligations.   Unless prohibited by the terms of an Award Agreement, the Company may, in its sole discretion, satisfy any U.S. federal, state, local, foreign or other tax withholding obligation relating to an Award by any of the following means or by a combination of such means: (i) causing the Participant to tender a cash payment; (ii) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to the Participant in connection with the Award; provided, however , that no shares of Common Stock are withheld with a value exceeding the minimum amount of tax required to be withheld by law (or such other amount as may be necessary to avoid classification of the Stock Award as a liability for financial accounting purposes); (iii) withholding cash from an Award settled in cash; (iv) withholding payment from any amounts otherwise payable to the Participant, including proceeds from the sale of shares of Common Stock issued pursuant to a Stock Award; or (v) by such other method as may be set forth in the Award Agreement.
 
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(i)                                   Electronic Delivery .  Any reference herein to a “written” agreement or document will include any agreement or document delivered electronically, filed publicly at www.sec.gov (or any successor website thereto), or posted on the Company’s intranet (or other shared electronic medium controlled by the Company to which the Participant has access).
 
(j)                                  Deferrals.   To the extent permitted by applicable law, the Board, in its sole discretion, may determine that the delivery of Common Stock or the payment of cash, upon the exercise, vesting or settlement of all or a portion of any Award may be deferred and may establish programs and procedures for deferral elections to be made by Participants.  Deferrals by Participants will be made in accordance with Section 409A of the Code (to the extent applicable to a Participant).  Consistent with Section 409A of the Code, the Board may provide for distributions while a Participant is still an employee or otherwise providing services to the Company.  The Board is authorized to make deferrals of Awards and determine when, and in what annual percentages, Participants may receive payments, including lump sum payments, following the Participant’s termination of Continuous Service, and implement such other terms and conditions consistent with the provisions of the Plan and in accordance with applicable law.
 
(k)                              Compliance with Section 409A.  Unless otherwise expressly provided for in an Award Agreement, the Plan and Award Agreements will be interpreted to the greatest extent possible in a manner that makes the Plan and the Awards granted hereunder exempt from Section 409A of the Code, and, to the extent not so exempt, in compliance with Section 409A of the Code. If the Board determines that any Award granted hereunder is not exempt from and is therefore subject to Section 409A of the Code, the Award Agreement evidencing such Award will incorporate the terms and conditions necessary to avoid the consequences specified in Section 409A(a)(1) of the Code, and to the extent an Award Agreement is silent on terms necessary for compliance, such terms are hereby incorporated by reference into the Award Agreement. Notwithstanding anything to the contrary in this Plan (and unless the Award Agreement specifically provides otherwise), if the shares of Common Stock are publicly traded, and if a Participant holding an Award that constitutes “deferred compensation” under Section 409A of the Code is a “specified employee” for purposes of Section 409A of the Code, no distribution or payment of any amount that is due because of a “separation from service” (as defined in Section 409A of the Code) will be issued or paid before the date that is six (6) months following the date of such Participant’s “separation from service” or, if earlier, the date of the Participant’s death, unless such distribution or payment can be made in a manner that complies with Section 409A of the Code, and any amounts so deferred will be paid in a lump sum on the day after such six (6) month period elapses, with the balance paid thereafter on the original schedule.
 
(l)                                   Clawback/Recovery.   All Awards granted under the Plan will be subject to recoupment in accordance with any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. In addition, the Board may impose such other clawback, recovery or recoupment provisions in an Award Agreement as the Board determines necessary or appropriate, including, but not limited to, a reacquisition right in respect of previously acquired shares of Common Stock or other cash or property upon the occurrence of an event constituting Cause. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any agreement with the Company or an Affiliate.
 
9.                                     ADJUSTMENTS UPON CHANGES IN COMMON STOCK; OTHER CORPORATE EVENTS.
 
(a)                               Capitalization Adjustments .  In the event of a Capitalization Adjustment, the Board will appropriately and  proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a); (ii) the class(es) and maximum number of securities that may be issued
 
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pursuant to the exercise of Incentive Stock Options pursuant to Section 3(c); (iii) the class(es) and maximum number of securities that may be awarded to any person pursuant to Section 3(d) and (iv) the class(es) and number of securities and price per share of stock subject to outstanding Stock Awards.  The Board will make such adjustments, and its determination will be final, binding and conclusive.
 
(b)                               Dissolution or Liquidation .  Except as otherwise provided in the Stock Award Agreement, in the event of a dissolution or liquidation of the Company, all outstanding Stock Awards (other than Stock Awards consisting of vested and outstanding shares of Common Stock not subject to a forfeiture condition or the Company’s right of repurchase) will terminate immediately prior to the completion of such dissolution or liquidation, and the shares of Common Stock subject to the Company’s repurchase rights or subject to a forfeiture condition may be repurchased or reacquired by the Company notwithstanding the fact that the holder of such Stock Award is providing Continuous Service; provided, however, that the Board may, in its sole discretion, cause some or all Stock Awards to become fully vested, exercisable and/or no longer subject to repurchase or forfeiture (to the extent such Stock Awards have not previously expired or terminated) before the dissolution or liquidation is completed but contingent on its completion.
 
(c)                                Corporate Transaction.   The following provisions will apply to Stock Awards in the event of a Corporate Transaction unless otherwise provided in the instrument evidencing the Stock Award or any other written agreement between the Company or any Affiliate and the Participant or unless otherwise expressly provided by the Board at the time of grant of a Stock Award. In the event of a Corporate Transaction, then, notwithstanding any other provision of the Plan, the Board will take one or more of the following actions with respect to Stock Awards, contingent upon the closing or completion of the Corporate Transaction:
 
(i)                                   arrange for the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) to assume or continue the Stock Award or to substitute a similar stock award for the Stock Award (including, but not limited to, an award to acquire the same consideration paid to the stockholders of the Company pursuant to the Corporate Transaction);
 
(ii)                               arrange for the assignment of any reacquisition or repurchase rights held by the Company in respect of Common Stock issued pursuant to the Stock Award to the surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company);
 
(iii)                           accelerate the vesting, in whole or in part, of the Stock Award (and, if applicable, the time at which the Stock Award may be exercised) to a date prior to the effective time of such Corporate Transaction as the Board determines (or, if the Board does not determine such a date, to the date that is five (5) days prior to the effective date of the Corporate Transaction), with such Stock Award terminating if not exercised (if applicable) at or prior to the effective time of the Corporate Transaction;
 
(iv)                           arrange for the lapse, in whole or in part, of any reacquisition or repurchase rights held by the Company with respect to the Stock Award;
 
(v)                               cancel or arrange for the cancellation of the Stock Award, to the extent not vested or not exercised prior to the effective time of the Corporate Transaction, in exchange for such cash consideration, if any, as the Board, in its sole discretion, may consider appropriate; and
 
(vi)                           make a payment, in such form as may be determined by the Board equal to the excess, if any, of (A) the value of the property the Participant would have received upon the exercise of the Stock Award immediately prior to the effective time of the Corporate Transaction, over (B) any exercise price payable by such holder in connection with such exercise.
 
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The Board need not take the same action or actions with respect to all Stock Awards or portions thereof or with respect to all Participants. The Board may take different actions with respect to the vested and unvested portions of a Stock Award.
 
(d)                               Change in Control.   A Stock Award may be subject to additional acceleration of vesting and exercisability upon or after a Change in Control as may be provided in the Stock Award Agreement for such Stock Award or as may be provided in any other written agreement between the Company or any Affiliate and the Participant, but in the absence of such provision, no such acceleration will occur.
 
10.                             TERMINATION OR SUSPENSION OF THE PLAN.
 
The Board may suspend or terminate the Plan at any time.  No Incentive Stock Options may be granted after the tenth anniversary of the earlier of (i) the date the Plan is adopted by the Board (the “ Adoption Date ”), or (ii) the date the Plan is approved by the stockholders of the Company.  No Awards may be granted under the Plan while the Plan is suspended or after it is terminated.
 
11.                             EFFECTIVE DATE OF PLAN; TIMING OF FIRST GRANT OR EXERCISE.
 
The Plan will come into existence on the Adoption Date; provided, however , that no Award may be granted prior to the IPO Date (that is, the Effective Date).  In addition, no Stock Award will be exercised (or, in the case of a Restricted Stock Award, Restricted Stock Unit Award, Performance Stock Award, or Other Stock Award, no Stock Award will be granted) and no Performance Cash Award will be settled unless and until the Plan has been approved by the stockholders of the Company, which approval will be within 12 months after the date the Plan is adopted by the Board.
 
12.                             CHOICE OF LAW.
 
The laws of the State of Delaware will govern all questions concerning the construction, validity and interpretation of this Plan, without regard to that state’s conflict of laws rules.
 
13.                             DEFINITIONS.   As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
 
(a)                               “ Affiliate ” means, at the time of determination, any “parent” or “subsidiary” of the Company, as such terms are defined in Rule 405 of the Securities Act.  The Board will have the authority to determine the time or times at which “parent” or “subsidiary” status is determined within the foregoing definition.
 
(b)                               “ Award ” means a Stock Award or a Performance Cash Award.
 
(c)                                “ Award Agreement ” means a written agreement between the Company and a Participant evidencing the terms and conditions of an Award.
 
(d)                               “ Board ” means the Board of Directors of the Company.
 
(e)                                “ Capitalization Adjustment ” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Stock Award after the Adoption Date without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, reverse stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other similar equity restructuring transaction, as that term is used
 
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in Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto).  Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
 
(f)                                  “ Cause ” will have the meaning ascribed to such term in any written agreement between the Participant and the Company or any Affiliate defining such term and, in the absence of such agreement, such term means, with respect to a Participant, the occurrence of any of the following events : (i) Participant’s willful failure substantially to perform his or her duties and responsibilities to the Company or any Affiliate or deliberate violation of a policy of the Company or any Affiliate; (ii) Participant’s commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct that has caused or is reasonably expected to result in material injury to the Company or any Affiliate; (iii) unauthorized use or disclosure by Participant of any proprietary information or trade secrets of the Company or any other party to whom the Participant owes an obligation of nondisclosure as a result of his or her relationship with the Company or any Affiliate; or (iv) Participant’s willful breach of any of his or her obligations under any written agreement or covenant with the Company or any Affiliate.  The determination as to whether a Participant is being terminated for Cause will be made in good faith by the Company and will be final and binding on the Participant.  Any determination by the Company that the Continuous Service of a Participant was terminated with or without Cause for the purposes of outstanding Awards held by such Participant will have no effect upon any determination of the rights or obligations of the Company, any Affiliate or such Participant for any other purpose.
 
(g)                               “ Change in Control ” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events:
 
(i)                                   any Exchange Act Person becomes the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities other than by virtue of a merger, consolidation or similar transaction.  Notwithstanding the foregoing, a Change in Control will not be deemed to occur (A) on account of the acquisition of securities of the Company directly from the Company, (B) on account of the acquisition of securities of the Company by an investor, any affiliate thereof or any other Exchange Act Person that acquires the Company’s securities in a transaction or series of related transactions the primary purpose of which is to obtain financing for the Company through the issuance of equity securities , (C) on account of the acquisition of securities of the Company by any individual who is, on the IPO Date, either an executive officer or a Director (either, an “ IPO Investor ”) and/or any entity in which an IPO Investor has a direct or indirect interest (whether in the form of voting rights or participation in profits or capital contributions) of more than 50% (collectively, the “ IPO Entities ”) or on account of the IPO Entities continuing to hold shares that come to represent more than 50% of the combined voting power of the Company’s then outstanding securities as a result of the conversion of any class of the Company’s securities into another class of the Company’s securities having a different number of votes per share pursuant to the conversion provisions set forth in the Company’s Amended and Restated Certificate of Incorporation; or (D) solely because the level of Ownership held by any Exchange Act Person (the “ Subject Person ”) exceeds the designated percentage threshold of the outstanding voting securities as a result of a repurchase or other acquisition of voting securities by the Company reducing the number of shares outstanding, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such share acquisition, the Subject Person becomes the Owner of any additional voting securities that, assuming the repurchase or other acquisition had not occurred, increases the percentage of the then outstanding voting securities Owned by the Subject Person over the designated percentage threshold, then a Change in Control will be deemed to occur;
 
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(ii)                               there is consummated a merger, consolidation or similar transaction involving (directly or indirectly) the Company and, immediately after the consummation of such merger, consolidation or similar transaction, the stockholders of the Company immediately prior thereto do not Own, directly or indirectly, either (A) outstanding voting securities representing more than 50% of the combined outstanding voting power of the surviving Entity in such merger, consolidation or similar transaction or (B) more than 50% of the combined outstanding voting power of the parent of the surviving Entity in such merger, consolidation or similar transaction, in each case in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such transaction; provided, however , that a merger, consolidation or similar transaction will not constitute a Change in Control under this prong of the definition if the outstanding voting securities representing more than 50% of the combined voting power of the surviving Entity or its parent are owned by the IPO Entities;
 
(iii)                           there is consummated a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries, other than a sale, lease, license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries to an Entity, more than 50% of the combined voting power of the voting securities of which are Owned by stockholders of the Company in substantially the same proportions as their Ownership of the outstanding voting securities of the Company immediately prior to such sale, lease, license or other disposition; provided, however , that a sale, lease, exclusive license or other disposition of all or substantially all of the consolidated assets of the Company and its Subsidiaries will not constitute a Change in Control under this prong of the definition if the outstanding voting securities representing more than 50% of the combined voting power of the acquiring Entity or its parent are owned by the IPO Entities; or
 
(iv)                           individuals who, on the Effective Date, are members of the Board (the “ Incumbent Board ”) cease for any reason to constitute at least a majority of the members of the Board; provided, however, that if the appointment or election (or nomination for election) of any new Board member was approved or recommended by a majority vote of the members of the Incumbent Board then still in office, such new member will, for purposes of this Plan, be considered as a member of the Incumbent Board.
 
Notwithstanding the foregoing definition or any other provision of this Plan, (A) the term Change in Control will not include a sale of assets, merger or other transaction effected exclusively for the purpose of changing the domicile of the Company, and (B) the definition of Change in Control (or any analogous term) in an individual written agreement between the Company or any Affiliate and the Participant will supersede the foregoing definition with respect to Awards subject to such agreement; provided, however, that if no definition of Change in Control or any analogous term is set forth in such an individual written agreement, the foregoing definition will apply.
 
(h)                               “ Code ” means the U.S. Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder.
 
(i)                                   “ Committee ” means a committee of one (1) or more Directors to whom authority has been delegated by the Board in accordance with Section 2(c).
 
(j)                                  “ Common Stock ” means the common stock of the Company.
 
(k)                              “ Company ” means Sientra, Inc., a Delaware corporation.
 
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(l)                                   “ Consultant ” means any person, including an advisor, who is (i) engaged by the Company or an Affiliate to render consulting or advisory services and is compensated for such services, or (ii) serving as a member of the board of directors of an Affiliate and is compensated for such services.  However, service solely as a Director, or payment of a fee for such service, will not cause a Director to be considered a “Consultant” for purposes of the Plan. Notwithstanding the foregoing, a person is treated as a Consultant under this Plan only if a Form S-8 Registration Statement under the Securities Act is available to register either the offer or the sale of the Company’s securities to such person.
 
(m)                          “ Continuous Service ” means that the Participant’s service with the Company or an Affiliate, whether as an Employee, Director or Consultant, is not interrupted or terminated.  A change in the capacity in which the Participant renders service to the Company or an Affiliate as an Employee, Consultant or Director or a change in the Entity for which the Participant renders such service, provided that there is no interruption or termination of the Participant’s service with the Company or an Affiliate, will not terminate a Participant’s Continuous Service.  For example, a change in status from an Employee of the Company to a Consultant of an Affiliate or to a Director will not constitute an interruption of Continuous Service.  If the Entity for which a Participant is rendering services ceases to qualify as an Affiliate, as determined by the Board in its sole discretion, such Participant’s Continuous Service will be considered to have terminated on the date such Entity ceases to qualify as an Affiliate. To the extent permitted by law, the Board or the chief executive officer of the Company, in that party’s sole discretion, may determine whether Continuous Service will be considered interrupted in the case of (i) any leave of absence approved by the Board or chief executive officer, including sick leave, military leave or any other personal leave, or (ii) transfers between the Company, an Affiliate, or their successors.  In addition, if required for exemption from or compliance with Section 409A of the Code, the determination of whether there has been a termination of Continuous Service will be made, and such term will be construed, in a manner that is consistent with the definition of “separation from service” as defined under Treasury Regulation Section 1.409A-1(h).  A leave of absence will be treated as Continuous Service for purposes of vesting in a Stock Award only to such extent as may be provided in the Company’s leave of absence policy, in the written terms of any leave of absence agreement or policy applicable to the Participant, or as otherwise required by law.
 
(n)                               “ Corporate Transaction ” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:
 
(i)                                   a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
 
(ii)                               a sale or other disposition of at least 90% of the outstanding securities of the Company;
 
(iii)                           a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
 
(iv)                           a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
 
(o)                               “ Covered Employee ” will have the meaning provided in Section 162(m)(3) of the Code.
 
(p)                               “ Director ” means a member of the Board.
 
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(q)                               “ Disability ” means, with respect to a Participant, the inability of such Participant 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 that has lasted or can be expected to last for a continuous period of not less than 12 months as provided in Sections 22(e)(3) and 409A(a)(2)(C)(i) of the Code, and will be determined by the Board on the basis of such medical evidence as the Board deems warranted under the circumstances.
 
(r)                                “ Effective Date ” is defined in Section 10 of the Plan.
 
(s)                                 “ Employee ” means any person providing services as an employee of the Company or an Affiliate.  However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.
 
(t)                                  “ Entity ” means a corporation, partnership, limited liability company or other entity.
 
(u)                               “ Exchange Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
 
(v)                               “ Exchange Act Person ” means any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act), except that “Exchange Act Person” will not include (i) the Company or any Subsidiary of the Company, (ii) any employee benefit plan of the Company or any Subsidiary of the Company or any trustee or other fiduciary holding securities under an employee benefit plan of the Company or any Subsidiary of the Company, (iii) an underwriter temporarily holding securities pursuant to a registered public offering of such securities, (iv) an Entity Owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their Ownership of stock of the Company, or (v) any natural person, Entity or “group” (within the meaning of Section 13(d) or 14(d) of the Exchange Act) that, as of the Effective Date, is the Owner, directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding securities.
 
(w)                            “ Fair Market Value ” means, as of any date, the value of the Common Stock determined as follows:
 
(i)                                   If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be, unless otherwise determined by the Board, the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination, as reported in a source the Board deems reliable.
 
(ii)                               Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the Fair Market Value will be the closing selling price on the last preceding date for which such quotation exists.
 
(iii)                           In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith and in a manner that complies with Sections 409A and 422 of the Code.
 
(x)                               “ Incentive Stock Option ” means an option granted pursuant to Section 5 of the Plan that is intended to be, and that qualifies as, an “incentive stock option” within the meaning of Section 422 of the Code.
 
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(y)                               “ IPO Date ” means the date of the underwriting agreement between the Company and the underwriters(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering (the “ IPO ”).
 
(z)                                “ Non-Employee Director ” means a Director who either (i) is not a current employee or officer of the Company or an Affiliate, does not receive compensation, either directly or indirectly, from the Company or an Affiliate for services rendered as a consultant or in any capacity other than as a Director (except for an amount as to which disclosure would not be required under Item 404(a) of Regulation S-K promulgated pursuant to the Securities Act (“ Regulation S-K ”)), does not possess an interest in any other transaction for which disclosure would be required under Item 404(a) of Regulation S-K, and is not engaged in a business relationship for which disclosure would be required pursuant to Item 404(b) of Regulation S-K; or (ii) is otherwise considered a “non-employee director” for purposes of Rule 16b-3 of the Exchange Act.
 
(aa)                       “ Nonstatutory Stock Option ” means any Option granted pursuant to Section 5 of the Plan that does not qualify as an Incentive Stock Option.
 
(bb)                       “ Officer ” means a person who is an officer of the Company within the meaning of Section 16 of the Exchange Act.
 
(cc)                         “ Option ” means an Incentive Stock Option or a Nonstatutory Stock Option to purchase shares of Common Stock granted pursuant to the Plan.
 
(dd)                       “ Option Agreement ” means a written agreement between the Company and an Optionholder evidencing the terms and conditions of an Option grant.  Each Option Agreement will be subject to the terms and conditions of the Plan.
 
(ee)                         “ Optionholder ” means a person to whom an Option is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Option.
 
(ff)                             “ Other Stock Award ” means an award based in whole or in part by reference to the Common Stock which is granted pursuant to the terms and conditions of Section 6(d).
 
(gg)                       “ Other Stock Award Agreement ” means a written agreement between the Company and a holder of an Other Stock Award evidencing the terms and conditions of an Other Stock Award grant.  Each Other Stock Award Agreement will be subject to the terms and conditions of the Plan.
 
(hh)                       “ Outside Director ” means a Director who either (i) is not a current employee of the Company or an “affiliated corporation” (within the meaning of Treasury Regulations promulgated under Section 162(m) of the Code), is not a former employee of the Company or an “affiliated corporation” who receives compensation for prior services (other than benefits under a tax-qualified retirement plan) during the taxable year, has not been an officer of the Company or an “affiliated corporation,” and does not receive remuneration from the Company or an “affiliated corporation,” either directly or indirectly, in any capacity other than as a Director, or (ii) is otherwise considered an “outside director” for purposes of Section 162(m) of the Code
 
(ii)                               “ Own ,” “ Owned ,” “ Owner ,” “ Ownership ” means a person or Entity will be deemed to “Own,” to have “Owned,” to be the “Owner” of, or to have acquired “Ownership” of securities if such person or Entity, directly or indirectly, through any contract, arrangement, understanding, relationship or otherwise, has or shares voting power, which includes the power to vote or to direct the voting, with respect to such securities.
 
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(jj)                             “ Participant ” means a person to whom an Award is granted pursuant to the Plan or, if applicable, such other person who holds an outstanding Stock Award.
 
(kk)                     “ Performance Cash Award ” means an award of cash granted pursuant to the terms and conditions of Section 6(c)(ii).
 
(ll)                               “ Performance Criteria ” means the one or more criteria that the Board will select for purposes of establishing the Performance Goals for a Performance Period.  The Performance Criteria that will be used to establish such Performance Goals may be based on any one of, or combination of, the following as determined by the Board: (1) profit before tax; (2) billings; (3) revenue; (4) net revenue; (5) earnings (which may include earnings before interest and taxes, earnings before taxes, and net earnings); (6) operating income; (7) operating margin; (8) operating profit; (9) controllable operating profit, or net operating profit; (10) net profit; (11) gross margin; (12) operating expenses or operating expenses as a percentage of revenue; (13) net income; (14) earnings per share; (15) total stockholder return; (16) market share; (17) return on assets or net assets; (18) the Company’s stock price; (19) growth in stockholder value relative to a pre-determined index; (20) return on equity; (21) return on invested capital; (22) cash flow (including free cash flow or operating cash flows); (23) cash conversion cycle; (24) economic value added; (25) individual confidential business objectives; (26) contract awards or backlog; (27) overhead or other expense reduction; (28) credit rating; (29) strategic plan development and implementation; (30) succession plan development and implementation; (31) improvement in workforce diversity; (32) customer indicators; (33) new product invention or innovation; (34) attainment of research and development milestones; (35) improvements in productivity; (36) bookings; (37) initiation of phases of clinical trials and/or studies by specified dates; (38) regulatory body approval with respect to products, studies and/or trials; (39) patient enrollment dates; (40) commercial launch of products; and (41) to the extent that an Award is not intended to comply with Section 162(m) of the Code, other measures of performance selected by the Board.
 
(mm)             “ Performance Goals ” means, for a Performance Period, the one or more goals established by the Board for the Performance Period based upon the Performance Criteria.  Performance Goals may be based on a Company-wide basis, with respect to one or more business units, divisions, Affiliates, or business segments, and in either absolute terms or relative to the performance of one or more comparable companies or the performance of one or more relevant indices.  Unless specified otherwise by the Board (i) in the Award Agreement at the time the Award is granted or (ii) in such other document setting forth the Performance Goals at the time the Performance Goals are established, the Board will appropriately make adjustments in the method of calculating the attainment of Performance Goals for a Performance Period as follows: (1) to exclude restructuring and/or other nonrecurring charges; (2) to exclude exchange rate effects; (3) to exclude the effects of changes to generally accepted accounting principles; (4) to exclude the effects of any statutory adjustments to corporate tax rates; (5) to exclude the effects of any “extraordinary items” as determined under generally accepted accounting principles; (6) to exclude the dilutive effects of acquisitions or joint ventures; (7) to assume that any business divested by the Company achieved performance objectives at targeted levels during the balance of a Performance Period following such divestiture; (8) to exclude the effect of any change in the outstanding shares of common stock of the Company by reason of any stock dividend or split, stock repurchase, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of shares or other similar corporate change, or any distributions to common stockholders other than regular cash dividends; (9) to exclude the effects of stock based compensation and the award of bonuses under the Company’s bonus plans; (10) to exclude costs incurred in connection with potential acquisitions or divestitures that are required to expensed under generally accepted accounting principles; (11) to exclude the goodwill and intangible asset impairment charges that are required to be recorded under generally accepted accounting principles; (12) to exclude the effect of any other unusual, non-recurring gain or loss or other extraordinary item; (13) to exclude the effects of the timing of acceptance for review and/or
 
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approval of submissions to the Food and Drug Administration or any other regulatory body; and (14) to exclude the effects of entering into or achieving milestones involved in licensing joint ventures.  In addition, the Board retains the discretion to reduce or eliminate the compensation or economic benefit due upon attainment of Performance Goals and to define the manner of calculating the Performance Criteria it selects to use for such Performance Period. Partial achievement of the specified criteria may result in the payment or vesting corresponding to the degree of achievement as specified in the Stock Award Agreement or the written terms of a Performance Cash Award.
 
(nn)                       “ Performance Period ” means the period of time selected by the Board over which the attainment of one or more Performance Goals will be measured for the purpose of determining a Participant’s right to and the payment of a Stock Award or a Performance Cash Award.  Performance Periods may be of varying and overlapping duration, at the sole discretion of the Board.
 
(oo)                       “ Performance Stock Award ” means a Stock Award granted under the terms and conditions of Section 6(c)(i).
 
(pp)                       “ Plan ” means this Sientra, Inc. 2014 Equity Incentive Plan, as it may be amended.
 
(qq)                       “ Restricted Stock Award ” means an award of shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(a).
 
(rr)                         “ Restricted Stock Award Agreement ” means a written agreement between the Company and a holder of a Restricted Stock Award evidencing the terms and conditions of a Restricted Stock Award grant.  Each Restricted Stock Award Agreement will be subject to the terms and conditions of the Plan.
 
(ss)                           “ Restricted Stock Unit Award ” means a right to receive shares of Common Stock which is granted pursuant to the terms and conditions of Section 6(b).
 
(tt)                             “ Restricted Stock Unit Award Agreement ” means a written agreement between the Company and a holder of a Restricted Stock Unit Award evidencing the terms and conditions of a Restricted Stock Unit Award grant.  Each Restricted Stock Unit Award Agreement will be subject to the terms and conditions of the Plan.
 
(uu)                       “ Securities Act ” means the Securities Act of 1933, as amended.
 
(vv)                       “ Stock Appreciation Right ” or “ SAR ” means a right to receive the appreciation on Common Stock that is granted pursuant to the terms and conditions of Section 5.
 
(ww)                 “ Stock Appreciation Right Agreement ” means a written agreement between the Company and a holder of a Stock Appreciation Right evidencing the terms and conditions of a Stock Appreciation Right grant.  Each Stock Appreciation Right Agreement will be subject to the terms and conditions of the Plan.
 
(xx)                       “ Stock Award ” means any right to receive Common Stock granted under the Plan, including an Incentive Stock Option, a Nonstatutory Stock Option, a Restricted Stock Award, a Restricted Stock Unit Award, a Stock Appreciation Right, a Performance Stock Award, or any Other Stock Award.
 
(yy)                       “ Stock Award Agreement ” means a written agreement between the Company and a Participant evidencing the terms and conditions of a Stock Award grant.  Each Stock Award Agreement will be subject to the terms and conditions of the Plan.
 
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(zz)                         “ Subsidiary ” means, with respect to the Company, (i) any corporation of which more than 50% of the outstanding capital stock having ordinary voting power to elect a majority of the board of directors of such corporation (irrespective of whether, at the time, stock of any other class or classes of such corporation will have or might have voting power by reason of the happening of any contingency) is at the time, directly or indirectly, Owned by the Company, and (ii) any partnership, limited liability company or other entity in which the Company has a direct or indirect interest (whether in the form of voting or participation in profits or capital contribution) of more than 50%.
 
(aaa)               “ Ten Percent Stockholder ” means a person who Owns (or is deemed to Own pursuant to Section 424(d) of the Code) stock possessing more than 10% of the total combined voting power of all classes of stock of the Company or any Affiliate
 
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SIENTRA, INC.
RESTRICTED STOCK UNIT GRANT NOTICE
(2014 EQUITY INCENTIVE PLAN)

Sientra, Inc. (the “ Company ”), pursuant to its 2014 Equity Incentive Plan (the “ Plan ”), hereby awards to Participant a Restricted Stock Unit Award for the number of shares of the Company’s Common Stock set forth below (the “ Award ”).  The Award is subject to all of the terms and conditions as set forth herein and in the Plan and the Restricted Stock Unit Award Agreement, both of which are attached hereto and incorporated herein in their entirety.  Capitalized terms not otherwise defined herein will have the meanings set forth in the Plan or the Restricted Stock Unit Award Agreement.  In the event of any conflict between the terms in the Award and the Plan, the terms of the Plan will control.

Participant:	 	 	
Date of Grant:	 	 	
Vesting Commencement Date:	 	 	
Number of Units/Shares Subject to Award:	 	 	

Vesting Schedule :	[_____________] Notwithstanding the foregoing, vesting will terminate upon the Participant’s termination of Continuous Service.	
 	 	
Issuance Schedule:	The shares will be issued in accordance with the issuance schedule set forth in Section 6 of the Restricted Stock Unit Award Agreement.	
 
Additional Terms/Acknowledgements:  Participant acknowledges receipt of, and understands and agrees to, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Award Agreement and the Plan.  Participant further acknowledges that as of the Date of Grant, this Restricted Stock Unit Grant Notice, the Restricted Stock Unit Award Agreement and the Plan set forth the entire understanding between Participant and the Company regarding this Award and supersede all prior oral and written agreements, promises and/or representations on that subject with the exception of (i) equity awards previously granted and delivered to Participant, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law and (iii) any written employment or severance arrangement that would provide for vesting acceleration of this award upon the terms and conditions set forth therein.
 
By accepting the Award, Participant acknowledges having received and read the Restricted Stock Unit Grant Notice, the Restricted Stock Unit Award Agreement and the Plan (the “ Grant Documents ”) and agrees to all of the terms and conditions set forth in these documents.  Furthermore, by accepting the Award, Participant consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

 
Notwithstanding the above, if Participant has not actively accepted the Award within 90 days of the first vesting date set forth in this Restricted Stock Unit Grant Notice, Participant is deemed to have accepted the Award, subject to all of the terms and conditions of the Grant Documents.

SIENTRA, INC.	 	PARTICIPANT:	
 	 	 	
By:	 	 	 	
Signature	 	Signature	
Title:	 	 	Date:	 	
Date:	 	 	 	

ATTACHMENTS :      Restricted Stock Unit Award Agreement, 2014 Equity Incentive Plan

 
ATTACHMENT I
 
SIENTRA, INC.
RESTRICTED STOCK UNIT AWARD AGREEMENT
(2014 EQUITY INCENTIVE PLAN)
 
Pursuant to the Restricted Stock Unit Grant Notice (the “ Grant Notice ”) and this Restricted Stock Unit Award Agreement (the “ Agreement ”) and in consideration of your services, Sientra, Inc. (the “ Company ”) has awarded you a Restricted Stock Unit Award (the “ Award ”) under its 2014 Equity Incentive Plan (the “ Plan ”). The Award is granted to you effective as of the Date of Grant set forth in the Grant Notice for this Award.  Defined terms not explicitly defined in this Agreement will have the same meanings given to them in the Plan.  In the event of any conflict between the terms in this Agreement and the Plan, the terms of the Plan will control.  The details of the Award, in addition to those set forth in the Grant Notice and the Plan, are as follows.
 
1.             GRANT OF THE AWARD.   The Award represents the right to be issued on a future date the number of shares of the Company’s Common Stock as indicated in the Grant Notice upon the satisfaction of the terms set forth in this Agreement.  Except as otherwise provided herein, you will not be required to make any payment to the Company with respect to your receipt of the Award, the vesting of the shares or the delivery of the underlying Common Stock.
 
2.             VESTING.   Subject to the limitations contained herein, the Award will vest, if at all, in accordance with the vesting schedule provided in the Grant Notice, provided that vesting will cease upon the termination of your Continuous Service.  Upon such termination of your Continuous Service, the shares credited to the Account that were not vested on the date of such termination will be forfeited at no cost to the Company and you will have no further right, title or interest in or to such underlying shares of Common Stock.
 
3.             NUMBER OF SHARES.
 
(a)           The number of units/shares subject to the Award may be adjusted from time to time for Capitalization Adjustments, as provided in the Plan.
 
(b)           Any shares, cash or other property that becomes subject to the Award pursuant to this Section 3 and Section 7, if any, will be subject, in a manner determined by the Board, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other shares covered by the Award.
 
(c)           Notwithstanding the provisions of this Section 3, no fractional shares or rights for fractional shares of Common Stock will be created pursuant to this Section 3.  The Board will, in its discretion, determine an equivalent benefit for any fractional shares or fractional shares that might be created by the adjustments referred to in this Section 3.
 
4.             SECURITIES LAW AND OTHER COMPLIANCE.   You may not be issued any shares under the Award unless either (a) the shares are registered under the Securities Act; or (b) the Company has determined that such issuance would be exempt from the registration requirements
 
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of the Securities Act. The Award also must comply with other applicable laws and regulations governing the Award, and you will not receive such shares if the Company determines that such receipt would not be in material compliance with such laws and regulations.
 
5.             TRANSFER RESTRICTIONS.
 
(a)           General.   Prior to the time that shares of Common Stock have been delivered to you, you may not transfer, pledge, sell or otherwise dispose of this Award or the shares issuable in respect of the Award, except as expressly provided in this Section 5.  For example, you may not use shares that may be issued in respect of the Award as security for a loan.  The restrictions on transfer set forth herein will lapse upon delivery to you of shares in respect of the vested portion of the Award.
 
(b)           Death.  The Award is transferable by will and by the laws of descent and distribution.  In addition, upon receiving written permission from the Board or its duly authorized designee, you may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect transactions under the Plan, designate a third party who, in the event of your death, will thereafter be entitled to receive any distribution of Common Stock or other consideration to which you were entitled at the time of your death pursuant to this Agreement.  In the absence of such a designation, your executor or administrator of your estate will be entitled to receive, on behalf of your estate, such Common Stock or other consideration.
 
(c)           Certain Trusts.   Upon receiving written permission from the Board or its duly authorized designee, you may transfer the Award to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the Award is held in the trust, provided that you and the trustee enter into transfer and other agreements required by the Company.
 
(d)           Domestic Relations Orders.   Upon receiving written permission from the Board or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer the Award or your right to receive the distribution of Common Stock or other consideration thereunder, pursuant to a domestic relations order that contains the information required by the Company to effectuate the transfer.  You are encouraged to discuss the proposed terms of any division of this Award with the Company prior to finalizing the domestic relations order to help ensure the required information is contained within the domestic relations order.
 
6.             DATE OF ISSUANCE.
 
(a)           The Company will deliver to you a number of shares of the Company’s Common Stock equal to the number of vested shares subject to the Award, including any additional shares received pursuant to Section 3 above that relate to those vested shares on the applicable vesting date(s). However, if a scheduled delivery date falls on a date that is not a business day, such delivery date will instead fall on the next following business day.
 
(b)           Notwithstanding the foregoing, in the event that (i) you are subject to the Company’s policy permitting certain individuals to sell shares only during certain “window”
 
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periods, in effect from time to time or you are otherwise prohibited from selling shares of the Company’s Common Stock in the public market and any shares covered by the Award are scheduled to be delivered on a day (the “ Original Distribution Date ”) that does not occur during an open “window period” applicable to you, as determined by the Company in accordance with such policy, or does not occur on a date when you are otherwise permitted to sell shares of the Company’s Common Stock on the open market, and (ii) the Company elects not to satisfy its obligations for Tax-Related Items (as defined in Section 10) by withholding shares from your distribution, then such shares will not be delivered on such Original Distribution Date and will instead be delivered on the first business day of the next occurring open “window period” applicable to you pursuant to such policy (regardless of whether you are still providing Continuous Service at such time) or the next business day when you are not prohibited from selling shares of the Company’s Common Stock in the open market, but in no event later than the fifteenth (15th) day of the third calendar month of the calendar year following the calendar year in which the shares of Common Stock originally became vested.  The form of such delivery ( e.g. , a stock certificate or electronic entry evidencing such shares) will be determined by the Company.  In all cases, the delivery of shares under this Award is intended to comply with Treasury Regulation Section 1.409A-1(b)(4) and will be construed and administered in such a manner.
 
7.             DIVIDENDS. You shall receive no benefit or adjustment to your Award with respect to any cash dividend, stock dividend or other distribution that does not result from a Capitalization Adjustment.
 
8.             RESTRICTIVE LEGENDS.   The shares issued under the Award will be endorsed with appropriate legends as determined by the Company.
 
9.             AWARD NOT AN EMPLOYMENT OR SERVICE CONTRACT.
 
(a)           Your Continuous Service with the Company or an Affiliate is not for any specified term and may be terminated by you or by the Company or an Affiliate at any time, for any reason, with or without cause and with or without notice.  Nothing in this Agreement (including, but not limited to, the vesting of the Award pursuant to Section 2 or the issuance of the shares subject to the Award), the Plan or any covenant of good faith and fair dealing that may be found implicit in this Agreement or the Plan will: (i) confer upon you any right to continue in the employ of, or affiliation with, the Company or an Affiliate; (ii) constitute any promise or commitment by the Company or an Affiliate regarding the fact or nature of future positions, future work assignments, future compensation or any other term or condition of employment or affiliation; (iii) confer any right or benefit under this Agreement or the Plan unless such right or benefit has specifically accrued under the terms of this Agreement or Plan; or (iv) deprive the Company or an Affiliate of the right to terminate you at will and without regard to any future vesting opportunity that you may have.
 
(b)           By accepting this Award, you acknowledge and agree that the right to continue vesting in the Award pursuant to Section 2 and the schedule set forth in the Grant Notice is earned only by continuing as an employee, director or consultant at the will of the Company or an Affiliate (not through the act of being hired, being granted this Award or any other award or benefit) and that the Company has the right to reorganize, sell, spin-out or
 
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otherwise restructure one or more of its businesses or Affiliates at any time or from time to time, as it deems appropriate (a “ reorganization ”).  You further acknowledge and agree that such a reorganization could result in the termination of your Continuous Service, or the termination of Affiliate status of your employer and the loss of benefits available to you under this Agreement, including but not limited to, the termination of the right to continue vesting in the Award.  You further acknowledge and agree that this Agreement, the Plan, the transactions contemplated hereunder and the vesting schedule set forth in the Grant Notice or any covenant of good faith and fair dealing that may be found implicit in any of them do not constitute an express or implied promise of continued engagement as an employee or consultant with the Company or an Affiliate for the term of this Agreement, for any period, or at all, and will not interfere in any way with your right or the right of the Company or an Affiliate to terminate your Continuous Service at any time, with or without cause and with or without notice.
 
10.          RESPONSIBILITY FOR TAXES.
 
(a)           You acknowledge that, regardless of any action taken by the Company, the ultimate liability for all income tax, social insurance, payroll tax, fringe benefits tax, payment on account or other tax-related items related to your participation in the Plan and legally applicable to you or deemed by the Company in its discretion to be an appropriate charge to you even if legally applicable to the Company (“ Tax-Related Items ”) is and remains your responsibility and may exceed the amount actually withheld by the Company.
 
(b)           Prior to any relevant taxable or tax withholding event, as applicable, you agree to make adequate arrangements satisfactory to the Company and/or the Employer to satisfy all Tax-Related Items.  In this regard, you authorize the Company or its agent to satisfy their withholding obligations with regard to all Tax-Related Items, if any, by any of the following means or by a combination of such means: (i) withholding from any compensation otherwise payable to you by the Company or the Employer; (ii) causing you to tender a cash payment; (iii) entering on your behalf (pursuant to this authorization without further consent) into a “same day sale” commitment with a broker dealer that is a member of the Financial Industry Regulatory Authority (a “ FINRA Dealer ”) whereby you irrevocably elect to sell a portion of the shares to be delivered under the Award to satisfy the Tax-Related Items and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Tax-Related Items directly to the Company and/or its Affiliates; or (iv) withholding shares of Common Stock from the shares of Common Stock issued or otherwise issuable to you in connection with the Award with a Fair Market Value (measured as of the date shares of Common Stock are issued pursuant to Section 6) equal to the amount of such Tax-Related Items.  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 Common Stock equivalent.  If the obligation for Tax-Related Items is satisfied by withholding in shares of Common Stock, for tax purposes, you are deemed to have been issued the full number of shares of Common Stock subject to the vested portion of the Award, notwithstanding that a number of the shares of Common Stock are held back solely for the purpose of paying the Tax-Related Items.
 
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(c)           Finally, you agree to pay to the Company or the Employer any amount of Tax-Related Items that the Company or the Employer may be required to withhold or account for as a result of your participation in the Plan that cannot be satisfied by the means previously described.  The Company may refuse to issue or deliver the shares or the proceeds of the sale of shares of Common Stock if you fail to comply with your obligations in connection with the Tax-Related Items.
 
11.          NO OBLIGATION TO MINIMIZE TAXES.  You acknowledge that the Company is not making representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Award, including, but not limited to, the grant, vesting or settlement of the Award, the subsequent sale of shares of Common Stock acquired pursuant to such settlement and the receipt of any dividends and/or any dividend equivalent payments.  Further, you acknowledge that the Company does not have any duty or obligation to minimize your liability for Tax-Related Items arising from the Award and will not be liable to you for any Tax-Related Items arising in connection with the Award.
 
12.          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 of Common Stock.  You are hereby advised to consult with your own personal tax, financial and/or legal advisors regarding the Tax-Related Items arising in connection with the Award and by accepting the Award, you have agreed that you have done so or knowingly and voluntarily declined to do so.
 
13.          UNSECURED OBLIGATION.   The Award is unfunded, and as a holder of a vested Award, you will be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares pursuant to this Agreement.  You will not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Agreement until such shares are issued to you pursuant to Section 6 of this Agreement.  Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company.  Nothing contained in this Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.
 
14.          OTHER DOCUMENTS .  You hereby acknowledge receipt or the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.  In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.
 
15.          NOTICES.   Any notices provided for in the Grant Notice, this Agreement or the Plan will be given in writing and will be deemed effectively given upon receipt or, in the case of notices delivered by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.  Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic means or to request your consent to participate in the Plan by electronic means.  You hereby consent to receive such documents by electronic delivery and, if requested, to agree to participate in the Plan through an
 
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on-line or electronic system established and maintained by the Company or another third party designated by the Company.
 
16.          MISCELLANEOUS.
 
(a)           The rights and obligations of the Company under the Award will be transferable to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Company’s successors and assigns. Your rights and obligations under the Award may only be assigned with the prior written consent of the Company.
 
(b)           You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of the Award.
 
(c)           You acknowledge and agree that you have reviewed the documents provided to you in relation to the Award in their entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting the Award, and fully understand all provisions of such documents.
 
(d)           This Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
 
(e)           All obligations of the Company under the Plan and this Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
 
17.          GOVERNING PLAN DOCUMENT.   The Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of the Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan.  Except as expressly provided herein, in the event of any conflict between the provisions of the Award and those of the Plan, the provisions of the Plan will control.
 
18.          SEVERABILITY.   If all or any part of this Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
 
19.          EFFECT ON OTHER EMPLOYEE BENEFIT PLANS.   The value of the Award subject to this Agreement will not be included as compensation, earnings, salaries, or other similar terms used when calculating the Employee’s benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company
 
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expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.
 
20.          AMENDMENT.   This Agreement may not be modified, amended or terminated except by an instrument in writing, signed by you and by a duly authorized representative of the Company. Notwithstanding the foregoing, this Agreement may be amended solely by the Board by a writing which specifically states that it is amending this Agreement, so long as a copy of such amendment is delivered to you, and provided that, except as otherwise expressly provided in the Plan, no such amendment adversely affecting your rights hereunder may be made without your written consent. Without limiting the foregoing, the Board reserves the right to change, by written notice to you, the provisions of this Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, ruling, or judicial decision, provided that any such change will be applicable only to rights relating to that portion of the Award which is then subject to restrictions as provided herein.
 
21.          COMPLIANCE WITH SECTION 409A OF THE CODE .   This Award is intended to comply with the “short-term deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4).  Notwithstanding the foregoing, if it is determined that the Award fails to satisfy the requirements of the short-term deferral rule and is otherwise deferred compensation subject to Section 409A, and if you are a “Specified Employee” (within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six months thereafter will not be made on the originally scheduled date(s) and will instead be issued in a lump sum on the date that is six months and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on you in respect of the shares under Section 409A of the Code.  Each installment of shares that vests is intended to constitute a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).
 
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ATTACHMENT II
 
2014 EQUITY INCENTIVE PLAN

 
 
SIENTRA, INC.
2014 EQUITY INCENTIVE PLAN
 
STOCK OPTION GRANT NOTICE
 
Sientra, Inc. (the “ Company ”), pursuant to its 2014 Equity Incentive Plan (the “ Plan ”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Common Stock set forth below.  This option is subject to all of the terms and conditions as set forth in this notice, in the Option Agreement, the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.  Capitalized terms not explicitly defined herein but defined in the Plan or the Option Agreement will have the same definitions as in the Plan or the Option Agreement. If there is any conflict between the terms in this notice and the Plan, the terms of the Plan will control.

Optionholder:	 	 	
Date of Grant:	 	 	
Vesting Commencement Date:	 	 	
Number of Shares Subject to Option:	 	 	
Exercise Price (Per Share):	 	 	
Total Exercise Price:	 	 	
Expiration Date:	 	 	

Type of Grant:	o   Incentive Stock Option 1                   o   Nonstatutory Stock Option	
 	 	
Exercise Schedule :	Same as Vesting Schedule	
 	 	
Vesting Schedule :	[ _____________]	
 	 	
Payment:	By one or a combination of the following items (described in the Option Agreement):
 
ý            By cash, check, bank draft or money order payable to the Company
 
ý            Pursuant to a Regulation T Program if the shares are publicly traded
 
ý            By delivery of already-owned shares if the shares are publicly traded
 
ý            If and only to the extent this option is a Nonstatutory Stock Option, and subject to the Company’s consent at the time of exercise, by a “net exercise” arrangement	
 
Additional Terms/Acknowledgements: Optionholder acknowledges receipt of, and understands and agrees to, this Stock Option Grant Notice, the Option Agreement and the Plan.  Optionholder acknowledges and agrees that this Stock Option Grant Notice and the Option Agreement may not be modified, amended or revised except as provided in the Plan.  Optionholder further acknowledges that as of the Date of Grant, this Stock Option Grant Notice, the Option Agreement, and the Plan set forth the entire understanding between Optionholder and the Company regarding this option award and supersede all prior oral and written agreements, promises and/or representations on that subject with the exception of (i) options previously granted and delivered to Optionholder, (ii) any compensation recovery policy that is adopted by the Company or is otherwise required by applicable law and (iii) any written
____________________________
 
1   If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value (measured by exercise price) in any calendar year.  Any excess over $100,000 is a Nonstatutory Stock Option.
 
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employment or severance arrangement that would provide for vesting acceleration of this option upon the terms and conditions set forth therein.
 
By accepting the Award, Participant acknowledges having received and read the Stock Option Grant Notice, the Option Award Agreement and the Plan (the “ Grant Documents ”) and agrees to all of the terms and conditions set forth in these documents.  Furthermore, by accepting this option, Optionholder consents to receive such documents by electronic delivery and to participate in the Plan through an online or electronic system established and maintained by the Company or another third party designated by the Company.

 

SIENTRA, INC.	 	OPTIONHOLDER:	 	
 	 	 	 	 	
By:	 	 	 	 	
 	Signature	 	Signature	 	
 	 	 	 	 	 	
Title:	 	 	Date:	 	 	
 	 	 	 	 	
Date:	 	 	 	 	

ATTACHMENTS :  Option Agreement, 2014 Equity Incentive Plan and Notice of Exercise
 
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ATTACHMENT I
 
OPTION AGREEMENT

 
SIENTRA, INC.
2014 EQUITY INCENTIVE PLAN
 
OPTION AGREEMENT
(INCENTIVE STOCK OPTION OR NONSTATUTORY STOCK OPTION)
 
Pursuant to your Stock Option Grant Notice (“ Grant Notice ”) and this Option Agreement, Sientra, Inc. (the “ Company ”) has granted you an option under its 2014 Equity Incentive Plan (the “ Plan ”) to purchase the number of shares of the Company’s Common Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice.  The option is granted to you effective as of the date of grant set forth in the Grant Notice (the “ Date of Grant ”).  If there is any conflict between the terms in this Option Agreement and the Plan, the terms of the Plan will control. Capitalized terms not explicitly defined in this Option Agreement or in the Grant Notice but defined in the Plan will have the same definitions as in the Plan.
 
The details of your option, in addition to those set forth in the Grant Notice and the Plan, are as follows:
 
1.                                     VESTING.   Subject to the provisions contained herein, your option will vest as provided in your Grant Notice.  Vesting will cease upon the termination of your Continuous Service.
 
2.                                     NUMBER OF SHARES AND EXERCISE PRICE.   The number of shares of Common Stock subject to your option and your exercise price per share in your Grant Notice will be adjusted for Capitalization Adjustments.
 
3.                                     EXERCISE RESTRICTION FOR NON-EXEMPT EMPLOYEES.   If you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (that is, a “ Non-Exempt Employee ”), and except as otherwise provided in the Plan, you may not exercise your option until you have completed at least six (6) months of Continuous Service measured from the Date of Grant, even if you have already been an employee for more than six (6) months. Consistent with the provisions of the Worker Economic Opportunity Act, you may exercise your option as to any vested portion prior to such six (6) month anniversary in the case of (i) your death or disability, (ii) a Corporate Transaction in which your option is not assumed, continued or substituted, (iii) a Change in Control or (iv) your termination of Continuous Service on your “retirement” (as defined in the Company’s benefit plans).
 
4.                                     METHOD OF PAYMENT.   You must pay the full amount of the exercise price for the shares you wish to exercise.  You may pay the exercise price in cash or by check, bank draft or money order payable to the Company or in any other manner permitted by your Grant Notice, which may include one or more of the following:
 
(a)                               Provided that at the time of exercise the Common Stock is publicly traded, pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board that, prior to the issuance of Common Stock, results in either the receipt of cash (or check) by the Company or the receipt of irrevocable instructions to pay the aggregate exercise price to the Company from the sales proceeds.  This manner of payment is also known as a “broker-assisted exercise”, “same day sale”, or “sell to cover”.
 
(b)                               Provided that at the time of exercise the Common Stock is publicly traded, by delivery to the Company (either by actual delivery or attestation) of already-owned shares of Common
 
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Stock that are owned free and clear of any liens, claims, encumbrances or security interests, and that are valued at Fair Market Value on the date of exercise.  “Delivery” for these purposes, in the sole discretion of the Company at the time you exercise your option, will include delivery to the Company of your attestation of ownership of such shares of Common Stock in a form approved by the Company.  You may not exercise your option by delivery to the Company of Common Stock if doing so would violate the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.
 
(c)                                If this option is a Nonstatutory Stock Option, subject to the consent of the Company at the time of exercise, by a “net exercise” arrangement pursuant to which the Company will reduce the number of shares of Common Stock issued upon exercise of your option by the largest whole number of shares with a Fair Market Value that does not exceed the aggregate exercise price.  You must pay any remaining balance of the aggregate exercise price not satisfied by the “net exercise” in cash or other permitted form of payment.  Shares of Common Stock will no longer be outstanding under your option and will not be exercisable thereafter if those shares (i) are used to pay the exercise price pursuant to the “net exercise,” (ii) are delivered to you as a result of such exercise, and (iii) are withheld to satisfy your tax withholding obligations.
 
5.                                     WHOLE SHARES.   You may exercise your option only for whole shares of Common Stock.
 
6.                                     SECURITIES LAW COMPLIANCE.   In no event may you exercise your option unless the shares of Common Stock issuable upon exercise are then registered under the Securities Act or, if not registered, the Company has determined that your exercise and the issuance of the shares would be exempt from the registration requirements of the Securities Act.  The exercise of your option also must comply with all other applicable laws and regulations governing your option, and you may not exercise your option if the Company determines that such exercise would not be in material compliance with such laws and regulations (including any restrictions on exercise required for compliance with Treas. Reg. 1.401(k)-1(d)(3), if applicable).
 
7.                                     TERM.   You may not exercise your option before the Date of Grant or after the expiration of the option’s term.  The term of your option expires, subject to the provisions of Section 5(h) of the Plan, upon the earliest of the following:
 
(a)                               immediately upon the date on which the event giving rise to your termination of Continuous Service for Cause occurs (or, if required by law, the date of termination of Continuous Service for Cause);
 
(b)                               sixty (60) days after the termination of your Continuous Service for any reason other than Cause, your Disability or your death (except as otherwise provided in Section 7(d) below); provided , however , that if during any part of such sixty (60) day period your option is not exercisable solely because of the condition set forth in the section above relating to “Securities Law Compliance,” your option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of sixty (60) days after the termination of your Continuous Service; provided further, if during any part of such sixty (60) day period, the sale of any Common Stock received upon exercise of your option would violate the Company’s insider trading policy, then your option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of sixty (60) days after the termination of your Continuous Service during which the sale of the Common Stock received upon exercise of your option would not be in violation of the Company’s insider trading policy.  Notwithstanding the foregoing, if (i) you are a Non-Exempt Employee, (ii) your Continuous Service terminates within six (6) months after the Date of Grant, and (iii) you have vested in a portion of your option at the time of your termination of Continuous Service, your option will not expire until the earlier
 
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of (x) the later of (A) the date that is seven (7) months after the Date of Grant, and (B) the date that is sixty (60) days after the termination of your Continuous Service, and (y) the Expiration Date;
 
(c)                                six (6) months after the termination of your Continuous Service due to your Disability (except as otherwise provided in Section 7(d)) below;
 
(d)                               six (6) months after your death if you die either during your Continuous Service or within thirty (30) days after your Continuous Service terminates for any reason other than Cause;
 
(e)                                the Expiration Date indicated in your Grant Notice; or
 
(f)                                  the day before the tenth (10th) anniversary of the Date of Grant.
 
If your option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the Date of Grant and ending on the day three (3) months before the date of your option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability.  The Company has provided for extended exercisability of your option under certain circumstances for your benefit but cannot guarantee that your option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your option more than three (3) months after the date your employment with the Company or an Affiliate terminates.
 
8.                                     EXERCISE.
 
(a)                               You may exercise the vested portion of your option during its term by (i) delivering a Notice of Exercise (in a form designated by the Company) or completing such other documents and/or procedures designated by the Company for exercise and (ii) paying the exercise price and any applicable withholding taxes to the Company’s Secretary, stock plan administrator, or such other person as the Company may designate, together with such additional documents as the Company may then require.
 
(b)                               By exercising your option you agree that, as a condition to any exercise of your option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your option, (ii) the lapse of any substantial risk of forfeiture to which the shares of Common Stock are subject at the time of exercise, or (iii) the disposition of shares of Common Stock acquired upon such exercise.
 
(c)                                If your option is an Incentive Stock Option, by exercising your option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Common Stock issued upon exercise of your option that occurs within two (2) years after the Date of Grant or within one (1) year after such shares of Common Stock are transferred upon exercise of your option.
 
9.                                     TRANSFERABILITY.   Except as otherwise provided in this Section 9, your option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you.
 
(a)                               Certain Trusts.   Upon receiving written permission from the Board or its duly authorized designee, you may transfer your option to a trust if you are considered to be the sole beneficial
 
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owner (determined under Section 671 of the Code and applicable state law) while the option is held in the trust.  You and the trustee must enter into transfer and other agreements required by the Company.
 
(b)                               Domestic Relations Orders.   Upon receiving written permission from the Board or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your option pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2) that contains the information required by the Company to effectuate the transfer.  You are encouraged to discuss the proposed terms of any division of this option with the Company prior to finalizing the domestic relations order or marital settlement agreement to help ensure the required information is contained within the domestic relations order or marital settlement agreement.  If this option is an Incentive Stock Option, this option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.
 
(c)                                Beneficiary Designation.   Upon receiving written permission from the Board or its duly authorized designee, you may, by delivering written notice to the Company, in a form approved by the Company and any broker designated by the Company to handle option exercises, designate a third party who, on your death, will thereafter be entitled to exercise this option and receive the Common Stock or other consideration resulting from such exercise.  In the absence of such a designation, your executor or administrator of your estate will be entitled to exercise this option and receive, on behalf of your estate, the Common Stock or other consideration resulting from such exercise.
 
10.                             OPTION NOT A SERVICE CONTRACT.   Your option is not an employment or service contract, and nothing in your option will be deemed to create in any way whatsoever any obligation on your part to continue in the employ of the Company or an Affiliate, or of the Company or an Affiliate to continue your employment.  In addition, nothing in your option will obligate the Company or an Affiliate, their respective stockholders, boards of directors, officers or employees to continue any relationship that you might have as a Director or Consultant for the Company or an Affiliate.
 
11.                             WITHHOLDING OBLIGATIONS.
 
(a)                               At the time you exercise your option, in whole or in part, and at any time thereafter as requested by the Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “same day sale” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of the Company or an Affiliate, if any, which arise in connection with the exercise of your option.
 
(b)                               If this option is a Nonstatutory Stock Option, then upon your request and subject to approval by the Company, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Common Stock otherwise issuable to you upon the exercise of your option a number of whole shares of Common Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of your option as a liability for financial accounting purposes).  If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Common Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your option.
 
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Notwithstanding the filing of such election, shares of Common Stock shall be withheld solely from fully vested shares of Common Stock determined as of the date of exercise of your option that are otherwise issuable to you upon such exercise.  Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.
 
(c)                                You may not exercise your option unless the tax withholding obligations of the Company and/or any Affiliate are satisfied.  Accordingly, you may not be able to exercise your option when desired even though your option is vested, and the Company will have no obligation to issue a certificate for such shares of Common Stock or release such shares of Common Stock from any escrow provided for herein, if applicable, unless such obligations are satisfied.
 
12.                             TAX CONSEQUENCES . You hereby agree that the Company does not have a duty to design or administer the Plan or its other compensation programs in a manner that minimizes your tax liabilities. You will not make any claim against the Company, or any of its Officers, Directors, Employees or Affiliates related to tax liabilities arising from your option or your other compensation. In particular, you acknowledge that this option is exempt from Section 409A of the Code only if the exercise price per share specified in the Grant Notice is at least equal to the “fair market value” per share of the Common Stock on the Date of Grant and there is no other impermissible deferral of compensation associated with the option.
 
13.                             NOTICES.   Any notices provided for in your option or the Plan will be given in writing (including electronically) and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five (5) days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.  The Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this option by electronic means or to request your consent to participate in the Plan by electronic means.  By accepting this option, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.
 
14.                             GOVERNING PLAN DOCUMENT.   Your option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your option, and is further subject to all interpretations, amendments, rules and regulations, which may from time to time be promulgated and adopted pursuant to the Plan.  If there is any conflict between the provisions of your option and those of the Plan, the provisions of the Plan will control.  In addition, your option (and any compensation paid or shares issued under your option) is subject to recoupment in accordance with The Dodd–Frank Wall Street Reform and Consumer Protection Act and any implementing regulations thereunder, any clawback policy adopted by the Company and any compensation recovery policy otherwise required by applicable law.
 
15.                             OTHER DOCUMENTS .  You hereby acknowledge receipt of and the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.  In addition, you acknowledge receipt of the Company’s policy permitting certain individuals to sell shares only during certain “window” periods and the Company’s insider trading policy, in effect from time to time.
 
16.                             EFFECT ON OTHER EMPLOYEE BENEFIT PLANS .  The value of this option will not be included as compensation, earnings, salaries, or other similar terms used when calculating your benefits under any employee benefit plan sponsored by the Company or any Affiliate, except as such plan otherwise expressly provides. The Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Affiliate’s employee benefit plans.
 
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17.                             VOTING RIGHTS .  You will not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this option until such shares are issued to you.  Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company.  Nothing contained in this option, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company or any other person.
 
18.                             SEVERABILITY .  If all or any part of this Option Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Option Agreement or the Plan not declared to be unlawful or invalid.  Any Section of this Option Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.
 
19.                             MISCELLANEOUS .
 
(a)                               The rights and obligations of the Company under your option will be transferable to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Company’s successors and assigns.
 
(b)                               You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your option.
 
(c)                                You acknowledge and agree that you have reviewed your option in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your option, and fully understand all provisions of your option.
 
(d)                               This Option Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
 
(e)                                All obligations of the Company under the Plan and this Option Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

*                                         *                                         *

This Option Agreement will be deemed to be signed by you upon the signing by you of the Grant Notice to which it is attached.
 
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ATTACHMENT II

2014 EQUITY INCENTIVE PLAN

 
ATTACHMENT III
 
NOTICE OF EXERCISE

 
NOTICE OF EXERCISE

Sientra, Inc.
Attention: Stock Plan Administrator
420 South Fairview Avenue, Suite 200
Santa Barbara, CA 93117	Date: _______________	

This constitutes notice to Sientra, Inc. (the “ Company ”) under my stock option that I elect to purchase the below number of shares of Common Stock of the Company (the “ Shares ”) for the price set forth below.

Type of option (check one):	 	Incentive  ¨	Nonstatutory  ¨	
 	 	 	 	
Stock option dated:	 	_______________	_______________	
 	 	 	 	
Number of Shares as
to which option is
exercised:	 	_______________	_______________	
 	 	 	 	
Certificates to be
issued in name of:	 	_______________	_______________	
 	 	 	 	
Total exercise price:	 	$______________	$______________	
 	 	 	 	
Cash payment delivered
herewith:	 	$______________	$______________	
 	 	 	 	
Value of ________ Shares
delivered herewith:	 	$______________	$______________	
 	 	 	 	
Value of ________ Shares
pursuant to net exercise:	 	$______________	$______________	
 	 	 	 	
Regulation T Program (cashless
exercise):	 	$______________	$______________	
 
By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the Sientra, Inc. 2014 Equity Incentive Plan, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this option, and (iii) if this exercise relates to an Incentive Stock Option, to notify you in writing within fifteen (15) days after the date of any disposition of any of the Shares issued upon exercise of this option that occurs within two (2) years after the date of grant of this option or within one (1) year after such Shares are issued upon exercise of this option.

 	Very truly yours,	 	

 	Signature	 	

 	Print Name	 	

 

Exhibit 10.5
 
SIENTRA, INC.
 
2014 EMPLOYEE STOCK PURCHASE PLAN
 ADOPTED BY THE BOARD OF DIRECTORS: October 10, 2014
APPROVED BY THE STOCKHOLDERS:  October 10, 2014
 
1.                                     GENERAL; PURPOSE.
 
(a)                               The Plan provides a means by which Eligible Employees of the Company and certain designated Related Corporations may be given an opportunity to purchase shares of Common Stock.  The Plan permits the Company to grant a series of Purchase Rights to Eligible Employees under an Employee Stock Purchase Plan.
 
(b)                              The Company, by means of the Plan, seeks to retain the services of such Employees, to secure and retain the services of new Employees and to provide incentives for such persons to exert maximum efforts for the success of the Company and its Related Corporations.
 
2.                                     ADMINISTRATION.
 
(a)                               The Board will administer the Plan unless and until the Board delegates administration of the Plan to a Committee or Committees, as provided in Section 2(c).
 
(b)                              The Board will have the power, subject to, and within the limitations of, the express provisions of the Plan:
 
(i)                                   To determine how and when Purchase Rights will be granted and the provisions of each Offering (which need not be identical).
 
(ii)                               To designate from time to time which Related Corporations of the Company will be eligible to participate in the Plan.
 
(iii)                           To construe and interpret the Plan and Purchase Rights, and to establish, amend and revoke rules and regulations for its administration.  The Board, in the exercise of this power, may correct any defect, omission or inconsistency in the Plan, in a manner and to the extent it deems necessary or expedient to make the Plan fully effective.
 
(iv)                           To settle all controversies regarding the Plan and Purchase Rights granted under the Plan.
 
(v)                               To suspend or terminate the Plan at any time as provided in Section 12.
 
(vi)                           To amend the Plan at any time as provided in Section 12.
 
(vii)                       Generally, to exercise such powers and to perform such acts as it deems necessary or expedient to promote the best interests of the Company and its Related Corporations and to carry out the intent that the Plan be treated as an Employee Stock Purchase Plan.
 
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(viii)                   To adopt such procedures and sub-plans as are necessary or appropriate to permit participation in the Plan by Employees who are foreign nationals or employed outside the United States.
 
(c)                                The Board may delegate some or all of the administration of the Plan to a Committee or Committees.  If administration is delegated to a Committee, the Committee will have, in connection with the administration of the Plan, the powers theretofore possessed by the Board that have been delegated to the Committee, including the power to delegate to a subcommittee any of the administrative powers the Committee is authorized to exercise (and references in this Plan to the Board will thereafter be to the Committee or subcommittee), subject, however, to such resolutions, not inconsistent with the provisions of the Plan, as may be adopted from time to time by the Board.  The Board may retain the authority to concurrently administer the Plan with the Committee and may, at any time, revest in the Board some or all of the powers previously delegated.  Whether or not the Board has delegated administration of the Plan to a Committee, the Board will have the final power to determine all questions of policy and expediency that may arise in the administration of the Plan.
 
(d)                              All determinations, interpretations and constructions made by the Board in good faith will not be subject to review by any person and will be final, binding and conclusive on all persons.
 
3.                                     SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
 
(a)                               Subject to the provisions of Section 11(a) relating to Capitalization Adjustments, the maximum number of shares of Common Stock that may be issued under the Plan will not exceed 255,500 shares of Common Stock, plus the number of shares of Common Stock that are automatically added on January 1st of each year for a period of up to ten years, commencing on the first January 1 following the IPO Date and ending on (and including) January 1, 2024, in an amount equal to the lesser of (i) 1.0 % of the total number of shares of Capital Stock outstanding on December 31st of the preceding calendar year, and (ii) 3,000,000 shares of Common Stock.  Notwithstanding the foregoing, the Board may act prior to the first day of any calendar year to provide that there will be no January 1 st  increase in the share reserve for such calendar year or that the increase in the share reserve for such calendar year will be a lesser number of shares of Common Stock than would otherwise occur pursuant to the preceding sentence.
 
(b)                              If any Purchase Right granted under the Plan terminates without having been exercised in full, the shares of Common Stock not purchased under such Purchase Right will again become available for issuance under the Plan.
 
(c)                                The stock purchasable under the Plan will be shares of authorized but unissued or reacquired Common Stock, including shares repurchased by the Company on the open market.
 
4.                                     GRANT OF PURCHASE RIGHTS; OFFERING.
 
(a)                               The Board may from time to time grant or provide for the grant of Purchase Rights to Eligible Employees under an Offering (consisting of one or more Purchase Periods) on an Offering Date or Offering Dates selected by the Board.  Each Offering will be in such form and will contain such terms and conditions as the Board will deem appropriate, and will comply
 
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with the requirement of Section 423(b)(5) of the Code that all Employees granted Purchase Rights will have the same rights and privileges.  The terms and conditions of an Offering shall be incorporated by reference into the Plan and treated as part of the Plan.  The provisions of separate Offerings need not be identical, but each Offering will include (through incorporation of the provisions of this Plan by reference in the document comprising the Offering or otherwise) the period during which the Offering will be effective, which period will not exceed 27 months beginning with the Offering Date, and the substance of the provisions contained in Sections 5 through 8, inclusive.
 
(b)                              If a Participant has more than one Purchase Right outstanding under the Plan, unless he or she otherwise indicates in forms delivered to the Company: (i) each form will apply to all of his or her Purchase Rights under the Plan, and (ii) a Purchase Right with a lower exercise price (or an earlier-granted Purchase Right, if different Purchase Rights have identical exercise prices) will be exercised to the fullest possible extent before a Purchase Right with a higher exercise price (or a later-granted Purchase Right if different Purchase Rights have identical exercise prices) will be exercised.
 
(c)                                The Board will have the discretion to structure an Offering so that if the Fair Market Value of a share of Common Stock on the first Trading Day of a new Purchase Period within that Offering is less than or equal to the Fair Market Value of a share of Common Stock on the Offering Date for that Offering, then (i) that Offering will terminate immediately as of that first Trading Day, and (ii) the Participants in such terminated Offering will be automatically enrolled in a new Offering beginning on the first Trading Day of such new Purchase Period.
 
5.                                     ELIGIBILITY.
 
(a)                               Purchase Rights may be granted only to Employees of the Company or, as the Board may designate in accordance with Section 2(b), to Employees of a Related Corporation.  Except as provided in Section 5(b), an Employee will not be eligible to be granted Purchase Rights unless, on the Offering Date, the Employee has been in the employ of the Company or the Related Corporation, as the case may be, for such continuous period preceding such Offering Date as the Board may require, but in no event will the required period of continuous employment be equal to or greater than two years.  In addition, the Board may provide that no Employee will be eligible to be granted Purchase Rights under the Plan unless, on the Offering Date, such Employee’s customary employment with the Company or the Related Corporation is more than 20 hours per week and more than five months per calendar year or such other criteria as the Board may determine consistent with Section 423 of the Code.
 
(b)                              The Board may provide that each person who, during the course of an Offering, first becomes an Eligible Employee will, on a date or dates specified in the Offering which coincides with the day on which such person becomes an Eligible Employee or which occurs thereafter, receive a Purchase Right under that Offering, which Purchase Right will thereafter be deemed to be a part of that Offering.  Such Purchase Right will have the same characteristics as any Purchase Rights originally granted under that Offering, as described herein, except that:
 
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(i)                                   the date on which such Purchase Right is granted will be the “Offering Date” of such Purchase Right for all purposes, including determination of the exercise price of such Purchase Right;
 
(ii)                               the period of the Offering with respect to such Purchase Right will begin on its Offering Date and end coincident with the end of such Offering; and
 
(iii)                           the Board may provide that if such person first becomes an Eligible Employee within a specified period of time before the end of the Offering, he or she will not receive any Purchase Right under that Offering.
 
(c)                                No Employee will be eligible for the grant of any Purchase Rights if, immediately after any such Purchase Rights are granted, such Employee owns stock possessing five percent or more of the total combined voting power or value of all classes of stock of the Company or of any Related Corporation.  For purposes of this Section 5(c), the rules of Section 424(d) of the Code will apply in determining the stock ownership of any Employee, and stock which such Employee may purchase under all outstanding Purchase Rights and options will be treated as stock owned by such Employee.
 
(d)                              As specified by Section 423(b)(8) of the Code, an Eligible Employee may be granted Purchase Rights only if such Purchase Rights, together with any other rights granted under all Employee Stock Purchase Plans of the Company and any Related Corporations, do not permit such Eligible Employee’s rights to purchase stock of the Company or any Related Corporation to accrue at a rate which exceeds $25,000 of Fair Market Value of such stock (determined at the time such rights are granted, and which, with respect to the Plan, will be determined as of their respective Offering Dates) for each calendar year in which such rights are outstanding at any time.
 
(e)                                Officers of the Company and any designated Related Corporation, if they are otherwise Eligible Employees, will be eligible to participate in Offerings under the Plan.  Notwithstanding the foregoing, the Board may provide in an Offering that Employees who are highly compensated Employees within the meaning of Section 423(b)(4)(D) of the Code will not be eligible to participate.
 
6.                                     PURCHASE RIGHTS; PURCHASE PRICE.
 
(a)                               On each Offering Date, each Eligible Employee, pursuant to an Offering made under the Plan, will be granted a Purchase Right to purchase up to that number of shares of Common Stock purchasable either with a percentage or with a maximum dollar amount, as designated by the Board, but in either case not exceeding 15% of such Employee’s earnings (as defined by the Board in each Offering) during the period that begins on the Offering Date (or such later date as the Board determines for a particular Offering) and ends on the date stated in the Offering, which date will be no later than the end of the Offering.
 
(b)                              The Board will establish one or more Purchase Dates during an Offering on which Purchase Rights granted for that Offering will be exercised and shares of Common Stock will be purchased in accordance with such Offering.
 
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(c)                                In connection with each Offering made under the Plan, the Board may specify (i) a maximum number of shares of Common Stock that may be purchased by any Participant on any Purchase Date during such Offering, (ii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants pursuant to such Offering and/or (iii) a maximum aggregate number of shares of Common Stock that may be purchased by all Participants on any Purchase Date under the Offering.  If the aggregate purchase of shares of Common Stock issuable upon exercise of Purchase Rights granted under the Offering would exceed any such maximum aggregate number, then, in the absence of any Board action otherwise, a pro rata (based on each Participant’s accumulated Contributions) allocation of the shares of Common Stock available will be made in as nearly a uniform manner as will be practicable and equitable.
 
(d)                              The purchase price of shares of Common Stock acquired pursuant to Purchase Rights will be not less than the lesser of:
 
(i)                                   an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the Offering Date; or
 
(ii)                               an amount equal to 85% of the Fair Market Value of the shares of Common Stock on the applicable Purchase Date.
 
7.                                     PARTICIPATION; WITHDRAWAL; TERMINATION.
 
(a)                               An Eligible Employee may elect to authorize payroll deductions as the means of making Contributions by completing and delivering to the Company, within the time specified in the Offering, an enrollment form provided by the Company. The enrollment form will specify the amount of Contributions not to exceed the maximum amount specified by the Board. Each Participant’s Contributions will be credited to a bookkeeping account for such Participant under the Plan and will be deposited with the general funds of the Company except where applicable law requires that Contributions be deposited with a third party. If permitted in the Offering, a Participant may begin such Contributions with the first payroll occurring on or after the Offering Date (or, in the case of a payroll date that occurs after the end of the prior  Offering but before the Offering Date of the next new Offering, Contributions from such payroll will be included in the new Offering).  If permitted in the Offering, a Participant may thereafter reduce (including to zero) or increase his or her Contributions.  If specifically provided in the Offering, in addition to making Contributions by payroll deductions, a Participant may make Contributions through the payment by cash or check prior to a Purchase Date.
 
(b)                              During an Offering, a Participant may cease making Contributions and withdraw from the Offering by delivering to the Company a withdrawal form provided by the Company.  The Company may impose a deadline before a Purchase Date for withdrawing.  Upon such withdrawal, such Participant’s Purchase Right in that Offering will immediately terminate and the Company will distribute to such Participant all of his or her accumulated but unused Contributions and such Participant’s Purchase Right in that Offering shall thereupon terminate.  A Participant’s withdrawal from that Offering will have no effect upon his or her eligibility to participate in any other Offerings under the Plan, but such Participant will be required to deliver a new enrollment form to participate in subsequent Offerings.
 
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(c)                                Purchase Rights granted pursuant to any Offering under the Plan will terminate immediately if the Participant either (i) is no longer an Employee for any reason or for no reason (subject to any post-employment participation period required by law) or (ii) is otherwise no longer eligible to participate. The Company will distribute to such individual all of his or her accumulated but unused Contributions.
 
(d)                              During a Participant’s lifetime, Purchase Rights will be exercisable only by such Participant.  Purchase Rights are not transferable by a Participant, except by will, by the laws of descent and distribution, or, if permitted by the Company, by a beneficiary designation as described in Section 10.
 
(e)                                Unless otherwise specified in the Offering, the Company will have no obligation to pay interest on Contributions.
 
8.                                     EXERCISE OF PURCHASE RIGHTS.
 
(a)                               On each Purchase Date, each Participant’s accumulated Contributions will be applied to the purchase of shares of Common Stock, up to the maximum number of shares of Common Stock permitted by the Plan and the applicable Offering, at the purchase price specified in the Offering.  No fractional shares will be issued unless specifically provided for in the Offering.
 
(b)                              If any amount of accumulated Contributions remains in a Participant’s account after the purchase of shares of Common Stock and such remaining amount is less than the amount required to purchase one share of Common Stock on the final Purchase Date of an Offering, then such remaining amount will be held in such Participant’s account for the purchase of shares of Common Stock under the next Offering under the Plan, unless such Participant withdraws from or is not eligible to participate in such Offering, in which case such amount will be distributed to such Participant after the final Purchase Date, without interest.  If the amount of Contributions remaining in a Participant’s account after the purchase of shares of Common Stock is at least equal to the amount required to purchase one whole share of Common Stock on the final Purchase Date of an Offering, then such remaining amount will not roll over to the next Offering and will instead be distributed in full to such Participant after the final Purchase Date of such Offering without interest.
 
(c)                                No Purchase Rights may be exercised to any extent unless the shares of Common Stock to be issued upon such exercise under the Plan are covered by an effective registration statement pursuant to the Securities Act and the Plan is in material compliance with all applicable federal, state, foreign and other securities and other laws applicable to the Plan.  If on a Purchase Date the shares of Common Stock are not so registered or the Plan is not in such compliance, no Purchase Rights will be exercised on such Purchase Date, and the Purchase Date will be delayed until the shares of Common Stock are subject to such an effective registration statement and the Plan is in material compliance, except that the Purchase Date will in no event be more than 6 months from the Offering Date.  If, on the Purchase Date, as delayed to the maximum extent permissible, the shares of Common Stock are not registered and the Plan is not in material compliance with all applicable laws, no Purchase Rights will be exercised and all accumulated but unused Contributions will be distributed to the Participants without interest.
 
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9.                                     COVENANTS OF THE COMPANY.
 
The Company will seek to obtain from each federal, state, foreign or other regulatory commission or agency having jurisdiction over the Plan such authority as may be required to grant Purchase Rights and issue and sell shares of Common Stock thereunder.  If, after commercially reasonable efforts, the Company is unable to obtain the authority that counsel for the Company deems necessary for the grant of Purchase Rights or the lawful issuance and sale of Common Stock under the Plan, and at a commercially reasonable cost, the Company will be relieved from any liability for failure to grant Purchase Rights and/or to issue and sell Common Stock upon exercise of such Purchase Rights.
 
10.                             DESIGNATION OF BENEFICIARY.
 
(a)                               The Company may, but is not obligated to, permit a Participant to submit a form designating a beneficiary who will receive any shares of Common Stock and/or Contributions from the Participant’s account under the Plan if the Participant dies before such shares and/or Contributions are delivered to the Participant.  The Company may, but is not obligated to, permit the Participant to change such designation of beneficiary. Any such designation and/or change must be on a form approved by the Company.
 
(b)                              If a Participant dies, and in the absence of a valid beneficiary designation, the Company will deliver any shares of Common Stock and/or Contributions to the executor or administrator of the estate of the Participant.  If no executor or administrator has been appointed (to the knowledge of the Company), the Company, in its sole discretion, may deliver such shares of Common Stock and/or Contributions to the Participant’s spouse, dependents or relatives, or if no spouse, dependent or relative is known to the Company, then to such other person as the Company may designate.
 
11.       ADJUSTMENTS  UPON  CHANGES  IN  COMMON  STOCK;  CORPORATE  TRANSACTIONS.
 
(a)                               In the event of a Capitalization Adjustment, the Board will appropriately and proportionately adjust: (i) the class(es) and maximum number of securities subject to the Plan pursuant to Section 3(a), (ii) the class(es) and maximum number of securities by which the share reserve is to increase automatically each year pursuant to Section 3(a), (iii) the class(es) and number of securities subject to, and the purchase price applicable to outstanding Offerings and Purchase Rights, and (iv) the class(es) and number of securities that are the subject of the purchase limits under each ongoing Offering.  The Board will make these adjustments, and its determination will be final, binding and conclusive.
 
(b)                              In the event of a Corporate Transaction, then: (i) any surviving corporation or acquiring corporation (or the surviving or acquiring corporation’s parent company) may assume or continue outstanding Purchase Rights or may substitute similar rights (including a right to acquire the same consideration paid to the stockholders in the Corporate Transaction) for outstanding Purchase Rights, or (ii) if any surviving or acquiring corporation (or its parent company) does not assume or continue such Purchase Rights or does not substitute similar rights for such Purchase Rights, then the Participants’ accumulated Contributions will be used to purchase shares of Common Stock within ten business days prior to the Corporate Transaction
 
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under the outstanding Purchase Rights, and the Purchase Rights will terminate immediately after such purchase.
 
12.                             AMENDMENT, TERMINATION OR SUSPENSION OF THE PLAN.
 
(a)                               The Board may amend the Plan at any time in any respect the Board deems necessary or advisable.  However, except as provided in Section 11(a) relating to Capitalization Adjustments, stockholder approval will be required for any amendment of the Plan for which stockholder approval is required by applicable law or listing requirements, including any amendment that either (i) materially increases the number of shares of Common Stock available for issuance under the Plan, (ii) materially expands the class of individuals eligible to become Participants and receive Purchase Rights, (iii) materially increases the benefits accruing to Participants under the Plan or materially reduces the price at which shares of Common Stock may be purchased under the Plan, (iv) materially extends the term of the Plan, or (v) expands the types of awards available for issuance under the Plan, but in each of (i) through (v) above only to the extent stockholder approval is required by applicable law or listing requirements.
 
(b)                              The Board may suspend or terminate the Plan at any time.  No Purchase Rights may be granted under the Plan while the Plan is suspended or after it is terminated.
 
(c)                                Any benefits, privileges, entitlements and obligations under any outstanding Purchase Rights granted before an amendment, suspension or termination of the Plan will not be materially impaired by any such amendment, suspension or termination except (i) with the consent of the person to whom such Purchase Rights were granted, (ii) as necessary to comply with any laws, listing requirements, or governmental regulations (including, without limitation, the provisions of Section 423 of the Code and the regulations and other interpretive guidance issued thereunder relating to Employee Stock Purchase Plans) including without limitation any such regulations or other guidance that may be issued or amended after the date the Plan is adopted by the Board, or (iii) as necessary to obtain or maintain favorable tax, listing, or regulatory treatment.  To be clear, the Board may amend outstanding Purchase Rights without a Participant’s consent if such amendment is necessary to ensure that the Purchase Right and/or the Plan complies with the requirements of Section 423 of the Code.
 
13.                             EFFECTIVE DATE OF PLAN.
 
The Plan will become effective immediately prior to and contingent upon the IPO Date.  No Purchase Rights will be exercised unless and until the Plan has been approved by the stockholders of the Company, which approval must be within 12 months before or after the date the Plan is adopted (or if required under Section 12(a) above, materially amended) by the Board.
 
14.                             MISCELLANEOUS PROVISIONS.
 
(a)                               Proceeds from the sale of shares of Common Stock pursuant to Purchase Rights will constitute general funds of the Company.
 
(b)                              A Participant will not be deemed to be the holder of, or to have any of the rights of a holder with respect to, shares of Common Stock subject to Purchase Rights unless and until
 
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the Participant’s shares of Common Stock acquired upon exercise of Purchase Rights are recorded in the books of the Company (or its transfer agent).
 
(c)                                The Plan and Offering do not constitute an employment contract.  Nothing in the Plan or in the Offering will in any way alter the at will nature of a Participant’s employment or  be deemed to create in any way whatsoever any obligation on the part of any Participant to continue in the employ of the Company or a Related Corporation, or on the part of the Company or a Related Corporation to continue the employment of a Participant.
 
(d)                              The provisions of the Plan will be governed by the laws of the State of California without resort to that state’s conflicts of laws rules.
 
15.                             DEFINITIONS.
 
As used in the Plan, the following definitions will apply to the capitalized terms indicated below:
 
(a)                               “ Board ” means the Board of Directors of the Company.
 
(b)                              “ Capital Stock ” means each and every class of common stock of the Company, regardless of the number of votes per share.
 
(c)                                “ Capitalization Adjustment ” means any change that is made in, or other events that occur with respect to, the Common Stock subject to the Plan or subject to any Purchase Right after the date the Plan is adopted by the Board without the receipt of consideration by the Company through merger, consolidation, reorganization, recapitalization, reincorporation, stock dividend, dividend in property other than cash, large nonrecurring cash dividend, stock split, liquidating dividend, combination of shares, exchange of shares, change in corporate structure or other similar equity restructuring transaction, as that term is used in Financial Accounting Standards Board Accounting Standards Codification Topic 718 (or any successor thereto).  Notwithstanding the foregoing, the conversion of any convertible securities of the Company will not be treated as a Capitalization Adjustment.
 
(d)                              “ Code ” means the Internal Revenue Code of 1986, as amended, including any applicable regulations and guidance thereunder .
 
(e)                                “ Committee ” means a committee of one or more members of the Board to whom authority has been delegated by the Board in accordance with Section 2(c).
 
(f)                                 “ Common Stock ” means, as of the IPO Date, the common stock of the Company, having 1 vote per share.
 
(g)                               “ Company ” means Sientra, Inc., a Delaware corporation.
 
(h)                              “Contributions ” means the payroll deductions and other additional payments specifically provided for in the Offering that a Participant contributes to fund the exercise of a Purchase Right. A Participant may make additional payments into his or her account if
 
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specifically provided for in the Offering, and then only if the Participant has not already had the maximum permitted amount withheld during the Offering through payroll deductions.
 
(i)                                   “ Corporate Transaction ” means the consummation, in a single transaction or in a series of related transactions, of any one or more of the following events:
 
(i)                                   a sale or other disposition of all or substantially all, as determined by the Board in its sole discretion, of the consolidated assets of the Company and its Subsidiaries;
 
(ii)                               a sale or other disposition of at least 90% of the outstanding securities of the Company;
 
(iii)                           a merger, consolidation or similar transaction following which the Company is not the surviving corporation; or
 
(iv)                           a merger, consolidation or similar transaction following which the Company is the surviving corporation but the shares of Common Stock outstanding immediately preceding the merger, consolidation or similar transaction are converted or exchanged by virtue of the merger, consolidation or similar transaction into other property, whether in the form of securities, cash or otherwise.
 
(j)                                  “ Director ” means a member of the Board.
 
(k)                              “ Eligible Employee ” means an Employee who meets the requirements set forth in the document(s) governing the Offering for eligibility to participate in the Offering, provided that such Employee also meets the requirements for eligibility to participate set forth in the Plan.
 
(l)                                   “ Employee ” means any person, including an Officer or Director, who is “employed” for purposes of Section 423(b)(4) of the Code by the Company or a Related Corporation.  However, service solely as a Director, or payment of a fee for such services, will not cause a Director to be considered an “Employee” for purposes of the Plan.
 
(m)                          “ Employee Stock Purchase Plan ” means a plan that grants Purchase Rights intended to be options issued under an “employee stock purchase plan,” as that term is defined in Section 423(b) of the Code.
 
(n)                              “ Exchange Act ” means the Securities Exchange Act of 1934, as amended and the rules and regulations promulgated thereunder.
 
(o)                               “ Fair Market Value ” means, as of any date, the value of the Common Stock determined as follows:
 
(i)                                   If the Common Stock is listed on any established stock exchange or traded on any established market, the Fair Market Value of a share of Common Stock will be the closing sales price for such stock as quoted on such exchange or market (or the exchange or market with the greatest volume of trading in the Common Stock) on the date of determination , as reported in such source as the Board deems reliable.  Unless otherwise provided by the Board, if there is no closing sales price for the Common Stock on the date of determination, then the
 
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Fair Market Value will be the closing sales price on the last preceding date for which such quotation exists.
 
(ii)                               In the absence of such markets for the Common Stock, the Fair Market Value will be determined by the Board in good faith in compliance with applicable laws and in a manner that complies with Sections 409A of the Code.
 
(iii)                           Notwithstanding the foregoing, for any Offering that commences on the IPO Date, the Fair Market Value of the shares of Common Stock on the Offering Date will be the price per share at which shares are first sold to the public in the Company’s initial public offering as specified in the final prospectus for that initial public offering.
 
(p)                              “ IPO Date ” means the date of the underwriting agreement between the Company and the underwriter(s) managing the initial public offering of the Common Stock, pursuant to which the Common Stock is priced for the initial public offering.
 
(q)                              “ Offering ” means the grant to Eligible Employees of Purchase Rights, with the exercise of those Purchase Rights automatically occurring at the end of one or more Purchase Periods. The terms and conditions of an Offering will generally be set forth in the “ Offering Document ” approved by the Board for that Offering.
 
(r)                                “ Offering Date ” means a date selected by the Board for an Offering to commence.
 
(s)                                 “ Officer ” means a person who is an officer of the Company or a Related Corporation within the meaning of Section 16 of the Exchange Act.
 
(t)                                  “ Participant ” means an Eligible Employee who holds an outstanding Purchase Right.
 
(u)                              “ Plan ” means this Sientra, Inc. 2014 Employee Stock Purchase Plan.
 
(v)                               “ Purchase Date ” means one or more dates during an Offering selected by the Board on which Purchase Rights will be exercised and on which purchases of shares of Common Stock will be carried out in accordance with such Offering.
 
(w)                           “ Purchase Period ” means a period of time specified within an Offering, generally beginning on the Offering Date or on the first Trading Day following a Purchase Date, and ending on a Purchase Date.  An Offering may consist of one or more Purchase Periods.
 
(x)                               “ Purchase Right ” means an option to purchase shares of Common Stock granted pursuant to the Plan.
 
(y)                               “ Related Corporation ” means any “parent corporation” or “subsidiary corporation” of the Company whether now or subsequently established, as those terms are defined in Sections 424(e) and (f), respectively, of the Code.
 
(z)                                “ Securities Act ” means the Securities Act of 1933, as amended.
 
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(aa)                       “ Trading Day ” means any day on which the exchange(s) or market(s) on which shares of Common Stock are listed, including but not limited to the NYSE, Nasdaq Global Select Market, the Nasdaq Global Market, the Nasdaq Capital Market or any successors thereto, is open for trading.
 
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Exhibit 10.8
***Text Omitted and Filed Separately
with the Securities and Exchange Commission.
Confidential Treatment Requested
Under 17 C.F.R. Section 200.80(b)(4) and Rule 406 of the
Securities Act of 1933, as amended.
AMENDED AND RESTATED EXCLUSIVITY AGREEMENT
 
This Amended and Restated Exclusivity Agreement ( Agreement ) is entered into as of the Effective Date (defined below) by and between Silimed-Silicone e Instrumental Medico-Cirugico e Hospitalar LTDA, a company organized under the laws of Brazil on behalf of itself and any affiliated, controlled or otherwise related entity or person including, without limitation, any entity controlled or owned at least in part by the officers and partners (stockholders) of Silimed-Silicone e Instrumental Medico-Cirurgico e Hospitalar Ltda. (collectively, ( Manufacturer ) and Juliet Medical, Inc., a Delaware corporation ( Company ) as of the Effective Date.
 
Background
 
Manufacturer manufactures and sells, among other things, various silicone based medical devices, sterile or non-sterile, including but not limited to custom and/or non-custom implantable devices for physicians. Manufacturer and Silimed, Inc., a Texas corporation that is selling its assets, including certain contractual rights to Company pursuant to the Asset Purchase Agreement (as defined below) are parties to an Exclusive Agreement dated December 1, 1997 (the 1997 Agreement ) granting Company the right to distribute and sell the Products (as defined below) in the United States. Pursuant to the 1997 Agreement, Company filed for regulatory approval of certain silicone and saline breast implant devices in the United States and is performing clinical trials for such silicone breast implants. Company is also selling tissue expanders, facial implants, testicular implants and other devices pursuant to 510k approvals. Manufacturer and Company desire to amend and restate the 1997 Agreement to reflect the change in circumstances as Company approaches commercial release of the silicone breast implant devices in the United States.
 
NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Manufacturer and Company agree to amend and restate the 1997 Agreement to read in full as follows:
 
1.                                       DEFINITIONS
 
1.1                                Definitions. Capitalized terms used in this Agreement and not otherwise defined herein shall have the meaning set forth below.
 
Affiliate means with respect to either party, any Person that, directly or indirectly, is controlled by, controls or is under common control with such party. For purposes of this definition, “control” means, with respect to any Person, the direct or indirect ownership of more than fifty percent (50%) of the voting interest in such Person or the possession otherwise, directly or indirectly, of the power to direct the management or policies of such Person.
 
Company IP means individually and collectively all IP Rights (a) owned by Company prior to December 1, 1997 or (b) acquired by Company from another Person at any time during the term of this Agreement or (c) conceived, authored, created or otherwise developed by or on behalf of Company on or after December 1, 1997 in each case to the extent that they relate to the Products or the Product Specifications (including processes and know-how for the manufacture thereof).
 
Confidential Information means all data, specifications, training and any other trade secrets or know-how related to the design, implementation, performance or manufacture of the Products, as well as all other information and data provided by either party to the other party pursuant to this Agreement in written or other tangible medium and marked as confidential except any portion thereof which: (i) is known to the receiving party, as evidenced by the receiving party’s written records, before receipt thereof under this Agreement; (ii) is disclosed to the receiving party by a third person who is under no obligation of confidentiality to the disclosing party hereunder with respect to such information and who otherwise has a right to make such disclosure; (iii) is or becomes generally known in the trade through no fault of the receiving party; or (iv) is independently developed by the receiving party, as evidenced by the receiving party’s written records, without access to such information.
 
Control means, with respect to any IP Rights, possession by a party or its Affiliates of the ability (whether by ownership, license, or otherwise) to grant access, a license, or a sublicense to such IP Rights without violating the
 
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terms of any agreement or other arrangement with any third party as of the time such party would first be required hereunder to grant the other party such access, license, or sublicense.
 
Effective Date means the “Closing Date” under the certain Asset Purchase Agreement between Silimed, Inc., a Texas corporation, and Company (the Asset Purchase Agreement ), which is the date on which Company will purchase from Silimed Inc. certain assets of Silimed, Inc. as described in the Asset Purchase Agreement. The Effective Date shall in no event be later than April 6, 2007.
 
Facility means Manufacturer’s manufacturing facility in Rio de Janeiro, Brazil.
 
FCA means “Free Carrier”, as that expression is defined in Incoterms 2000 , ICC Publishing S.A.
 
Force Majeure means any event beyond the control of the parties, including, without limitation, fire, flood, riots, strikes, epidemics, acts of war or terrorism (declared or undeclared and including the continuance, expansion or new outbreak of any war, conflict or terrorism now in existence), embargoes and governmental actions or decrees.
 
Improvements means individually and collectively all discoveries, inventions, know-how, techniques, methodologies, modifications, improvements, works of authorship, designs and data (whether or not protectable under patent, copyright, trade secrecy or similar laws) relating to additions, developments, enhancements, updates and other changes in Products, including but not limited to any extensions of the label claims for any Product(s) and any new designs for the Product(s) that are conceived, created, discovered, developed, or reduced to practice or tangible medium of expression: (a) solely by one or more employees or consultants of Manufacturer at any time in the course of performing the transactions contemplated by this Agreement; or (b) jointly by one or more employees or consultants of Manufacturer and one or more employees or consultants of Company at any time in the course of performing the transactions contemplated by this Agreement; or (c) solely by one or more employees or consultants of Company at any time in the course of performing the transactions contemplated by this Agreement.
 
IP Rights means any and all of the following in any jurisdiction throughout the world: (a) inventions and patents and patent applications for same; (b) copyrights and registrations and applications for same; (c) trademarks, trade names, domain names and other indicia of source or origin; (d) software; (e) Confidential Information, including trade secrets and know-how; and (f) all other intellectual property rights or industrial property rights of any kind or nature (whether or not protectable under patent, copyright, trade secrecy or similar laws) that are conceived, discovered, developed, created or reduced to practice or tangible medium of expression by consultants or employees of a party to this Agreement (or by Silimed, Inc. in the case of Juliet Medical, Inc. as a party) without the use of IP Rights owned or Controlled by the other party to this Agreement (or by Silimed Inc. in the case of Juliet Medical, Inc. as a party) or are otherwise Controlled by such party (or by Silimed Inc. in the case of Juliet Medical, Inc. as a party).
 
Manufacturer IP means all (a) IP Rights owned by Manufacturer prior to December 1, 1997, (b) IP Rights acquired by Manufacturer from another Person, and (c) IP Rights conceived, authored, created or otherwise developed by or on behalf of Manufacturer at any time in each case to the extent that they relate to the Products or the Product Specifications (including processes and know-how for the manufacture thereof).
 
Person means any individual, corporation, association, partnership (general or limited), joint venture, trust, estate, limited liability company, limited liability partnership, unincorporated organization, government (or any agency or political subdivision thereof) or other legal entity or organization.
 
Products means all products for all medical applications which are now or which may hereafter become a part of the Manufacturer’s line of products falling within the scope of the Patents (to the extent Manufacturer has a Patent) all as further described in the applicable Product Specifications, including the silicone breast implants, saline breast implants, polyurethane breast implants, tissue expanders, testicular implants, body contouring implants, facial implants (including maxofacial implants and nostril retainers), urology products (including constrictors and vaginal stents), gastric balloon products and gastric band products identified in Attachment 1 together with any Improvements. Attachment 1 may be amended from time to time in accordance with Section 2.1(b) to add additional products or Improvements to Products as they become part of Manufacturer’s line of products.
 
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Product Approvals means, for the United States, those regulatory approvals required for importation, promotion, pricing, marketing and sale of the Product in such country.
 
Product Specifications means the specifications set forth in Attachment 1 for the Products, as such specifications may be modified from time to time by the mutual agreement of the parties acting in accordance with Section 3.11 to reflect (i) the Product Approvals that issue with respect to the Products or (ii) Improvements and the addition of new products to Manufacturer’s product line.
 
Territory means the United States of America (including its territories).
 
Trademarks means (a) the trademarks, set forth on Attachment 3 , and (b) any other trademarks, as may be agreed upon in writing from time to time by the parties for use by Company in connection with the promotion, marketing and sale of the Products in the Territory.
 
1.2                                Other Defined Terms. Each of the following terms has the meanings ascribed to it in the section set forth opposite such term:

1997 Agreement	 	Recitals	
AER	 	Section 5.4	
Agreement	 	Recitals	
Applicable GMP	 	Section 5.2	
Company	 	Recitals	
Excused Supply Failure	 	Section 3.3	
Firm Order Period	 	Section 3.1	
ICDR	 	Section 9.4	
Indemnified Party	 	Section 7.2	
Indemnifying Party	 	Section 7.2	
Losses	 	Section 7.2	
Manufacturer	 	Recitals	
Regulatory Authority	 	Section 5.2	
Representative	 	Section 9.1	
RMA	 	Section 3.10	
SOPs	 	Section 5.4	
Supply Forecast	 	Section 3.1.	
 
2.              DISTRIBUTION RIGHTS; VALIDATION
 
2.1           Appointment.   (a) Subject to terms and conditions of this Agreement: Manufacturer hereby appoints Company as Manufacturer’s exclusive distributor for the promotion, sale and delivery of the Products in the Territory. Company hereby accepts such appointment as exclusive distributor within the Territory. Company shall use its commercially reasonable efforts to promote and sell the Products in the Territory, subject to delays caused by Regulatory Authorities with respect to the issuance of Product Approvals and to adequate supply of the Products for resale in the Territory.
 
(b)                                  The Manufacturer shall promptly notify Company of any Improvements to Products and of any new products that become part of the Manufacturer’s line of products, and Manufacturer shall provide Company with such notice, the Products Specifications for such Improvements to Products or new products and the pricing for such new products (such pricing to be determined in accordance with Section 3.4). Such Improvements to Products and new products shall automatically become Products subject to this Agreement in accordance with Section 3.11.
 
2.2                                Exclusive Dealing.   (a) Manufacturer shall not provide Products to any third party if Manufacturer knows or has reason to believe that Products provided to such party have been or will be sold for use or used in the Territory. Company shall not provide Products to any third party if Company knows or has reason to believe that Products provided to such third party have been or will be sold for use, or used, outside of the Territory.
 
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(b)                                  Notwithstanding the provisions of Section 2.1 and Section 2.2(a), it is understood and agreed that Manufacturer is party to a supply agreement with […***…] for the distribution of Manufacturer’s […***…] product marketed as “Pouch of Gastroschisis” for pediatric applications. This Agreement shall in no way limit or otherwise affect such supply agreement with respect to such […***…] product.
 
(c)                                   Except as otherwise provided in Section 2.2(b), Manufacturer shall notify Company if it receives any request to supply Products to any customer located in or for sale, use or distribution in the Territory. It is understood and agreed that it shall not be a breach of this Agreement for Manufacturer to have contact with such customers or customers located in the Territory; provided Manufacturer does not directly or indirectly sell, offer to sell, market, distribute, ship or deliver Products to customers located in the Territory.
 
(d)                                  Company shall notify Manufacturer if it receives any request to supply Products to any customer for sale, use or distribution outside the Territory.
 
2.3                                Competitive Products. During the term of this Agreement, Company shall not, and shall cause its Affiliates not to, market, sell or otherwise distribute in the Territory any product that is directly competitive with any Product that is then being commercially sold or clinically tested by Company in the Territory. It is understood and agreed that a product is “directly competitive with a Product” if it has an elastomer made of silicone and a filler made of either silicone or saline.
 
2.4                                2. 3A                       Production Line Validation. Manufacturer hereby represents and warrants to Company that Manufacturer has successfully validated all production line(s) at the Facility upon which Products are produced in accordance with all quality system regulations promulgated under the Applicable GMP.
 
2.5                                Annual Meetings.  (a) No later than ninety (90) days prior to each anniversary of the Effective Date, the parties shall meet, in person or by videoconference or teleconference, to confer regarding (i) the Company’s expectations with respect to Product development and commercialization in the next contract year so that the Manufacturer may consider any changes in the resource allocation required to address such expected demand for Products; and (ii) the Manufacturer’s expectations with respect to pricing for each Product for the next contract year so that the Company may consider its cost structure with respect to the next contract year. The purpose of such meetings is to serve as a venue for the parties to provide timely notice of their respective expectations for the next contract year as well as trends and developments they foresee in order to reduce the likelihood of surprises with respect to either Company’s demand for Products or Manufacturer’s pricing for Products. If meetings are held in person they shall be held at either the headquarters of Manufacturer or the headquarters of the Company on an alternating basis, unless the parties mutually agree to hold such meeting in an alternative venue. The party hosting the meeting shall be responsible for providing an agenda for each meeting at least seven (7) days in advance of such meeting and shall prepare written draft minutes of all meetings in reasonable detail and distribute such draft minutes to the other party for comment and review within seven (7) days after the relevant meeting. The party receiving such minutes shall have seven (7) days to provide comments. The party preparing the minutes shall incorporate timely received comments and distribute finalized minutes within thirty (30) days following the relevant meeting.
 
(b)                                  The parties shall review and approve on a timely basis, but in any case, within thirty (30) days following receipt of finalized minutes, the expected forecasts for Products and the proposed pricing for Products for the next contract year. In the event that the Manufacturer does not approve the Company’s expected forecast for Products or the Company does not approve the Manufacturer’s proposed pricing for any Product(s) as presented at the meeting, then such party shall provide the other party with a detailed statement describing the basis of its concerns and the parties shall in good faith seek to resolve such matter prior to the commencement of the next contract year in accordance with the provisions of this Agreement, including Sections 3.1, 3.3 and 3.4.
 
3.                                       PURCHASE OF PRODUCTS AND TERMS OF SALE.
 
3.1                                Purchase Forecasts. During the term of this Agreement, Company shall provide to Manufacturer, on a quarterly basis, a non-binding rolling forecast of orders of each of the Products with respect to the next twelve (12) months ( Supply Forecast ). Notwithstanding the foregoing, the forecasts for […***…] of any 12 month period ( Firm
 
***Confidential Treatment Requested
 
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Order Period ) covered by a Supply Forecast shall represent binding purchase obligations of Company to purchase all the Products set forth in the Supply Forecast for such Firm Order Period; provided , that (a) the forecast for […***…] of the Supply Forecast covering the period immediately following receipt of a Product Approval for the United States for a particular Product shall be considered part of the Firm Order Period for such Product and) shall represent a binding purchase obligation of Company to purchase all such Product for such Firm Order Period and (b) the forecast for all “custom” Products shall represent a binding purchase obligation of Company to purchase such “custom” Product.
 
3.2                                Product Orders.   (a) Orders for each Firm Order Period shall be placed by written purchase order and submitted by mail, electronic mail or facsimile, or by other means agreed upon by the parties. No order shall be binding upon Manufacturer until the same shall have been accepted in writing by Manufacturer (including acceptance by EDI). Manufacturer shall accept or reject all orders within five (5) days following receipt of same and shall deliver all orders that are accepted within ninety (90) days following the date such order is received. The parties covenant and agree that any standard printed terms of purchase/sale of Company and Manufacturer provided by either party to the other party shall be disregarded and that the provisions of this Agreement shall govern such purchase and sale.
 
(b)                                  Company shall use […***…] efforts to maximize sales of Products during the term of this Agreement.
 
3.3                                Obligation to Supply. (a) Manufacturer shall use […***…] efforts to accept and fill each order for Products submitted by Company; including orders that exceed the Supply Forecast for any month by up to […***…] percent ([…***…]%) of the amount in the Supply Forecast for such month delivered to Manufacturer ninety (90) days prior to such month. When allocating production with respect to filling orders for Products, Manufacturer shall ensure that Company orders are accepted and filled in a manner that does not differ in any material respect from the priority and fill rate Manufacturer applies to Products ordered by third parties or Manufacturer’s own sales organization; provided, however, the foregoing provision shall not apply to accepting or filling orders that exceed the Supply Forecast. Notwithstanding the foregoing, Manufacturer shall not be in breach of this Section 3.3 if Manufacturer’s failure to supply Products is due to a Force Majeure event or if Manufacturer’s failure is limited to quantities in excess of the quantities specified in this Section 3.3 (any such failure an Excused Supply Failure ).
 
(b)                                  If Manufacturer is unable to supply any Product(s) ordered by Company in accordance with the terms of this Agreement other than because of an Excused Supply Failure, then Manufacturer shall use […***…] efforts to remedy the problem, including by securing an alternative source of supply within a reasonable time at no cost to Company, and any such alternative source of supply shall be on terms substantially identical with the terms of this Agreement. If Manufacturer is unable to remedy such problem within […***…] after its initial failure to supply (measured from the date that delivery would have been due under Company’s binding Supply Forecast), then Manufacturer shall consult with Company and the parties shall work together to remedy the problem, which may include having Manufacturer reactivate its old manufacturing facility. If Manufacturer is unable to remedy the supply problem after an aggregate period of […***…]  (or longer as agreed in writing by the parties), commencing with the date upon which such failure to supply began, then Company may at its option, and upon notice to Manufacturer, remedy the supply problem by manufacturing the applicable Product(s) itself or through an alternative source of supply (which shall not be deemed a violation by Company of Section 2.3) using the procedure specified in Section 3.3A or in the alternative, terminate this Agreement with respect to such Product(s) pursuant to Section 8.2 (last sentence).
 
(c)                                   In the event that, for any material period of time (i.e., any period of time that may interrupt Manufacturer’s ability to supply then Products that are the subject of the then most recent Supply Forecast), the Manufacturer Facility or the Manufacturer production line becomes non-operational for any reason whatsoever, Manufacturer will promptly notify Company, and Manufacturer will ensure that the production line for the affected Products is restored and revalidated at the same rate and in a manner that does not differ in any material respect from the priority and restoration rate of any other production line(s) at the Facility.
 
3.3A                       Manufacturing Rights.   (a) If Company notifies Manufacturer that Company will manufacture any Product(s) itself or through a third party as a result of a failure to supply by Manufacturer, Manufacturer shall (i) deliver to Company within thirty (30) days media embodying or disclosing all technology and proprietary or intellectual property rights necessary to enable Company or its designee to manufacture such Product(s) conforming with the applicable Product Specifications; and (ii) provide Company or its designee, upon request, with assistance
 
***Confidential Treatment Requested
 
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in establishing a back-up manufacturing line. […***…] Company shall require any third party Company designates to manufacture Products pursuant to this Section 3.3A, to agree in writing to observe the terms of this Agreement relating to confidentiality and the manufacture of Products.
 
(b)                                  It is understood and agreed that in no case shall […***…] pursuant to this Section 3.3A.
 
(c)                                   Company may continue to exercise the manufacturing rights provided in this Section 3.3A until Manufacturer notifies Company that it is again able to supply Company’s needs for the applicable Product(s) and substantiates such claim to Company’s reasonable satisfaction. Upon such a showing, Company shall commence purchasing such Product(s) from Manufacturer and Company’s rights under this Section 3.3A shall terminate (with respect to such interruption in supply), provided that: (i) Company shall not be required to cancel any then outstanding purchase orders with any third party operating a back-up manufacturing line established pursuant to this Section 3.3A to the extent such orders have been accepted by such third party and are binding obligations of Company; and (ii) Manufacturer shall pay all cancellation costs incurred by Company in switching its purchases from such third party to Manufacturer. Company shall use commercially reasonable efforts to avoid significant cancellation fees in any third party contracts it enters pursuant to this Section 3.3A. Company shall not order Products from any third party operating a back-up manufacturing line established pursuant to this Section 3.3A for delivery more than […***…] months following the date of such order.
 
3.4                                Product Prices.   (a) The prices for each of the Products are set forth on Attachment 2 .
 
(b)                                  Except as otherwise agreed by the parties or as provided in this Section 3.4, Manufacturer will not increase prices for the Products. Not more than once annually, Manufacturer may increase the prices for the Products to reflect (i) increases in the cost of raw materials, or (ii) increases in the costs of production components utilized in the manufacture of such Products including utilities, packaging materials and labor utilized in such manufacturing plus a pro rata portion of factory overhead costs allocated to the Products purchased by Company pursuant to this Agreement in accordance with normal accounting practices for all products manufactured in the Facility. Price increases shall not include any costs attributable to idle plant capacity (that Manufacturer or any third party may have) or general corporate activities that are not primarily associated with the manufacture of Products, including, by way of example only, salaries and benefits of executive management, administrative support for such management, and all costs of the finance, purchasing, legal, business development and corporate development functions of Manufacturer or overhead (other than Facility overhead for the portions of the Facility used for manufacturing Products). Without limiting the foregoing, Manufacturer will use commercially reasonable efforts to maintain price increases to an amount that does not exceed […***…] percent ([…***…] %) per annum and shall include with any notice of a price increase documentation of such production cost increases. Company shall have the right, not more than once in any twelve (12) month period, upon reasonable notice to have an independent certified public accountant, selected by Company and reasonably acceptable to Manufacturer, inspect Manufacturer’s books and records for purposes of verifying Manufacturer’s actual production costs for the Products. Manufacturer shall make all applicable books and records available for such inspection during normal business hours at Manufacturer’s facility. Any such audit shall be at the expense of Company, unless such audit discloses that Manufacturer’s reported average production costs for the audited period are less than Manufacturer’s actual production costs for such period by more than […***…] percent ([…***…]%), in which case Manufacturer shall reimburse Company for such expenses. If any audit discloses that Manufacturer’s actual production cost for a Product is less than the reported production cost, Manufacturer shall promptly make payment to Company of an amount equal to the product of […***…].
 
(c)                                   Company shall not be required to pay any royalty to Manufacturer for its sale of Product supplied by Manufacturer pursuant to this Agreement.
 
3.5                                Intentionally Omitted.
 
***Confidential Treatment Requested
 
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3.6                                Resale Prices. Nothing contained herein shall be deemed to limit in any way the right of Company to determine the prices at which, or the terms on which, the Products purchased by Company may be resold by Company.
 
3.7                                Payment. (a) Company shall pay for Products within thirty (30) days after the date of Manufacturer’s invoice. All payments shall be stated and paid in U.S. Dollars. Except for income taxes that may be assessed against Manufacturer, all taxes and charges that may be imposed by any government taxing authority on the amounts paid by Company to Manufacturer under this Agreement shall be paid by Company for Manufacturer’s account.
 
(b)                                  In the event Company fails to make any payment hereunder in full when due that is not disputed in good faith, the amount due shall accrue interest beginning on the […***…] day following the final date on which such payment was due, calculated at the annual rate equal to […***…] ([…***…]%) above the prime interest rate reported in the Wall Street Journal for the due date, calculated from the due date until paid in full. Such payment when made shall be accompanied by all interest so accrued. Said interest and the payment and acceptance thereof shall not negate or waive the right of Manufacturer to any other remedy, legal or equitable, to which it may be entitled because of the delinquency of the payment. In the event Company disputes any payment it shall notify Company in accordance with Section 9.2 and shall pay all undisputed sums in accordance with this Agreement.
 
(c)                                   Intentionally omitted.
 
(d)                                  Nothing in this Section 3.7 shall waive any other rights and remedies Manufacturer may have under law or this Agreement, and all such rights and remedies set forth herein shall be considered cumulative with all other available rights and remedies.
 
3.8                                Shipping.   (a) Manufacturer shall arrange for shipment (according to Company directions) and invoicing to Company of the Products ordered by Company via common carrier (air freight), FCA Rio de Janeiro, Brazil to the carrier selected by Company. Company shall pay all customs, duties and other governmental charges, if any, related to importation and sale of the Product in the Territory following such FCA delivery, and shall have all responsibility for storing and clearing the Products through all United States customs and importation requirements. Manufacturer shall be responsible for clearing the products for export from Brazil.
 
(b)                                  Manufacturer will supply Products to Company in finished and final packaged format for end user sale, (including all trade dress, labeling and warning and handling instructions) as documented in the applicable packaging specifications for each Product. The parties shall adopt such packaging specifications for each Product not later than six (6) months prior to the anticipated date of commercial launch for the applicable Product in the Territory and such packaging specifications shall be appended to this Agreement as Attachment 4 .
 
3.9                                Product Samples.   (a) Manufacturer shall provide Company, promptly upon request, with a reasonable number samples of the Products of any current production run, not to exceed […***…] percent ([…***…]%) of such production run, for testing purposes. Such Product samples shall be shipped to Company in accordance with the provisions set forth in Section 3.8, and Company shall pay the price for such Products in the manner described in Section 3.7.
 
(b)                                  Manufacturer shall also make available to Company, at Company’s expense and upon Company’s request, for regulatory approval purposes, sample Products in accordance with the applicable Product Specifications. In addition, Manufacturer shall supply Company, at no charge, with a mutually agreed number of units of each of the Products for demonstration and marketing purposes and will supply additional units at cost.
 
3.10                         Acceptance.   (a) Company shall notify Manufacturer within thirty (30) days of the receipt of a shipment of the Products (or for shipments delivered to Company’s customer within thirty (30) days following the receipt of the samples for such shipment requested by Company in accordance with Section 3.9(a)) of any apparent non-conformity of the Product to the applicable Product Specifications. If Company fails to so notify Manufacturer, it will be deemed to have accepted the Product; provided that the warranty provided in Section 6.2 and Manufacturer’s obligations under Section 7.2 shall survive acceptance of the Product by Company.
 
***Confidential Treatment Requested
 
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(b)                                  Manufacturer shall perform all in-process and finished product tests or checks required by the applicable Product Specifications and Applicable GMP. For purposes of this Agreement, such tests shall be considered routine and shall be performed at Manufacturer’s expense; provided that in the event that Company requests any tests in addition to the foregoing, Company shall compensate Manufacturer for the cost of such additional tests in accordance with a method to be mutually determined. All tests and test results shall be performed, documented and summarized by Manufacturer in accordance with the applicable Product Specifications and applicable laws, rules and regulations. Manufacturer shall immediately notify Company of any significant out-of-specification analytical results for either in process or finished Product test results.
 
(c)                                   Company shall not be required to pay Manufacturer for any Products which have been properly rejected for failure to comply with Product Specifications. Manufacturer shall at its expense and at no further cost to Company replace any Products that do not conform to the Product Specifications. All defective units of the Product shall be returned to Manufacturer or its designee if requested by Manufacturer and at Manufacturer’s cost; upon Manufacturer’s request, Company will hold such Products at its premises for inspection by Manufacturer or its designee. Company shall notify Manufacturer in writing of its rejection of Product under this Section 3.10 within thirty (30) days of Company’s receipt thereof, shall request a Return Material Authorization ( RMA ) number and shall within thirty (30) days of receipt of such RMA number return a sample of such rejected Product to Manufacturer or its designee freight prepaid and properly insured, along with a reasonably detailed statement of the claimed defect and proof of date of purchase unless Manufacturer requests Company to hold such Products at its premises for inspection by Manufacturer or its designee. In the event Manufacturer determines that the returned (or held) Product is defective and properly rejected by Company, Manufacturer shall replace such defective Product (and shall provide Company with an RMA for the balance of the defective lot of Product which shall be returned to Manufacturer freight prepaid and properly insured unless Manufacturer requests that Company have such lot destroyed). Manufacturer shall deliver to Company, freight prepaid, all replacements for Products properly rejected, along with reimbursement of the shipment charges for return of the nonconforming Product (if any). In the event that any rejected Product is determined by Manufacturer to not be defective, Company shall reimburse Manufacturer for all costs and expenses related to the inspection and return of such Product to Company. If there is disagreement between the parties as to whether the Product meets Product Specifications, the parties shall have such Product tested by a mutually agreed upon third party and such third party’s determination as to whether such Product meets Product Specifications shall be binding on the parties. The expense for such testing shall be borne by Company unless it is determined that the Product does not meet the Product Specifications. Pending the outcome of such testing, Manufacturer shall have the right to suspend shipments of the applicable Products in respect of all existing and future orders of such Product.
 
(d)                                  Company shall notify Manufacturer in writing of any shortage in quantity of any shipment of Product within thirty (30) days of receipt of such Product. In the event of such shortage, Manufacturer shall endeavor to make up and ship the shortage as promptly as possible, but with the substitute shipment occurring no later than thirty (30) days after notice, at no additional cost to Company.
 
3.11                         Changes.   (a) The Product Specifications may be modified or changed only by mutual agreement of the Company and Manufacturer. To the extent that such modification or change results in an increase or decrease in the cost of manufacturing any Product or requires additional capital investment or other material changes to the manufacturing process, the parties shall, contemporaneously with the modification to the Product Specifications if not earlier, jointly examine and mutually agree upon the consequences thereof and shall make an appropriate increase or decrease to the purchase price of such Product arising from such modification or change and amend Attachment 2 accordingly. At least six (6) weeks prior notice to the other party is required for any requested Product Specifications change; provided, however, that if any requested Product Specifications change requires additional Product Approval(s), the implementation of such requested change shall in no event be required until four (4) weeks after such approval(s) have been obtained.
 
(b)                                  Manufacturer shall promptly contact Company in the event that Manufacturer anticipates making changes to any material used to manufacture the Products or in the event Manufacturer considers any such material used to manufacture the Products to be nonconforming or unacceptable and Manufacturer shall not be required to implement any change to the Product Specifications that it reasonably believes will prevent it from being able to perform in accordance with the terms of this Agreement unless such terms are modified. If Manufacturer notifies Company that it believes the preceding sentence is applicable the parties shall meet and attempt to resolve the matter
 
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using the procedure specified in Section 9.2 if necessary; during any such period the Product will continue to be manufactured under the Product Specifications without such modification.
 
(c)                                   Company shall promptly upon request supply Manufacturer with “flow charts” regarding FDA requirements for any changes made in the material, construction, processing or manufacturing for any Products and any future Products.
 
4.                                       CONFIDENTIALITY; INTELLECTUAL PROPERTY RIGHTS
 
4.1                                Confidentiality. (a) During the term of this Agreement and for […***…] years thereafter, Manufacturer and Company shall not use for any purpose other than this Agreement and shall not reveal or disclose to third parties the subject matter of this Agreement and any Confidential Information received from the other party as confidential in nature. Any Confidential Information disclosed by either party hereunder to the other party may be used only by employees of the other party or its affiliates who agree to be bound by such party’s obligations hereunder with respect to such Confidential Information and who have a genuine need to know such information for the purposes permitted by this Agreement. The parties shall take reasonable measures to assure that no unauthorized use or disclosure is made by others to whom access to such Confidential Information is granted. Nothing herein shall be construed as preventing a receiving party from using and disclosing any Confidential Information as necessary (i) in prosecuting or defending litigation in accordance with Section 4.3; (ii) in connection with the initiation and conduct of clinical trials; or (iii) in conducting research and development in accordance with this Agreement including with third party collaborators (if such collaborators are subject to written confidentiality agreements with such party).
 
(b)                                  No public announcement or other disclosure to any third party concerning the existence of or terms of this Agreement shall be made, either directly or indirectly, by either party to this Agreement, except as may be legally required or as may be required for recording purposes, without first obtaining the written approval of the other party and agreement upon the nature and text of such announcement or disclosure. The party desiring to make any such public announcement or other disclosure (pursuant to legal requirement, for recording purposes or otherwise) shall provide the other party with a written copy of the proposed public statement, in reasonably sufficient time prior to public release in order to allow such other party to comment upon such announcement or disclosure.
 
4.2                                Licenses.   (a) Manufacturer hereby grants to Company an exclusive, royalty-free, non-transferable (except in accordance with section 10.4) license to use (i) the Trademarks in the Territory in connection with the promotion, marketing, advertising, and sale of Products in the Territory; and (ii) any other Manufacturer IP as necessary or useful to promote, sell and deliver the Products in the Territory. In addition, upon the occurrence of the events described in Section 3.3A and solely in accordance with Section 3.3A Company may practice such intellectual property as necessary or useful for purposes of manufacturing Product in accordance with Section 3.3A.
 
(b)                                  If at any time Manufacturer believes that any Product(s) do not meet Manufacturer’s commercially reasonable quality expectations, Manufacturer will notify Company and Company will use commercially reasonable efforts to cure any such deficiency within a commercially reasonable period of time and unless such deficiency is resolved to Manufacturer’s reasonable satisfaction, not to be unreasonably withheld, Manufacturer may require Company to cease using the Trademarks in connection with the applicable Products. Upon Manufacturer’s request, Company will provide Manufacturer with samples of its usage of the Trademarks. Any use of the Trademarks will indicate that Manufacturer is the owner of the Trademarks. All uses of the Trademarks and all goodwill associated therewith will inure solely to the benefit of Manufacturer.
 
(c)                                   Company shall use the Trademarks only in the manners expressly approved by Manufacturer in advance in writing. Company shall use the Trademarks to promote, market, advertise and sell the Products in the Territory. Company may elect to adopt other trademarks for use in the promotion, marketing and sale of the Products (in addition to the Trademarks), in which case Section 4.2(b)-(c) shall not apply to Company’s use of such other marks.
 
4.3           Infringement.   (a) Each of Company and Manufacturer will notify the other party in writing of any infringement or unauthorized use or disclosure of the other party’s IP Rights in the Territory within thirty (30) days after it becomes aware of such infringement or unauthorized use or disclosure.
 
***Confidential Treatment Requested
 
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(b)                                  Subject to Sections 4.3(c) and 4.3(d), each party shall have the exclusive right (but not the obligation) at its own cost to take all legal action in the Territory it deems necessary or advisable to eliminate or minimize the consequences of any infringement or unauthorized use or disclosure of its IP Rights in the Territory.
 
(c)                                   Without limiting the generality or applicability of Section 4.3(b), Manufacturer shall have the exclusive right (but not the obligation) at its own cost to take all legal action in the Territory it deems necessary or advisable to eliminate or minimize the consequences of any infringement or unauthorized use or disclosure of the Trademarks in the Territory. All proceeds realized upon any judgment or settlement regarding an action undertaken with respect to the Trademarks shall be retained by Manufacturer.
 
(d)                                  Without limiting the generality or applicability of Section 4.3(b), Company shall have the exclusive right at its own cost to take all legal action in the Territory it deems necessary or advisable to eliminate or minimize the consequences of any infringement or unauthorized use or disclosure of the IP Rights other than Trademarks or Manufacturer Confidential Information as embodied in a Product. For the purpose of taking any such legal action, Company shall have the right, subject to Manufacturer’s prior written consent (which consent shall not be unreasonably withheld) to use the name of Manufacturer as plaintiff, either solely or jointly in accordance with the applicable rules of procedure. Manufacturer shall furnish Company with whatever written authority may be required in order to enable Company to use Manufacturer’s name in connection with any such legal action, and shall otherwise cooperate with Company (at Company’s expense) in connection with any such action. All proceeds realized upon any judgment or settlement regarding an action undertaken with respect to the IP Rights other than Trademarks or Manufacturer Confidential Information as embodied in a Product shall be used to reimburse Company for the costs of litigating or settling such matter and then shall be paid to Company and to Manufacturer in an amount that compensates Company for lost sales in respect of such infringement and Manufacturer in an amount that reflects the sums that would be due Manufacturer from Company based on the lost sales.
 
4.4                                Ownership of IP Rights; Retained Rights.   (a) This Agreement does not convey to Company any right, title or interest in or to any Manufacturer IP by implication, estoppel or otherwise except for the license rights expressly granted under Section 4.2. Title to the Manufacturer IP shall at all times remain vested in Manufacturer.
 
(b)                                  This Agreement does not convey to Manufacturer any right, title or interest in or to any Company IP by implication, estoppel or otherwise except for the license rights expressly granted under Section 4.4(d). Title to the Company IP shall at all times remain vested in Company.
 
(c)                                   Intentionally Omitted.
 
(d)                                  Company hereby grants to Manufacturer a non-exclusive, royalty-free, fully paid-up license to use the Company IP to fulfill Manufacturer’s obligations to Company under this Agreement.
 
4.5                                Improvements. If the parties jointly undertake any development, modification, enhancement or alteration of the Products after the Effective Date, then: (a) Company shall be the exclusive owner of all Improvements created solely by Company employees or consultants; (b) Manufacturer shall be the exclusive owner of all Improvements created solely by Manufacturer employees or consultants; and (c) the parties shall jointly own all Improvements created jointly by the parties; provided that Manufacturer hereby grants and agrees to grant to Company a perpetual, irrevocable, exclusive, transferable, fully paid-up, royalty-free right and license to use such Improvements in the Territory and Company hereby grants to Manufacturer a perpetual, irrevocable, exclusive, transferable, fully paid-up, royalty-free right and license to use such Improvements outside the Territory. If required, patent counsel mutually acceptable to the parties shall determine inventorship of all Improvements in accordance with U.S. patent law (and other U.S. intellectual property law, if applicable) and which party is entitled to ownership of such Improvements. Any disagreements will be resolved using the procedures described in Section 9.2 and Section 9.6.
 
5.                                       REGULATORY ACTIVITIES; APPROVALS
 
5.1                                Regulatory Approvals.   (a) Company (i) will have sole responsibility and authority, at its sole expense, for obtaining and maintaining Product Approvals for the Products from the FDA or other Regulatory Authority
 
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necessary for the commercial import, export, distribution and sale of the Product in the Territory, and (ii) shall use its commercially reasonable efforts to obtain and maintain all such Product Approvals as soon as reasonably practicable after the Effective Date; this responsibility includes, without limitation, conducting and managing a clinical trial program in the United States, if necessary, as determined by Company. All regulatory’ filings with any Regulatory Authority in the Territory relating to the Product will be made in the name of Company or its designee. Manufacturer will use commercially reasonable efforts to cooperate with all of Company’s efforts to obtain and maintain Product Approvals for the Product, including by providing Company and the Regulatory Authority with such information and assistance as Company may reasonably request regarding the Product, including but not limited to, any and all surgical and clinical studies, documentation, certifications, bio-compatibility studies, and any other information which may be required by the Regulatory Authority or which may have a bearing or positive impact on the approval of any Products for which Company seeks Product Approvals; and Manufacturer will comply with all applicable regulatory requirements (including without limitation design controls, change controls, manufacturing and quality systems and Applicable GMP) reasonably necessary to obtain Regulatory Approval of the Product.
 
(b)                                  Manufacturer shall, at its expense and its discretion, use commercially reasonable efforts to obtain and maintain any regulatory approvals required for the manufacture of the Product at the Manufacturer Facility. Such regulatory approvals for the manufacture of the product at the Manufacturer Facility shall be applied for and maintained in the name of Manufacturer. Company will use commercially reasonable efforts to cooperate with all of Manufacturer’s efforts to obtain and maintain regulatory approvals for the manufacture of the Product at the Facility, including, without limitation, by providing Manufacturer and the Regulatory Authority with such information and assistance as Manufacturer may reasonably request regarding the Product.
 
(c)                                   Each party shall keep the other advised of regulatory interactions, activities and correspondence and the registration status of the Products and the Facility on a quarterly basis, except that matters requiring more immediate attention shall be communicated as soon as practicable. Each party shall promptly provide reasonable advice and assistance to the other party as may be necessary to obtain and maintain approvals for the Facility, Applicable GMPs for the manufacture of the Products and Product Approvals for the Products.
 
5.2                                Quality Control. (a) Manufacturer shall manufacture the Products in accordance with the Product Specifications. Manufacturer will install and maintain effective quality control systems, conduct quality assurance testing and keep statistical process control records conforming to the then applicable good manufacturing practices regulations of the U.S. Food and Drug Administration under 21 CFR Part 820 or comparable regulations of any other any regulatory agency or authority that has authority to grant registrations, authorizations and approvals necessary for the commercial manufacture of the Products (each, a Regulatory Authority ) (the Applicable GMP ) and including specifically ISO 9001 certification and ISO 13485 certification.
 
(b)                                  Manufacturer will comply with Applicable GMP requirements in its manufacturing of the Products. Prior to shipping any Product, Manufacturer will carry out the Product tests specified in the applicable Product Specifications on each Product. If any Product fails to meet the Product Specifications, the Product will be replaced by Manufacturer. No Product will be shipped to Company or its designee without passing all tests specified in the Product Specifications except with Company’s prior written approval.
 
(c)                                   Manufacturer will maintain manufacturing quality documentation, including records of Manufacturer’s Product tests in accordance with the applicable regulations of the applicable Regulatory Authorities and Manufacturer will certify that Product was manufactured and tested in accordance with the applicable Product Specifications and regulatory requirements. Company may request copies of such manufacturing quality documentation and records and certifications as part of the inspections permitted under Section 5.3(a). Company will maintain quality control documentation, including records of Company’s Product Approval process and records related to Company’s promotion and marketing of the Product.
 
5.3                                Inspections.   (a) During regular business hours and upon reasonable advance notice, Manufacturer will permit Company and its agents to inspect the Facility and provide access to Manufacturer’s manufacturing quality control documentation and regulatory files related to the Products to the extent necessary for, and for the sole purpose of assessing Manufacturer’s compliance with the provisions of Sections 5.2 and 6.2 of this Agreement;
 
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provided that such inspections shall be conducted in a manner that does not unreasonably disrupt operations of the Facility.
 
(b)                                  Manufacturer will allow representatives of any Regulatory Authority with jurisdiction over the manufacture, marketing, distribution and sale of any of the Products in the Territory to inspect the Facility, and will cooperate with such representatives in every reasonable manner. Manufacturer will promptly provide Company with notice of any inspections of the Facility by inspectors of the FDA or any other Regulatory Authority reasonably related to its performance hereunder or the subject matter of this Agreement and will permit Company to attend such inspections. Manufacturer will provide Company with copies of any FDA Form 483 notices of adverse findings, regulatory letters or similar writings it receives from any Regulatory Authority setting forth adverse findings or non¬compliance with applicable laws, regulations or standards relating to the Products supplied by Manufacturer hereunder within two (2) days of its receipt thereof, and Manufacturer’s written response to such Regulatory Authority not later than the date of its submission thereof.
 
(c)                                   If an inspection pursuant to Section 5.3(a) reveals that the Facility does not satisfy the requirements above in all material respects, then Company will promptly provide to Manufacturer written notice of such fact, which notice will contain in reasonable detail the deficiencies found in the manufacturing facilities and, if practicable, those steps Company believes Manufacturer should undertake in order to remedy such deficiencies. Manufacturer will remedy such deficiencies within a reasonable period of time after receipt of such written notice.
 
5.4                                Vigilance; Recalls.   (a)  Attachment 5 contains the Company’s standard operating procedures (SOPs) as to Product recalls, which have been mutually agreed upon by the parties. If either party becomes aware of information about any Product indicating that it may not conform to the applicable Product Specifications, or that there are potential issues regarding safety or accuracy of results of Product, it will promptly so notify the other party. The parties will promptly confer to discuss such circumstances and to consider appropriate courses of action, which courses of action will be consistent with the SOPs.
 
(b)                                  In the event that (i) Company determines that an event, incident, or circumstance may result in the need for a recall or other removal of the Product or any lot or lots thereof from the market; (ii) any Regulatory Authority in the Territory threatens to remove a Product from the market; or (iii) any Regulatory Authority in the Territory requires distribution of a “Dear Doctor” letter or its equivalent regarding the use of Product, Company shall promptly advise Manufacturer in writing, and shall provide Manufacturer with copies of all relevant correspondence, notices and the like. Notwithstanding anything the contrary herein, Company shall have final authority to make all decisions relating to any recall within the Territory and shall pay all costs associated with such recall of the Product for any reason, whether or not requested or ordered by any Regulatory Authority; provided that the foregoing does not limit Company’s right to proceed against Manufacturer pursuant to Section 6.2 to the extent such recall or withdrawal of the Product is the result of (i) any breach by Manufacturer of its duties under the Agreement or (ii) Manufacturer’s negligence or willful-misconduct. If Company initiates any recall of a Product, Manufacturer shall cooperate and provide reasonable assistance to Company in conducting such recall.
 
(c)                                   Intentionally Omitted.
 
(d)                                  With respect to any recall, withdrawal, or field correction of a Product, Company or its designee will make all contacts with the FDA and other Regulatory Authorities, and will be responsible for coordinating all of the necessary activities in connection with such recall, withdrawal, or field correction. Company and Manufacturer will coordinate any statements to customers and the media, including, but not limited to, press releases and interviews for publication or broadcast except as otherwise required by applicable law to assure patient safety, and neither party will issue any such statements without consulting with the other. The parties will reasonably cooperate with each other in the conduct of such activities and will perform any acts reasonably requested by the other party to facilitate the recall, withdrawal or field correction. Each party will keep the other party fully informed of progress and in relation to all material decisions or actions such party undertakes pursuant to this Section 5.4(d).
 
(e)                                   Each party will notify the other party within three (3) business days (unless a shorter period is required under applicable laws or regulations) of any event or complaint that gives rise or could give rise to the need to file a adverse event report within the meaning of the Federal Food, Drug and Cosmetic Act of 1938, as amended or similar report under the laws or regulations administered by any Regulatory Authority (collectively, an AER ),
 
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with respect to any Product or the manufacture, distribution or use thereof in accordance with applicable regulations covering AER’s. Each such notice will be Confidential Information under this Agreement. If, as a result of any corrective action or any final, non-appealable or non-appealed governmental or court action, an AER is required to be issued for any Product sold hereunder, Company will bear the costs and expenses of and will be responsible for all corrective actions associated with such AER but the foregoing does not limit Company’s right to proceed against Manufacturer pursuant to Section 6.2 to the extent such AER is the direct result of any breach by Manufacturer of its duties under the Agreement.
 
5.5                                Compliance with Laws. Company shall comply with all applicable laws and regulations pertaining to the importation, distribution, sales and marketing of the Products and performance by Company of its obligations under this Agreement. Manufacturer will comply with all applicable laws and regulations pertaining to the manufacture of the Products and in any other manner pertaining to performance by Manufacturer of its obligations under this Agreement.
 
5.6                                FDA Approvals. Company shall use its commercially reasonable efforts to obtain promptly all Product Approvals, including, but not limited to, approvals from the FDA necessary for the commercial import, export, distribution and sale of the Product in the Territory.
 
6.                                       REPRESENTATIONS AND WARRANTIES
 
6.1                                Authorization; Enforceability. Each of Manufacturer and Company represents and warrants to the other that: (a) it is a corporation or limited liability company duly organized and validly existing under the laws of its incorporating jurisdiction; (b) it has all requisite corporate power and authority to enter into this Agreement; (c) it is duly authorized to execute and deliver this Agreement and to perform its obligations hereunder and consummate the transactions contemplated hereby; (d) this Agreement is a valid and binding obligation of such party enforceable in accordance with its terms; and (e) its execution, delivery and performance of this Agreement will not conflict in any material fashion with the terms of any other agreement or instrument to which it is or becomes a party or by which it is or becomes bound, nor violate any law or regulation of any court, governmental body or administrative or other agency having authority over it.
 
6.2                                Product Warranty. Manufacturer represents and warrants to Company, its successors, assigns, and customers and to users of the Products that each Product supplied to Company hereunder: (a) conforms to the applicable Product Specifications for the applicable period stated in Attachment 6 , for each Product described therein; and (b) was manufactured, processed, labeled, packaged, stored and tested (in each case, while in the possession or control of Manufacturer) in accordance with the Product Specifications (including any applicable Product Approvals) and Applicable GMP. This warranty does not apply to any non-conformity of the Products resulting from (i) any alteration, misuse, mishandling or storage in an improper environment in each case by any party other than Manufacturer or its agents or (ii) any labeling approved by Company or any labeling required to be added to the Products by Company. THE FOREGOING WARRANTY IS THE SOLE AND EXCLUSIVE WARRANTY GIVEN BY MANUFACTURER WITH RESPECT TO THE PRODUCTS, AND MANUFACTURER DOES NOT GIVE OR MAKE, AND COMPANY IS NOT RELYING ON, ANY OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, INCLUDING IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, TITLE OR NONINFRINGEMENT IN CONNECTION WITH THE PRODUCTS .
 
7.                                       RISK ALLOCATION
 
7.1                                LIMITATION OF LIABILITY. NEITHER PARTY SHALL BE LIABLE TO THE OTHER FOR LOST PROFITS OR FOR ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, SPECIAL, PUNITIVE OR EXEMPLARY DAMAGES IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, HOWEVER CAUSED, UNDER ANY THEORY OF LIABILITY INCLUDING CONTRACT, TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, AND NOTWITHSTANDING THAT SUCH DAMAGES MAY HAVE BEEN IN THE REASONABLE CONTEMPLATION OF THE PARTIES. THE LIMITATIONS OF LIABILITY SET FORTH IN THIS SECTION 7.1 SHALL NOT APPLY TO COMPANY’S PAYMENT OBLIGATIONS SET FORTH IN THIS AGREEMENT, TO BREACH OF CONFIDENTIALITY OBLIGATIONS UNDER SECTION 4.1 OR VIOLATIONS OF
 
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ANOTHER PARTY’S INTELLECTUAL PROPERTY RIGHTS AND SHALL NOT SERVE TO LIMIT A PARTY’S INDEMNIFICATION OBLIGATIONS PROVIDED IN SECTION 7.2 WITH RESPECT TO THIRD PARTY CLAIMS.
 
7.2                                Indemnification. Subject to the provisions of Section 7.3, each of Manufacturer and Company (each, in such capacity, an Indemnifying Party ) will defend, indemnify and hold harmless the other party, its subsidiaries, parent corporations, affiliates, officers, directors, employees, agents, or representatives and their respective successors and assigns (each, in such capacity, an Indemnified Party ) from and against any claim, suit, demand, loss, damage, expense (including reasonable attorney’s fees of indemnitee(s) and those that may be asserted by a third party) or liability (collectively, Losses ) imposed upon the Indemnified Party(s) by any third party to the extent arising from or related to: (a) any material breach of such Indemnifying Party’s representations and warranties under this Agreement; (b) any negligence or intentional misconduct by such Indemnifying Party (or its employees, agents or representatives) in performing its obligations under this Agreement; (c) in the case of Manufacturer as the Indemnifying Party an inherent defect in the Products or failure of the Product to comply with the Product Specifications; (d) in the case of Company as the Indemnifying Party (i) any labeling, package insert, warnings or other materials supplied or required by law or this Agreement to be supplied by or at the direction of Company; and (ii) any promotional claims with respect to any Product by Company or by an Affiliate, licensee, sublicensee, distributor or agent of Company; and (e) in the case of Manufacturer as the Indemnifying Party any claim that the Product infringes any patent or other intellectual property right of any third party other than cases in which such infringement arises from a modification proposed by Company to a Product Specification. The foregoing indemnification action shall not apply to the extent that such Losses arose as a result of any Indemnified Party’s negligence, intentional misconduct or breach of this Agreement.
 
7.3                                Procedure. To receive the benefit of indemnification under Section 7.2, the Indemnified Party must (a) promptly notify the Indemnifying Party of a claim or suit; provided, that failure to give such notice shall not relieve Indemnifying Party of its indemnification obligations except to the extent that such failure prejudices the rights of Indemnifying Party; (b) provide reasonable cooperation to the Indemnifying Party (and its insurer), as reasonably requested, at Indemnifying Party’s cost and expense; and (c) tender to the Indemnifying Party (and its insurer) full authority to defend or settle the claim or suit; provided that no settlement requiring any admission by the Indemnified Party or that imposes any obligation on the Indemnified Party shall be made without the Indemnified Party’s consent, not to be unreasonably withheld. Neither party, as Indemnifying Party, has any obligation to indemnify the other party in connection with any settlement made without the Indemnifying Party’s written consent. The Indemnified Party has the right to participate at its own expense in the claim or suit and in selecting counsel therefor.
 
7.4                                Insurance. Each party shall procure and maintain insurance or self-insurance, including product liability insurance, adequate to cover its obligations hereunder and which are consistent with normal business practices of prudent companies similarly situated at all times during which any Product is being clinically tested with human subjects or commercially distributed or sold by Company. It is understood that such insurance shall not be construed to create a limit of either party’s liability with respect to its indemnification obligations under Section 7.2. Each party shall provide the other with written evidence of such insurance (or financial information that describes the amounts available under any self-insurance facility) upon request. Each party shall provide the other with written notice at least fifteen (15) days prior to the cancellation, non-renewal or material change in such insurance or self-insurance which materially adversely affects the rights of the other party hereunder. If such party does not obtain replacement insurance or take other measures that allow it to provide comparable coverage within such 15-day period, the other party shall have the right to terminate this Agreement effective at the end of such fifteen (15) day period without notice or any additional waiting periods.
 
8.                                       TERM AND TERMINATION
 
8.1                                Term. This Agreement shall take effect as the Effective Date and shall remain in effect until the fifth anniversary of the Effective Date, unless sooner terminated in accordance with Section 8.2 of this Agreement (including the Sections referenced in Section 8.2) or extended in accordance with this Section 8.1. Manufacturer hereby grants Company, or its successors and assigns, an option to renew this Agreement, upon the same terms as herein set forth, for one (1) additional five (5) year period, which option to renew shall automatically take effect at the expiration of the then current term unless written notice of Company’s decision not to renew is delivered to
 
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Manufacturer at least six (6) months prior to the expiration of the then current term. All applicable terms and conditions of this Agreement shall remain in effect during the renewal term, unless expressly amended by mutual agreement of the parties. During any notice period prior to the expiration of the initial term or any renewal term, each party will continue to perform and fulfill all of its respective obligations.
 
8.2                                Termination. Subject to Sections 3.3(b) and 3.7 with respect to breaches addressed thereby, either party may terminate this Agreement at any time upon sixty (60) days notice to the other party in the event that the other party shall have breached any of its material obligations hereunder and shall not have cured such default prior to the expiration of the sixty (60) day period, provided that if the breach relates only to a single Product, then the terminating party shall be entitled to terminate this Agreement only with respect to the applicable Product. In addition, either party shall have the right to terminate this Agreement on a Product-by-Product basis upon thirty (30) days notice if a Force Majeure condition (excluding a Force Majeure condition that is the fault of the party seeking to terminate) has prevented performance by the other party for more than forty five (45) consecutive days or more than one hundred twenty (120) days in the aggregate in any 12-month period. The parties may also terminate this Agreement at any time on a Product-by-Product basis upon mutual written agreement of the parties. Company may also terminate this Agreement with respect to a Product upon notice to Manufacturer if Manufacturer fails to cure a breach with respect to such Product under Section 3.3(b) in accordance with Section 3.3(b).
 
8.3                                Effect of Termination. (a) Termination of this Agreement shall not affect rights and obligations of either party that may have accrued prior to the effective date of termination or any obligation specifically stated to survive termination. The provisions of Sections 1, 4.1, 4.4-4.5, 5.2(c), 5.4(a)-(d), 6.1-6.2, 7.1-7.3, 8.3, 9, 10.1, 10.3 and 10.5-10.14 shall survive any expiration or termination of this Agreement in accordance with their respective terms. Upon termination of this Agreement for any reason and upon expiration of the applicable sell-out period specified in this Section 8.3, Company shall discontinue any and all use of the licenses granted under Section 4.2.
 
(b)                                  Upon any termination (including expiration) of this Agreement, each party shall return to the other party or certify in writing to the other party that it has destroyed all documents and other tangible items it or its employees or agents have received or created pertaining, referring or relating to the Confidential Information of the other party; provided, however, that a party is permitted to retain one copy of such materials in its legal files to be used solely to verify compliance with its obligations hereunder.
 
(c)                                   Upon any termination (including expiration) of this Agreement, Manufacturer and Company will cooperate to minimize disruption to customers for the Product in the Territory. Except in the event of termination arising from Company’s breach of this Agreement, and on a cash-in-advance basis only, Manufacturer will fill existing orders that Manufacturer has received and accepted and will accept additional orders from Company for additional Products that Company is, as of the date of termination notice, contractually obligated to furnish to its customers, to the extent Company does not have sufficient product in its inventory to fulfill such obligations; provided Company notifies Manufacturer of such transactions by the termination date. Any Products manufactured pursuant to the provisions of this Section 8.3(c) shall be subject to the provisions of Section 3 and Section 5 (except as expressly modified by this Section 8.3(c) with respect to payment terms).
 
(d)                                  If termination is based upon material breach by Company, Manufacturer shall have the right but not the obligation to repurchase some or all of the inventory of the Product held by Company or its Affiliates. The price for such inventory shall be the cost thereof actually paid by Company to Manufacturer. Upon issuance of an RMA to Company by Manufacturer, Company shall ship the Products to Manufacturer freight prepaid. If Manufacturer does not repurchase the inventory under this Section 8.3(d), Company shall have the right to sell out its inventory for a period of […***…] from the date of termination. Thereafter, Manufacturer shall have the right but not the obligation to repurchase any remaining inventory of the Product in accordance with the provisions of this Section 8.3(d).
 
9.                                       DISPUTE RESOLUTION.
 
9.1                                Designated Contacts. Each party will designate an individual ( Representative ) who will have the authority to represent such Party in all matters concerning the transactions contemplated by this Agreement. All communications should be addressed to the designated Representative. The initial Company Representative will be Hani Zeini. The initial Manufacturer Representative will be Antoine Robert.
 
***Confidential Treatment Requested
 
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9.2                                Issue Resolution. In the event that any dispute arises relating to this Agreement, the Representatives shall promptly meet and attempt to resolve same through good faith discussions. If the Representatives are unable to resolve any dispute to their mutual satisfaction within thirty (30) days after they commence discussions regarding same, and do not agree to extend the time for resolution of the issue at the end of their meeting, then either party may initiate alternative dispute resolution in accordance with Section 9.3. Pending resolution of any dispute, both parties will continue their performance under this Agreement including, without limitation, the payment of all amounts due to the other party that are not in dispute.
 
9.3                                Arbitration. Any controversy or claim arising between the parties in connection with this Agreement that cannot be resolved using the procedure specified in sections 9.1-9.2, shall be resolved by binding arbitration in accordance with the terms and conditions of Sections 9.3-9.5; provided, that actions by either party seeking equitable or declaratory relief may be brought in court pursuant to Section 10.1 without resort to any of the provisions of this Section 9. This agreement to arbitrate shall continue in full force and effect despite the expiration, rescission or termination of this Agreement. All arbitration shall be undertaken in accordance with the federal policy in the United States favoring arbitration, as set forth in the Federal Arbitration Act, and the decision of the arbitrator(s) shall be enforceable in any court of competent jurisdiction. The parties knowingly and voluntarily waive their rights to have their dispute tried and adjudicated by a judge and jury except as expressly provided herein. The arbitrator(s) shall apply the law of New York and the arbitration shall be held in New York, New York, United States of America.
 
9.4                                Arbitration Procedure. Any party may demand arbitration by sending written notice to the other party. The arbitration and the selection of the arbitrator(s) shall be conducted in accordance with such rules as may be agreed upon by the parties, or, failing agreement within thirty (30) days after arbitration is demanded, under the International Arbitration Rules of the American Arbitration Association’s International Centre for Dispute Resolutions ( ICDR ), as such rules may be modified by this Agreement. If the parties are unable to agree upon a single arbitrator within thirty (30) days following the date arbitration is demanded, then three (3) arbitrators shall be used, one selected by each party within ten (10) days after the conclusion of the thirty (30) day period and a third selected by the first two within ten (10) days thereafter. Unless the parties agree otherwise, they shall be limited in their discovery to directly relevant documents. Responses or objections to a document request shall be served twenty (20) days after receipt of the request. The arbitrator(s) shall resolve any discovery disputes.
 
9.5                                Awards. The arbitrator(s) shall only have the authority to award actual money damages (with interest on unpaid amounts from the date due) and the arbitrator(s) shall not have the authority to award exemplary or punitive damages, and the parties expressly waive any claimed right to such damages. The arbitration shall be of each party’s individual claims only, and no claim of any other party shall be subject to arbitration in such proceeding. The costs and expenses of the arbitration, but not the costs and expenses of the parties, shall be shared equally by the parties; provided that if the arbitrator(s) determine(s) that one party prevailed in the proceeding, then the other party shall bear the entire cost and expense of the arbitration. If a party fails to proceed with arbitration, unsuccessfully challenges the arbitration award, or fails to comply with the arbitration award, the other party is entitled to costs, including reasonable attorneys’ fees, for having to compel arbitration or defend or enforce the award. Except as otherwise required by law, the parties and the arbitrator(s) shall maintain as confidential all information or documents obtained during the arbitration process, including the resolution of the dispute.
 
9.6                                Intellectual Property. Notwithstanding the provisions of Sections 9.3-9.5, no claim or dispute relating to the ownership, use, enforceability or validity of any IP Rights shall be subject to arbitration; if any such claim or dispute arises and is not resolved by the parties in accordance with Section 9.2, then the parties shall resort to litigation to resolve such matter.
 
10.                                GENERAL PROVISIONS.
 
10.1                         Governing Law; Venue. (a) This Agreement shall be governed and construed in accordance with the internal, substantive laws of New York, United States of America, to the exclusion of any choice or conflict of laws rule or provision that would result in the application of the substantive law of any other jurisdiction. The United Nations Convention on Contracts for the International Sale of Goods shall not apply to the transactions contemplated by this Agreement.
 
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(b)                                  Any action, suit or other proceeding pursuant to, arising under, or touching or concerning this Agreement or the transactions contemplated hereby shall be brought exclusively in any court of competent jurisdiction in New York, New York, United States of America. The parties agree to take any and all necessary or appropriate action to submit to the exclusive jurisdiction of any such court.
 
10.2                         Waiver. No provision of or right under this Agreement shall be deemed to have been waived by any act or acquiescence on the part of either party, its agents or employees, but only by an instrument in writing signed by an authorized officer of each party. No waiver by either party of any breach of this Agreement by the other party shall be effective as to any other breach, whether of the same or any other term or condition and whether occurring before or after the date of such waiver.
 
10.3                         Independent Contractors. Each party represents that it is acting on its own behalf as an independent contractor and is not acting as an agent for or on behalf of any third party. This Agreement and the relations hereby established by and between Company and Manufacturer do not constitute a partnership, joint venture, franchise, agency or contract of employment.
 
10.4                         Assignment. Neither party may assign this Agreement or any of its rights and obligations under this Agreement without the prior written consent of the other party; provided , that either party may assign this Agreement without consent to: (a) any Person to which such party transfers all or substantially all of its assets or with which such party is consolidated or merged; or (b) any Affiliate; provided , further , that in each instance the assignee expressly assumes all obligations imposed on the assigning party by this Agreement in writing and the other party is promptly notified of such assignment. Any attempt to assign this Agreement or any rights or obligations hereunder other than as expressly permitted by this Section 10.4 shall be null and void.
 
10.5                         Successors and Assigns. This Agreement shall bind and inure to the benefit of the parties hereto and their respective successors and permitted assigns.
 
10.6                         Notices. Unless otherwise provided herein, any notice, report, payment or document to be given by one party to the other shall be in writing and shall be deemed given when delivered personally or mailed by certified or registered mail, postage prepaid (such mailed notice to be effective on the date which is three (3) business days after the date of mailing), or sent by internationally recognized overnight courier (such notice sent by courier to be effective one business day after it is deposited with such courier), or sent by telefax (such notice sent by telefax to be effective when sent, if confirmed by certified or registered mail or overnight courier as aforesaid) to the address set forth on the signature page to this Agreement or to such other place as any party may designate as to itself by written notice to the other party.
 
10.7                         Severability. In the event any provision of this Agreement shall for any reason be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other term or provision hereof. The parties agree that they will negotiate in good faith or will permit a court to replace any provision hereof so held invalid, illegal or unenforceable with a valid provision which is as similar as possible in substance to the invalid, illegal or unenforceable provision.
 
10.8                         Captions. Captions of the sections and subsections of this Agreement are for reference purposes only and do not constitute terms or conditions of this Agreement and shall not limit or affect the meaning or construction of the terms and conditions hereof.
 
10.9                         Word Meanings. Words such as herein , hereinafter , hereof and hereunder refer to this Agreement as a whole and not merely to a section or paragraph in which such words appear, unless the context otherwise requires. The singular shall include the plural, and each masculine, feminine and neuter reference shall include and refer also to the others, unless the context otherwise requires.
 
10.10                  Entire Agreement; Amendment. The terms and provisions contained in this Agreement (including the Attachments) constitute the entire understanding of the parties with respect to the transactions and matters contemplated hereby and supersede all prior or contemporaneous communications, representations, agreements and understandings relating to the subject matter hereof, including the 1997 Agreement. No representations,
 
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inducements, promises or agreements, whether oral or otherwise, between the parties not contained in this Agreement shall be of any force or effect. No agreement or understanding amending or extending this Agreement including the Attachments or varying its terms (including any inconsistent terms in any purchase order, acknowledgment or similar form) shall be binding upon either party unless it is in a writing specifically referring to this Agreement and signed by’ a duly authorized representative of each of the parties.
 
10.11                  Conflict or Inconsistency. In the event of any conflict or inconsistency between the terms and conditions of this Agreement and any terms or conditions set forth in any purchase order or other document relating to the transactions contemplated by this Agreement, the terms and conditions set forth in this Agreement shall prevail.
 
10.12                  Rules of Construction. The parties agree that they have participated equally in the formation of this Agreement and that the language and terms of this Agreement shall not be construed against either party by reason of the extent to which such party or its professional advisors participated in the preparation of this Agreement.
 
10.13                  Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
 
10.14                  Force Majeure. Except as otherwise provided in this Agreement, a delay or failure of a party to comply with any obligation created by this Agreement that is caused by a Force Majeure condition shall not be a breach of this Agreement.
 
10.15                  Further Assurances. Each party covenants and agrees that, subsequent to the execution and delivery of this Agreement and without any additional consideration, it will execute and deliver any further legal instruments and perform any acts which are or may become reasonably necessary to effectuate the purposes of this Agreement.
 
10.16                  Canada. Manufacturer will, within thirty (30) days following the Effective Date seek to arrange a meeting among representatives of the Company and the party to which Manufacturer has granted distribution rights for products in the country of Canada (Anexxa Medical Technologies Inc.) for the purpose of determining whether the Company can persuade such distributor to give up its rights to Canada in exchange for a payment from Company. If Company and such distributor are able to reach a mutually satisfactory agreement under which such distributor will relinquish rights to distribute in Canada in exchange for a payment from Company then Manufacturer hereby covenants and agrees that: (a) it will permit such distributor to terminate such distribution agreement without payment of any termination or similar fee; and (b) effective upon the payment of such fee by Company, the country of Canada shall automatically be added to the definition of Territory under this Agreement and the provisions of the last sentence of Section 3.8(a) shall automatically be amended to include as Company’s responsibility clearing Products through all customs and import requirements for Canada.
 
[Remainder of this page intentionally left blank]
 
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IN WITNESS WHEREOF the parties have caused this Agreement to be executed on their behalf by their duly
authorized representatives intending it to take effect as an instrument under seal as of the Effective Date.

Silimed-Silicone e Instrumental Medico-Cirugico e Hospitalar LTDA	Juliet Medical, Inc.	
 	 	
By:	/s/ Antoine Robert,	 	By:	/s/Hani Zeini	
Name: Antoine Robert	Name: Hani Zeini	
Title: Presidente	Title: Chief Executive Officer	
 	 	
Notice Address:	Notice Address:	
Silimed-Silicone e Instrumental Medico-Cirugico	Juliet Medical, Inc.	
E Hospitalar LTDA	c/o Orbimed Advisors LLC	
R Figueiredo Rocha, 374	New York, NY USA 10017	
Rio de Janeiro, Brazil	 	
Fax: 55-212-471-211	Fax: 091.212.739.6737	
Email: antoinerobert@silimied.com.br	Email: hani@julietmedical.com	
Attn: Antoine Robert, President	Attn: Hani Zeini, Chief Executive Officer	

 	 	
Attachment 1 : Products; Product Specification	 	
Attachment 2 : Pricing	 	
Attachment 3 : Trademarks	 	
Attachment 4 : Packaging Specifications	 	
Attachment 5 : Standard Operating Procedures	 	
Attachment 6 : Product Warranty Periods	 	

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Attachment 1
 
Mammary Implants:
-Inflatable Mammary Implant (textured surface Posterior Valve)
-Inflatable Mammary Implant (textured surface Anterior Valve)
-Anatomical Inflatable Mammary Implant
-Anatomical Mammary Implant (silicone gel polyurethane foam coated)
-Anatomical Mammary Implant (silicone gel textured surface)
-Mammary Implant (silicone gel smooth surface)
-Mammary Implant (silicone gel polyurethane foam coated surface)
-Mammary Implant (silicone gel textured surface)
-Smooth Surface Mammary Implant (round shape)
-Textured Surface Mammary Implant (round shape)
-Nuance® Mammary Implant
-Enhance® Mammary Implant
-Quartzo® Mammary Implant
-Pitanguy/Rebello Mammary Implant
-Inferior Pole Anatomical System
 
Contour Implants:
-Calf Implant (filled)
-Calf Implant
-Gluteal Implant
-Round and Oval bases --4 Designs
-Round and Oval bases --5 Designs
-Quartzo
-Pectoral Implant
-Silicone Smooth Surface/Texture Surface
-Silicone Texture Only
 
Tissue Expanders:
-Tissue Expanders
-Anatomical Tissue Expanders (breast)
-Gingival Expander
 
Facial Implants:
-Eyelid Suspensor Implant
-Ear Implant
-Medgel Nasal Splint
-Nostril Retainer
-Anatomical Chin Implant
-Chin Implant
-Anatomical Malar Implant
-Malar Implant
-Implant for Nasal Dorsum
-Nasal Implant in “L” Shape
-Zygomatic Implant
 
Hand Surgery Products:
-Tendon Spacer
-Implant for the First Intermetacarpal Space
 
Urology Products:
-Inflatable Periurethral Constrictor
-Vesical Conformer
-Tube for Hypospadius
-Testicular Implant
-Silicone Gel
-Silicone Gel Smoot Surface
-Malleable Penile Implant
-Adjustable Penile Implant
-Vaginal Stent

 
Bariatric Products:
-Adjustable Gastric Band
-Gastric Balloon
 
Miscellaneous Products:
-SILICAT Chemotherapy Kit
-Guide for Canula
-Suspension Sheet for Mammoplasty
-Medgel
-Silicone Sheets and Blocks

 
Mammary Implants:
-Inflatable Mammary Implant (textured surface Posterior Valve)
-Inflatable Mammary Implant (textured surface Anterior Valve)
-Anatomical Inflatable Mammary Implant
-Anatomical Mammary Implant (silicone gel polyurethane foam coated)
-Anatomical Mammary Implant (silicone gel textured surface)
-Mammary Implant (silicone gel smooth surface)
-Mammary Implant (silicone gel polyurethane foam coated surface)
-Mammary Implant (silicone gel textured surface)
-Smooth Surface Mammary Implant (round shape)
-Textured Surface Mammary Implant (round shape)
-Nuance® Mammary Implant/Enhance® Mammary Implant
-Quartzo® Mammary Implant
-Pitanguy/Rebello Mammary Implant
-inferior Pole Anatomical System

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Contour Implants:
-Calf Implant (filled)
-Calf Implant
-Gluteal Implant
-- Round and Oval bases --4 Designs
-- Round and Oval bases --5 Designs
-- Quartzo
-Pectoral Implant
-- Silicone Smooth Surface/Texture Surface
-- Silicone Texture Only

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Tissue Expanders
-Tissue Expanders
- Anatomical Tissue Expanders (breast)
- Gingival Expander

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Urology Products:
-Inflatable Periurethral Constrictor
-Vesical Conformer
-Tube for Hypospadius
-Testicular Implant
-- Silicone Gel
-- Silicone Gel Smoot Surface
-Malleable Penile Implant
-Adjustable Penile Implant
-Vaginal Stent

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Bariatric Products
-Adjustable Gastric Bad
- Gastric Balloon

 

 

 

 

 
Miscellaneous Products:
 
-SILICAT Chemotherapy Kit
-Guide for Canula
-Suspension Sheet for Mammoplasty
-Medgel
-Silicone Sheets and Blocks

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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***Confidential Treatment Requested
 
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SILIMED-Silicone e Instrumental Médico-Cirúrgico Hospitalar Ltda.
Rua Figueiredo Rocha, 374 – Rio de Janeiro – BRASIL – 21240-660
· (5521) 3687-7140 / 3687-7141 - · (5521) 3687-7000

 
Attachment 3:
Trademarks
SILIMED
BIODESIGN
ENHANCE
NUANCE
MEME
REPLICON

 
Attachment 4
Packaging Specifications
SILIMED — 510(K) Products
General Information:

510(K) -PRODUCT	UNITS/
PACKAGING	STERILE (Y/N)	PACKAGING	
K981851 - OVAL CARVING BLOCK	1	Y	Double Blister sealed with Tyvek in a cardboard box	
K974482 - GLUTEAL IMPLANT	1	Y	Double Blister sealed with Tyvek in a cardboard box	
K981852 - TISSUE EXPANDER	1	Y	Double Blister sealed with Tyvek in a cardboard box	
K042054 - PECTORAL IMPLANT	1	Y	Double Blister sealed with Tyvek in a cardboard box	
K974480 - CALF IMPLANT	1	Y	Double Blister sealed with Tyvek in a cardboard box	
K974479 - VAGINAL STENT	1	Y	Double Blister sealed with Tyvek in a cardboard box	
K981833 - NASAL IMPLANT	1	Y	Double plastic envelope in a pvc envelope	
K981850 - CHIN IMPLANT	1	Y	Double plastic envelope in a pvc envelope	
K980221 - NASAL RETAINER	1	Y	Double plastic envelope in a pvc envelope	
 
K981835 - MALAR IMPLANT
 	 
1
 	 
Y
 	 
Double plastic envelope in a pvc envelope

Unit for Shipping:
 
· SILIMED does not use pallets for shipping.
· The large unit for shipping has the cubical weight of 61.95Kg. The quantity of packagings depends on the size and/or type of products packaging

 
Attachment 5
Standard Operating Procedures
[to be mutually agreed in accordance with the procedure specified in Section 5.4 prior to shipment of the first Products to Company for commercial sale]

 
Attachment 6
Product Warranty Periods

PRODUCT	WARRANTY PERIOD	
Mammary Implants including:
-Inflatable Mammary Implant (textured surface Posterior Valve)
-Inflatable Mammary Implant (textured surface Anterior Valve)
-Anatomical Inflatable Mammary Implant
-Anatomical Mammary Implant (silicone gel polyurethane foam coated)
-Anatomical Mammary Implant (silicone gel textured surface)
-Mammary Implant (silicone gel smooth surface)
-Mammary Implant (silicone gel polyurethane foam coated surface)
-Mammary Implant (silicone gel textured surface)
-Smooth Surface Mammary Implant (round shape)
-Textured Surface Mammary Implant (round shape)
-Nuance® Mammary Implant/Enhance® Mammary Implant
-Quartzo® Mammary Implant
-Pitanguy/Rebello Mammary Implant
-Inferior Pole Anatomical System	10 years from manufacturing date	
 	 	
Contour Implants including:
-Calf Implant (filled)
-Calf Implant
-Gluteal Implant
-- Round and Oval bases --4 Designs
-- Round and Oval bases --5 Designs
-- Quartzo
-Pectoral Implant
-- Silicone Smooth Surface/Texture Surface
 -- Silicone Texture Only	10 years from manufacturing date	
 	 	
Tissue Expanders
-Tissue Expanders
-Anatomical Tissue Expanders (breast) -Gingival Expander	5 years from manufacturing date	
 	 	
Facial Implants including:
 -Eyelid Suspensor Implant
-Ear Implant
-Medgel Nasal Splint
-Nostril Retainer
-Anatomical Chin Implant -Chin Implant
-Anatomical Malar Implant -Malar Implant
-Implant for Nasal Dorsum -Nasal Implant in “L” Shape -Zygomatic Implant	10 years from manufacturing date	
 	 	
Hand Surgery Products including:
-Tendon Spacer
-Implant for the First Intermetacarpal Space	5 years from manufacturing date	
 	 	
Urology Products including:
-Inflatable Periurethral Constrictor
-Vesical Conformer
-Tube for Hypospadius
-Testicular Implant
-Malleable Penile Implant
-Adjustable Penile Implant
-Vaginal Stent	5 years from manufacturing date	

1 

 

Bariatric Products (Bands) including:
-Adjustable gastric band	10 years from manufacturing date	
Bariatric Products (Balloons) including:
-Gastric Balloon	1 year from manufacturing date	
 	 	
Miscellaneous Products including:
 -SILICAT Chemotherapy Kit
-Guide for Canula
-Suspension Sheet for Mammoplasty
-Medgel
-Silicone Sheets and Blocks	None	
 
Manufacturer will include a certificate showing the date of manufacture with each shipment of each Product. No Product will be supplied more than 180 days following the date of Manufacture.
 
2 

Exhibit 10.14
 
SIENTRA, INC.
 
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
 
Hani Zeini

This Executive Employment Agreement (the “ Agreement ”), made between Sientra, Inc. (the “ Company ”) and Hani Zeini (“ Executive ”) (collectively, the “ Parties ”), is effective as of October 15, 2014 (the “ Effective Date ”) and amends and restates the prior employment letter agreement between the Company and Executive dated June 15, 2007.
 
WHEREAS , the Company desires to continue to employ Executive, who is the founder of the Company, pursuant to the terms, provisions and conditions set forth in this Agreement; and
 
WHEREAS , Executive desires to accept and continue his employment on the terms, provisions and conditions set forth in this Agreement.
 
NOW, THEREFORE , in consideration of the promises and the mutual covenants herein contained, the Parties hereby agree as follows:
 
1.                                     Employment by the Company.
 
1.1                             Position.   Executive shall continue to serve as the Company’s President and Chief Executive Officer.  During the term of Executive’s employment with the Company, Executive will devote Executive’s diligent efforts and substantially all of Executive’s business time and attention to the business of the Company, except for approved vacation periods and reasonable periods of illness or other incapacities permitted by the Company’s general employment policies.
 
1.2                             Duties and Location.   Executive shall perform such duties as are required by the Company’s Board of Directors (the “ Board ”), to whom Executive will report.  Executive’s primary office location shall be the Company’s Santa Barbara office.  The Company reserves the right to reasonably require Executive to perform Executive’s duties at places other than Executive’s primary office location from time to time, and to require reasonable business travel.  Executive shall devote substantially all of Executive’s business time and attention to the performance of Executive’s duties hereunder and shall not engage in any other business, profession or occupation for compensation or otherwise that would conflict or interfere with the rendition of such services, either directly or indirectly; provided that nothing in this Agreement shall preclude Executive from (i) managing personal investments, (ii) serving on civic or charitable boards or committees, (iii) engaging in business or professional activities for compensation from a third party, for 40 or fewer hours per calendar year, so long as such activities do not compete with the Company, and (iv) with the prior approval from the Chairman of the Board (not to be unreasonably withheld or delayed), serving on the board of directors of other for-profit companies that do not compete with the Company, so long as all such activities described in clauses (i) through (iv) herein do not materially interfere with the performance of Executive’s duties and responsibilities under this Agreement.
 
1.3                             Policies and Procedures.   The employment relationship between the Parties shall be governed by the general employment policies and practices of the Company, except that when the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.
 
1. 

 
2.                                     Compensation.
 
Salary.   As of the Effective Date, Executive’s current base salary is payable at the annualized rate of $462,250 per year (the “ Base Salary ”), subject to standard payroll deductions and withholdings and payable in accordance with the Company’s regular payroll schedule.
 
2.1                             Bonus.   As of the Effective Date, Executive is currently eligible for an annual discretionary bonus of up to 50% of Executive’s Base Salary (the “ Target Bonus ”), with the actual bonus amount (the “ Annual Bonus ”) determined by the Compensation Committee of the Board (the “ Committee ”) based upon achievement of the performance goals established by the Committee.  Subject to Executive’s continued employment at such time, Executive’s Target Bonus will increase upon the effectiveness of the Company’s initial public offering to 65% of Executive’s Base Salary.  Whether Executive receives an Annual Bonus for any given year, and the amount of any such Annual Bonus, will be determined by the Committee in its sole discretion based upon the Company’s and Executive’s achievement of objectives and milestones to be determined on an annual basis by the Committee.  Executive must remain an active employee through the end of any given calendar year in order to earn an Annual Bonus for that year and any such bonus will be paid prior to February 15 of the year following the year in which Executive’s right to such amount became vested.  Executive will not be eligible for, and will not earn, any Annual Bonus (including a prorated bonus) if Executive’s employment terminates for any reason before the end of the calendar year, except as expressly contemplated in Section 6 below.
 
3.                                     Standard Company Benefits.  Executive shall be entitled to participate in all employee benefit programs for which Executive is eligible under the terms and conditions of the benefit plans that may be in effect from time to time and provided by the Company to its employees.  The Company reserves the right to cancel or change the benefit plans or programs it offers to its employees at any time.
 
4.                                     Paid Time Off.  Executive shall be entitled to accrue and use paid time off in accordance with the terms of the Company’s policies and practices, provided, however, that in no event will Executive’s vacation accrual rate be lower than 20 days per year.
 
5.                                     Expenses.  The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in furtherance or in connection with the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time.
 
6.                                     Termination of Employment; Severance.
 
6.1                             At-Will Employment.   Executive’s employment relationship is at-will.  Either Executive or the Company may terminate the employment relationship at any time, with or without Cause or advance notice.
 
6.2                             Termination for Cause; Resignation; Death or Disability.
 
(a)                               The Company may terminate Executive’s employment with the Company at any time for Cause (as defined below).  Further, Executive may resign at any time, with or without Good Reason (as defined below).  Executive’s employment with the Company may also be terminated due to Executive’s death or disability.
 
(b)                               If Executive resigns for any reason, except as provided in Section 6.4 below, or the Company terminates Executive’s employment for Cause, or upon Executive’s death or disability, then (i) Executive will no longer vest in any equity awards, (ii) all payments of compensation
 
2. 

 
by the Company to Executive hereunder will terminate immediately (except as to amounts already earned), and (iii) Executive will not be entitled to any severance benefits.  In addition, Executive shall resign from all positions and terminate any relationships as an employee, advisor, officer or director with the Company and any of its affiliates, each effective on the date of termination.
 
6.3                             Termination without Cause.  In the event Executive’s employment with the Company is terminated by the Company without Cause (and other than as result of death or disability) prior to the closing of a Change in Control (as defined below) or more than twelve (12) months following the closing of a Change of Control, then provided such termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “ Separation from Service ”), and provided that Executive remains in compliance with the terms of this Agreement, the Company shall provide Executive with the following severance benefits (collectively, the “ Severance Benefits ”):
 
(a)                               The Company shall pay Executive (i) an amount equal to 12 months of Executive’s then-current Base Salary paid in a lump sum (the “ Salary-Based Severance ”), plus (ii) a lump sum amount equal to the Annual Bonus, if any, earned by Executive in connection with completion of the fiscal year prior to Executive’s Separation from Service.
 
(b)                               Provided that Executive timely elects continued coverage under COBRA, the Company shall pay Executive’s COBRA premiums to continue Executive’s coverage (including coverage for eligible dependents, if applicable) (“ COBRA Premiums ”) through the period (the “ COBRA Premium Period ”) starting on the Executive’s Separation from Service and ending on the earliest to occur of: (i) twelve (12) months following Executive’s Separation from Service; (ii) the date Executive becomes eligible for group health insurance coverage through a new employer; or (iii) the date Executive ceases to be eligible for COBRA continuation coverage for any reason, including plan termination.  In the event Executive becomes covered under another employer’s group health plan or otherwise cease to be eligible for COBRA during the COBRA Premium Period, Executive must immediately notify the Company of such event.  Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot pay the COBRA Premiums without a substantial risk of violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to Executive a taxable monthly payment in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue Executive’s group health coverage in effect on the date of Executive’s employment termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether Executive elects COBRA continuation coverage and shall end on the earlier of (x) the date upon which Executive obtains other employment or (y) the last day of the 12th calendar month following Executive’s Separation from Service date.
 
(c)                                The Company shall accelerate the vesting of that portion of all then-unvested Company equity awards granted to Executive that would have vested over the 12-month period following the date of Executive’s Separation from Service.
 
6.4                             Change in Control.
 
(a)                               If the Company terminates Executive’s employment with the Company without Cause, or Executive resigns for Good Reason, in either case on or within twelve (12) months following the closing of a Change in Control (as defined below), and such termination represents a Separation from Service, then Executive shall be entitled to the Severance Benefits as set forth in Section 6.3, except that 100% of all of Executive’s then-outstanding unvested Company equity awards will accelerate and will be deemed vested and exercisable as of Executive’s Separation from Service.
 
3. 

 
(b)                               In addition, if an acquiror does not assume or continue Executive’s then-unvested Company equity awards in connection with a Change in Control that also represents a Corporate Transaction (as defined in the Company’s 2014 Equity Incentive Plan), then all such awards shall accelerate in full and will be deemed vested and exercisable as of the closing of the Corporate Transaction.
 
7.                                     Conditions to Receipt of Severance Benefits.   The receipt of the Severance Benefits provided in Section 6.3 and Section 6.4 above, as applicable, will be subject to Executive signing and not revoking a separation agreement and release of claims in a form reasonably satisfactory to the Company (the “ Separation Agreement ”) within the time period set forth therein, which shall not exceed 50 days from the date of Executive’s Separation from Service (the “ Release Period ”).  No Severance Benefits will be paid or provided until the Separation Agreement becomes effective.  If the Release Period described in the preceding sentence spans two calendar years, then payment of Severance Benefits will in any event commence in the second calendar year.  Executive shall also resign from all positions and terminate any relationships as an employee, advisor, officer or director with the Company and any of its affiliates, each effective on the date of termination.
 
8.                                     Section 409A.    It is intended that all of the severance benefits and other payments payable under this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9), and this Agreement will be construed to the greatest extent possible as consistent with those provisions, and to the extent no so exempt, this Agreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A.  For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), Executive’s right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.  Notwithstanding any provision to the contrary in this Agreement, if Executive is deemed by the Company at the time of Executive’s Separation from Service to be a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i), and if any of the payments upon Separation from Service set forth herein and/or under any other agreement with the Company are deemed to be “deferred compensation”, then to the extent delayed commencement of any portion of such payments is required in order to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such payments shall not be provided to Executive prior to the earliest of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company, (ii) the date of Executive’s death or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation.  Upon the first business day following the expiration of such time period, all payments deferred pursuant to this Paragraph shall be paid in a lump sum to Executive, and any remaining payments due shall be paid as otherwise provided herein or in the applicable agreement. No interest shall be due on any amounts so deferred.
 
9.                                     Parachute Payments.  If any payment or benefit (including payments and benefits pursuant to this Agreement) that Executive would receive in connection with a Change in Control from the Company or otherwise (“ Transaction Payment ”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”), then the Company shall cause to be determined, before any amounts of the Transaction Payment are paid to Service Provider, which of the following two alternative forms of payment would result in Service Provider’s receipt, on an after-tax basis, of the greater amount of the Transaction Payment notwithstanding that all or some portion of the Transaction Payment may be subject to the Excise Tax: (1) payment in full of the entire amount of the Transaction Payment (a “ Full Payment ”), or (2) payment of only a part of the Transaction Payment so
 
4. 

 
that Service Provider receives the largest payment possible without the imposition of the Excise Tax (a “ Reduced Payment ”).  For purposes of determining whether to make a Full Payment or a Reduced Payment, the Company shall cause to be taken into account all applicable federal, state and local income and employment taxes and the Excise Tax (all computed at the highest applicable marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes).  If a Reduced Payment is made, (x) Executive shall have no rights to any additional payments and/or benefits constituting the Transaction Payment, and (y) reduction in payments and/or benefits shall occur in the manner that results in the greatest economic benefit to Executive as determined in this paragraph.  If more than one method of reduction will result in the same economic benefit, the portions of the Transaction Payment shall be reduced pro rata . Unless Executive and the Company otherwise agree in writing, any determination required under this section shall be made in writing by the Company’s independent public accountants (the “ Accountants ”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes.  For purposes of making the calculations required by this section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  Executive and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this section as well as any costs incurred by Executive with the Accountants for tax planning under Sections 280G and 4999 of the Code.
 
10.                             Definitions.
 
10.1                     Cause.   For purposes of this Agreement, “Cause” for termination will mean:  (a) Executive’s willful failure substantially to perform his duties and responsibilities to the Company or willful, material violation of a policy of the Company; (b) Executive’s commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct that has caused or is reasonably expected to result in material injury to the Company; (c) Executive’s willful breach of any of his obligations under any written agreement or covenant with the Company; (d) Executive’s material and willful violation of a federal or state law or regulation applicable to the business of the Company; and (e) Executive’s conviction or plea of guilty or no contest to a felony.
 
10.2                     Change in Control.  For purposes of this Agreement, “Change in Control” shall have the meaning provided in the Company’s 2014 Equity Incentive Plan.
 
10.3                     Corporate Transaction.  For purposes of this Agreement, “Corporate Transaction” shall have the meaning provided in the Company’s 2014 Equity Incentive Plan.
 
10.4                     Good Reason.  For purposes of this Agreement, Executive shall have “ Good Reason ” for resignation from employment with the Company if any of the following actions are taken by the Company without Executive’s affirmative prior written consent to such adverse change (which specifically acknowledges Executive’s waiver of the Good Reason condition with respect to the individual action that would otherwise form the basis of a resignation for Good Reason):  (a) a material reduction in Executive’s base salary, bonus opportunity or benefits; (b) a material reduction in Executive’s title, duties, responsibilities and/or authority; or (c) relocation of Executive’s principal place of employment to a place other than Santa Barbara, California.  In order to resign for Good Reason, Executive must provide written notice to the Board within 30 days after the first occurrence of the event giving rise to Good Reason setting forth the basis for Executive’s resignation, allow the Company at least 30 days from receipt of such written notice to cure such event, and if such event is not reasonably cured within such period, Executive must resign from all positions Executive then holds with the Company not later than 60 days after the expiration of the cure period.
 
5. 

 
11.                             Proprietary Information Obligations. Regardless of the reason of Executive’s termination of employment with the Company, Executive will continue to comply with the Employee Confidentiality, Inventions and Non-Interference Agreement dated September 15, 2006 (the “ Confidentiality Agreement ”).
 
12.                             No Adverse Interests.   Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.
 
13.                             Non-Solicitation.  Executive agree that during the period of employment with the Company and for twelve (12) months after the date Executive’s employment is terminated for any reason, Executive will not, either directly or through others, solicit or encourage or attempt to solicit or encourage any employee, independent contractor, or consultant of the Company to terminate his or her relationship with the Company in order to become an employee, consultant or independent contractor to or for any other person or entity.
 
14.                             Dispute Resolution.   To ensure the timely and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, including but not limited to statutory claims, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in Los Angeles, California, conducted by JAMS, Inc. (“ JAMS ”) under the then applicable JAMS rules (which can be found at the following web address: http://www.jamsadr.com/rulesclauses ).  By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding.  The Company acknowledges that Executive will have the right to be represented by legal counsel at any arbitration proceeding.  The arbitrator shall:  (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award.  The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law.  The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required of the Executive if the dispute were decided in a court of law.  Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.  Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.
 
15.                             General Provisions.
 
15.1                     Notices.   Any notices provided must be in writing and will be deemed effective upon the earlier of personal delivery (including personal delivery by fax) or the next day after sending by overnight carrier, to the Company at its primary office location and to Executive at the address as listed on the Company payroll.
 
15.2                     Severability.   Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction to the extent possible in keeping with the intent of the parties.
 
6. 

 
15.3                     Waiver.   Any waiver of any breach of any provisions of this Agreement must be in writing to be effective, and it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.
 
15.4                     Complete Agreement.   This Agreement, together with the Confidentiality Agreement, constitutes the entire agreement between Executive and the Company with regard to this subject matter.  It supersedes all previous agreements and understandings between the parties with respect to the subject matter hereof and is the complete, final, and exclusive embodiment of the Parties’ agreement with regard to this subject matter.  This Agreement is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations.  This Agreement cannot be modified or amended except in a writing signed by a duly authorized officer of the Company.
 
15.5                     Counterparts.   This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.
 
15.6                     Headings.   The headings of the paragraphs hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.
 
15.7                     Successors and Assigns.   This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which shall not be withheld unreasonably.
 
15.8                     Tax Withholding and Indemnification.  All payments and awards contemplated or made pursuant to this Agreement will be subject to withholdings of applicable taxes in compliance with all relevant laws and regulations of all appropriate government authorities.  Executive acknowledges and agrees that the Company has neither made any assurances nor any guarantees concerning the tax treatment of any payments or awards contemplated by or made pursuant to this Agreement.  Executive has had the opportunity to retain a tax and financial advisor and fully understands the tax and economic consequences of all payments and awards made pursuant to the Agreement.
 
15.9                     Choice of Law.   All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California.
 
7. 

 
IN WITNESS WHEREOF , the Parties have executed this Agreement on the day and year first written above.

 	SIENTRA, INC.	 	

 	By:	 /s/ Nicholas Simon	 	
 	Nicholas Simon	 	
 	On behalf of the Board of Directors	 	

 	EXECUTIVE	 	
 	 	 	
 	/s/ Hani Zeini	 	
 	Hani Zeini	 	
 
1. 

Exhibit 10.15
 
SIENTRA, INC.
 
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
 
Matthew Pigeon

This Amended and Restated Executive Employment Agreement (the “ Agreement ”), made between Sientra, Inc. (the “ Company ”) and Matthew Pigeon (“ Executive ”) (collectively, the “ Parties ”), is effective as of October 15, 2014 (the “ Effective Date ”) and amends and restates the prior employment letter agreement between the Company and Executive dated December 14, 2009.
 
WHEREAS , the Company desires to continue to employ Executive pursuant to the terms, provisions and conditions set forth in this Agreement; and
 
WHEREAS , Executive desires to accept and continue his employment on the terms, provisions and conditions set forth in this Agreement.
 
NOW, THEREFORE , in consideration of the promises and the mutual covenants herein contained, the Parties hereby agree as follows:
 
1.                                     Employment by the Company.
 
1.1                             Position.   Executive shall continue to serve as Chief Financial Officer and Treasurer.  During the term of Executive’s employment with the Company, Executive will devote Executive’s diligent efforts and substantially all of Executive’s business time and attention to the business of the Company, except for approved vacation periods and reasonable periods of illness or other incapacities permitted by the Company’s general employment policies.
 
1.2                             Duties and Location.   Executive shall perform such duties as are required by the Company’s Chief Executive Officer, to whom Executive will report.  Executive’s primary office location shall be the Company’s Santa Barbara office.  The Company reserves the right to reasonably require Executive to perform Executive’s duties at places other than Executive’s primary office location from time to time, and to require reasonable business travel.  Executive shall devote substantially all of Executive’s business time and attention to the performance of Executive’s duties hereunder and shall not engage in any other business, profession or occupation for compensation or otherwise that would conflict or interfere with the rendition of such services, either directly or indirectly; provided that nothing in this Agreement shall preclude Executive from (i) managing personal investments, (ii) serving on civic or charitable boards or committees, (iii) engaging in business or professional activities for compensation from a third party, for 40 or fewer hours per calendar year, so long as such activities do not compete with the Company, and (iv) with the prior approval from the Chief Executive Officer or Chairman of the Board (not to be unreasonably withheld or delayed), serving on the board of directors of other for-profit companies that do not compete with the Company, so long as all such activities described in clauses (i) through (iv) herein do not materially interfere with the performance of Executive’s duties and responsibilities under this Agreement.
 
1.3                             Policies and Procedures.   The employment relationship between the Parties shall be governed by the general employment policies and practices of the Company, except that when the terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.
 
1. 

 
2.                                     Compensation.
 
2.1                             Salary.   As of the Effective Date, Executive’s current base salary is payable at the annualized rate of $313,733 per year (the “ Base Salary ”), subject to standard payroll deductions and withholdings and payable in accordance with the Company’s regular payroll schedule.
 
2.2                             Bonus.   As of the Effective Date, Executive is currently eligible for an annual discretionary bonus of up to 30% of Executive’s Base Salary (the “ Target Bonus ”), with the actual bonus amount (the “ Annual Bonus ”) determined by the Compensation Committee of the Board of Directors (the “Board” ) (or a subcommittee thereof) (the “ Committee ”) based upon achievement of the performance goals established by the Committee.  Subject to Executive’s continued employment at such time, Executive’s Target Bonus will increase upon the effectiveness of the Company’s initial public offering to 45% of Executive’s Base Salary.  Whether Executive receives an Annual Bonus for any given year, and the amount of any such Annual Bonus, will be determined by the Committee in its sole discretion based upon the Company’s and Executive’s achievement of objectives and milestones to be determined on an annual basis by the Committee.  Executive must remain an active employee through the end of any given calendar year in order to earn an Annual Bonus for that year and any such bonus will be paid prior to February 15 of the year following the year in which Executive’s right to such amount became vested.  Executive will not be eligible for, and will not earn, any Annual Bonus (including a prorated bonus) if Executive’s employment terminates for any reason before the end of the calendar year, except as expressly contemplated in Section 6 below.
 
3.                                     Standard Company Benefits.  Executive shall be entitled to participate in all employee benefit programs for which Executive is eligible under the terms and conditions of the benefit plans that may be in effect from time to time and provided by the Company to its employees.  The Company reserves the right to cancel or change the benefit plans or programs it offers to its employees at any time.
 
4.                                     Paid Time Off.  Executive shall be entitled to accrue and use paid time off in accordance with the terms of the Company’s policies and practices.
 
5.                                     Expenses.  The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in furtherance or in connection with the performance of Executive’s duties hereunder, in accordance with the Company’s expense reimbursement policy as in effect from time to time.
 
6.                                     Termination of Employment; Severance.
 
6.1                             At-Will Employment.   Executive’s employment relationship is at-will.  Either Executive or the Company may terminate the employment relationship at any time, with or without Cause or advance notice.
 
6.2                             Termination; Resignation; Death or Disability.
 
(a)                               The Company may terminate Executive’s employment with the Company at any time with or without Cause (as defined below).  Further, Executive may resign at any time, with or without Good Reason (as defined below).  Executive’s employment with the Company may also be terminated due to Executive’s death or disability.
 
(b)                               Except as provided in Section 6.3 below, if Executive resigns or the Company terminates Executive’s employment, or upon Executive’s death or disability, then (i) Executive will no longer vest in any equity awards, (ii) all payments of compensation by the Company to Executive
 
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hereunder will terminate immediately (except as to amounts already earned), and (iii) Executive will not be entitled to any severance benefits.  In addition, Executive shall resign from all positions and terminate any relationships as an employee, advisor, officer or director with the Company and any of its affiliates, each effective on the date of termination.
 
6.3                             Termination in Connection with Change in Control.  In the event Executive’s employment with the Company is terminated by the Company without Cause (and other than as result of death or disability) prior to the closing of a Change in Control (as defined below) or more than twelve (12) months following the closing of a Change of Control, then provided such termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “ Separation from Service ”), and provided that Executive remains in compliance with the terms of this Agreement, the Company shall provide Executive with the following severance benefits (collectively, the “ Severance Benefits ”):
 
(a)                               The Company shall pay Executive, an amount equal to nine (9) months of Executive’s then-current Base Salary paid in equal installments on the Company’s normal payroll schedule over the nine month period immediately following the date of Separation from Service.
 
(b)                               Provided that Executive timely elects continued coverage under COBRA, the Company shall pay Executive’s COBRA premiums to continue Executive’s coverage (including coverage for eligible dependents, if applicable) (“ COBRA Premiums ”) through the period (the “ COBRA Premium Period ”) starting on the Executive’s Separation from Service and ending on the earliest to occur of: (i) nine (9) months following Executive’s Separation from Service; (ii) the date Executive becomes eligible for group health insurance coverage through a new employer; or (iii) the date Executive ceases to be eligible for COBRA continuation coverage for any reason, including plan termination.  In the event Executive becomes covered under another employer’s group health plan or otherwise cease to be eligible for COBRA during the COBRA Premium Period, Executive must immediately notify the Company of such event.  Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot pay the COBRA Premiums without a substantial risk of violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to Executive a taxable monthly payment in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue Executive’s group health coverage in effect on the date of Executive’s employment termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether Executive elects COBRA continuation coverage and shall end on the earlier of (x) the date upon which Executive obtains other employment or (y) the last day of the 9th calendar month following Executive’s Separation from Service date.
 
(c)                                100% of all of Executive’s then-outstanding unvested Company equity awards will accelerate and will be deemed vested and exercisable as of Executive’s Separation from Service.
 
7.                                     Conditions to Receipt of Severance Benefits.   The receipt of the Severance Benefits provided in Section 6.3 above will be subject to Executive signing and not revoking a separation agreement and release of claims in a form reasonably satisfactory to the Company (the “ Separation Agreement ”) within the time period set forth therein, which shall not exceed 50 days from the date of Executive’s Separation from Service (the “ Release Period ”).  No Severance Benefits will be paid or provided until the Separation Agreement becomes effective.  If the Release Period described in the preceding sentence spans two calendar years, then payment of Severance Benefits will in any event commence in the second calendar year.  Executive shall also resign from all positions and terminate any
 
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relationships as an employee, advisor, officer or director with the Company and any of its affiliates, each effective on the date of termination.
 
8.                                     Section 409A.    It is intended that all of the severance benefits and other payments payable under this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9), and this Agreement will be construed to the greatest extent possible as consistent with those provisions, and to the extent no so exempt, this Agreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A.  For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), Executive’s right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.  Notwithstanding any provision to the contrary in this Agreement, if Executive is deemed by the Company at the time of Executive’s Separation from Service to be a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i), and if any of the payments upon Separation from Service set forth herein and/or under any other agreement with the Company are deemed to be “deferred compensation”, then to the extent delayed commencement of any portion of such payments is required in order to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such payments shall not be provided to Executive prior to the earliest of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company, (ii) the date of Executive’s death or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation.  Upon the first business day following the expiration of such time period, all payments deferred pursuant to this Paragraph shall be paid in a lump sum to Executive, and any remaining payments due shall be paid as otherwise provided herein or in the applicable agreement. No interest shall be due on any amounts so deferred.
 
9.                                     Parachute Payments.  If any payment or benefit (including payments and benefits pursuant to this Agreement) that Executive would receive in connection with a Change in Control from the Company or otherwise (“ Transaction Payment ”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”), then the Company shall cause to be determined, before any amounts of the Transaction Payment are paid to Service Provider, which of the following two alternative forms of payment would result in Service Provider’s receipt, on an after-tax basis, of the greater amount of the Transaction Payment notwithstanding that all or some portion of the Transaction Payment may be subject to the Excise Tax: (1) payment in full of the entire amount of the Transaction Payment (a “ Full Payment ”), or (2) payment of only a part of the Transaction Payment so that Service Provider receives the largest payment possible without the imposition of the Excise Tax (a “ Reduced Payment ”).  For purposes of determining whether to make a Full Payment or a Reduced Payment, the Company shall cause to be taken into account all applicable federal, state and local income and employment taxes and the Excise Tax (all computed at the highest applicable marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes).  If a Reduced Payment is made, (x) Executive shall have no rights to any additional payments and/or benefits constituting the Transaction Payment, and (y) reduction in payments and/or benefits shall occur in the manner that results in the greatest economic benefit to Executive as determined in this paragraph.  If more than one method of reduction will result in the same economic benefit, the portions of the Transaction Payment shall be reduced pro rata . Unless Executive and the Company otherwise agree in writing, any determination required under this section shall be made in writing by the Company’s independent public accountants (the “ Accountants ”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes.  For purposes of making the calculations required by this section, the Accountants may make reasonable assumptions and approximations
 
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concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  Executive and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this section as well as any costs incurred by Executive with the Accountants for tax planning under Sections 280G and 4999 of the Code.
 
10.                             Definitions.
 
10.1                     Cause.   For purposes of this Agreement, “Cause” for termination will mean:  (a) Executive’s willful failure substantially to perform his duties and responsibilities to the Company or willful, material violation of a policy of the Company; (b) Executive’s commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct that has caused or is reasonably expected to result in material injury to the Company; (c) Executive’s willful breach of any of his obligations under any written agreement or covenant with the Company; (d) Executive’s material and willful violation of a federal or state law or regulation applicable to the business of the Company; and (e) Executive’s conviction or plea of guilty or no contest to a felony.
 
10.2                     Change in Control.  For purposes of this Agreement, “Change in Control” shall have the meaning provided in the Company’s 2014 Equity Incentive Plan.
 
10.3                     Good Reason.  For purposes of this Agreement, Executive shall have “ Good Reason ” for resignation from employment with the Company if any of the following actions are taken by the Company without Executive’s affirmative prior written consent to such adverse change (which specifically acknowledges Executive’s waiver of the Good Reason condition with respect to the individual action that would otherwise form the basis of a resignation for Good Reason):  (a) a material reduction in Executive’s base salary of 10% or more in the aggregate during the 12-month period following the closing of a Change in Control; (b) a material reduction in Executive’s duties (including responsibilities and/or authorities), provided, however, that a change in job position (including a change in title) shall not be deemed a “material reduction” in and of itself unless Executive’s new duties are materially reduced from the prior duties; or (c) relocation of Executive’s principal place of employment to a place that increases Executive’s one-way commute by more than fifty (50) miles as compared to Executive’s then-current principal place of employment immediately prior to such relocation.  In order to resign for Good Reason, Executive must provide written notice to the Company’s Chief Executive Officer within 30 days after the first occurrence of the event giving rise to Good Reason setting forth the basis for Executive’s resignation, allow the Company at least 30 days from receipt of such written notice to cure such event, and if such event is not reasonably cured within such period, Executive must resign from all positions Executive then holds with the Company not later than 60 days after the expiration of the cure period.
 
11.                             Proprietary Information Obligations. Regardless of the reason of Executive’s termination of employment with the Company, Executive will continue to comply with the Employee Confidentiality, Inventions and Non-Interference Agreement dated December 14, 2009 (the “ Confidentiality Agreement ”) .
 
12.                             No Adverse Interests.   Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.
 
13.                             Non-Solicitation.  Executive agrees that during the period of employment with the Company and for twelve (12) months after the date Executive’s employment is terminated for any reason,
 
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Executive will not, either directly or through others, solicit or encourage or attempt to solicit or encourage any employee, independent contractor, or consultant of the Company to terminate his or her relationship with the Company in order to become an employee, consultant or independent contractor to or for any other person or entity.
 
14.                             Dispute Resolution.   To ensure the timely and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, including but not limited to statutory claims, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in Los Angeles, California, conducted by JAMS, Inc. (“ JAMS ”) under the then applicable JAMS rules (which can be found at the following web address: http://www.jamsadr.com/rulesclauses ).  By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding.  The Company acknowledges that Executive will have the right to be represented by legal counsel at any arbitration proceeding.  The arbitrator shall:  (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award. The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law.  The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required of the Executive if the dispute were decided in a court of law.  Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.  Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.
 
15.                             General Provisions.
 
15.1                     Notices.   Any notices provided must be in writing and will be deemed effective upon the earlier of personal delivery (including personal delivery by fax) or the next day after sending by overnight carrier, to the Company at its primary office location and to Executive at the address as listed on the Company payroll.
 
15.2                     Severability.   Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction to the extent possible in keeping with the intent of the parties.
 
15.3                     Waiver.   Any waiver of any breach of any provisions of this Agreement must be in writing to be effective, and it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.
 
15.4                     Complete Agreement.   This Agreement, together with the Confidentiality Agreement, constitutes the entire agreement between Executive and the Company with regard to this subject matter.  It supersedes all previous agreements and understandings between the parties with respect to the subject matter hereof and is the complete, final, and exclusive embodiment of the Parties’ agreement with regard to this subject matter.  This Agreement is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes
 
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any other such promises, warranties or representations.  This Agreement cannot be modified or amended except in a writing signed by a duly authorized officer of the Company.
 
15.5                     Counterparts.   This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.
 
15.6                     Headings.   The headings of the paragraphs hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.
 
15.7                     Successors and Assigns.   This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which shall not be withheld unreasonably.
 
15.8                     Tax Withholding and Indemnification.  All payments and awards contemplated or made pursuant to this Agreement will be subject to withholdings of applicable taxes in compliance with all relevant laws and regulations of all appropriate government authorities.  Executive acknowledges and agrees that the Company has neither made any assurances nor any guarantees concerning the tax treatment of any payments or awards contemplated by or made pursuant to this Agreement.  Executive has had the opportunity to retain a tax and financial advisor and fully understands the tax and economic consequences of all payments and awards made pursuant to the Agreement.
 
15.9                     Choice of Law.   All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California.
 
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IN WITNESS WHEREOF , the Parties have executed this Agreement on the day and year first written above.

 	SIENTRA, INC.	

 	By:	/s/ Hani Zeini	 	
 	 	       Hani Zeini	 	
 	 	       Founder and Chief Executive Officer	 	

 	EXECUTIVE	
 	 	
 	/s/ Matthew Pigeon	 	
 	Matthew Pigeon	
 
1. 

Exhibit 10.16
 
SIENTRA, INC.
 
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
 
Joel Smith
 
This Amended and Restated Executive Employment Agreement (the “ Agreement ”), made between Sientra, Inc. (the “ Company ”) and Joel Smith (“ Executive ”) (collectively, the “ Parties ”), is effective as of October 15, 2014 (the “ Effective Date ”) and amends and restates the prior employment letter agreement between the Company and Executive dated May 25, 2007.
 
WHEREAS , the Company desires to continue to employ Executive pursuant to the terms, provisions and conditions set forth in this Agreement; and
 
WHEREAS , Executive desires to accept and continue his employment on the terms, provisions and conditions set forth in this Agreement.
 
NOW, THEREFORE , in consideration of the promises and the mutual covenants herein contained, the Parties hereby agree as follows:
 
1.                                     Employment by the Company.
 
1.1                             Position.   Executive shall continue to serve as General Counsel, Chief Compliance Officer and Corporate Secretary.  During the term of Executive’s employment with the Company, Executive will devote Executive’s diligent efforts and substantially all of Executive’s business time and attention to the business of the Company, except for approved vacation periods and reasonable periods of illness or other incapacities permitted by the Company’s general employment policies.
 
1.2                             Duties and Location.   Executive shall perform such duties as are required by the Company’s Chief Executive Officer, to whom Executive will report.  Executive’s primary office location shall be the Company’s Santa Barbara office.  The Company reserves the right to reasonably require Executive to perform Executive’s duties at places other than Executive’s primary office location from time to time, and to require reasonable business travel.  Executive shall devote substantially all of Executive’s business time and attention to the performance of Executive’s duties hereunder and shall not engage in any other business, profession or occupation for compensation or otherwise that would conflict or interfere with the rendition of such services, either directly or indirectly; provided that nothing in this Agreement shall preclude Executive from (i) managing personal investments, (ii) serving on civic or charitable boards or committees, (iii) engaging in business or professional activities for compensation from a third party, for 40 or fewer hours per calendar year, so long as such activities do not compete with the Company, and (iv) with the prior approval from the Chief Executive Officer or Chairman of the Board (not to be unreasonably withheld or delayed), serving on the board of directors of other for-profit companies that do not compete with the Company, so long as all such activities described in clauses (i) through (iv) herein do not materially interfere with the performance of Executive’s duties and responsibilities under this Agreement.
 
1.3                             Policies and Procedures.   The employment relationship between the Parties shall be governed by the general employment policies and practices of the Company, except that when the
 
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terms of this Agreement differ from or are in conflict with the Company’s general employment policies or practices, this Agreement shall control.
 
2.                                     Compensation.
 
2.1                             Salary.   As of the Effective Date, Executive’s current base salary is payable at the annualized rate of $287,000 per year (the “ Base Salary ”), subject to standard payroll deductions and withholdings and payable in accordance with the Company’s regular payroll schedule.
 
2.2                             Bonus.   As of the Effective Date, Executive is currently eligible for an annual discretionary bonus of up to 30% of Executive’s Base Salary (the “ Target Bonus ”), with the actual bonus amount (the “ Annual Bonus ”) determined by the Compensation Committee of the Board of Directors (the “Board” ) (or a subcommittee thereof) (the “ Committee ”) based upon achievement of the performance goals established by the Committee.  Subject to Executive’s continued employment at such time, Executive’s Target Bonus will increase upon the effectiveness of the Company’s initial public offering to 45% of Executive’s Base Salary.  Whether Executive receives an Annual Bonus for any given year, and the amount of any such Annual Bonus, will be determined by the Committee in its sole discretion based upon the Company’s and Executive’s achievement of objectives and milestones to be determined on an annual basis by the Committee.  Executive must remain an active employee through the end of any given calendar year in order to earn an Annual Bonus for that year and any such bonus will be paid prior to February 15 of the year following the year in which Executive’s right to such amount became vested.  Executive will not be eligible for, and will not earn, any Annual Bonus (including a prorated bonus) if Executive’s employment terminates for any reason before the end of the calendar year, except as expressly contemplated in Section 6 below.
 
3.                                     Standard Company Benefits.  Executive shall be entitled to participate in all employee benefit programs for which Executive is eligible under the terms and conditions of the benefit plans that may be in effect from time to time and provided by the Company to its employees.  The Company reserves the right to cancel or change the benefit plans or programs it offers to its employees at any time.
 
4.                                     Paid Time Off.  Executive shall be entitled to accrue and use paid time off in accordance with the terms of the Company’s policies and practices.
 
5.                                     Expenses.  The Company will reimburse Executive for reasonable travel, entertainment or other expenses incurred by Executive in furtherance or in connection with the performance of Executive’s duties hereunder. In addition, the Company will reimburse Executive for his reasonable out-of-pocket expenses in connection with his commute from his residence in San Diego, California to the Company’s offices in Santa Barbara, California.  All reimbursements will be subject to the Company’s expense reimbursement policy as in effect from time to time.
 
6.                                     Termination of Employment; Severance.
 
6.1                             At-Will Employment.   Executive’s employment relationship is at-will.  Either Executive or the Company may terminate the employment relationship at any time, with or without Cause or advance notice.
 
6.2                             Termination; Resignation; Death or Disability.
 
(a)                               The Company may terminate Executive’s employment with the Company at any time with or without Cause (as defined below).  Further, Executive may resign at any
 
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time, with or without Good Reason (as defined below).  Executive’s employment with the Company may also be terminated due to Executive’s death or disability.
 
(b)                               Except as provided in Section 6.3 below, if Executive resigns or the Company terminates Executive’s employment, or upon Executive’s death or disability, then (i) Executive will no longer vest in any equity awards, (ii) all payments of compensation by the Company to Executive hereunder will terminate immediately (except as to amounts already earned), and (iii) Executive will not be entitled to any severance benefits.  In addition, Executive shall resign from all positions and terminate any relationships as an employee, advisor, officer or director with the Company and any of its affiliates, each effective on the date of termination.
 
6.3                             Termination in Connection with Change in Control.  In the event Executive’s employment with the Company is terminated by the Company without Cause (and other than as result of death or disability) prior to the closing of a Change in Control (as defined below) or more than twelve (12) months following the closing of a Change of Control, then provided such termination constitutes a “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h), without regard to any alternative definition thereunder, a “ Separation from Service ”), and provided that Executive remains in compliance with the terms of this Agreement, the Company shall provide Executive with the following severance benefits (collectively, the “ Severance Benefits ”):
 
(a)                               The Company shall pay Executive, an amount equal to nine (9) months of Executive’s then-current Base Salary paid in equal installments on the Company’s normal payroll schedule over the nine month period immediately following the date of Separation from Service.
 
(b)                               Provided that Executive timely elects continued coverage under COBRA, the Company shall pay Executive’s COBRA premiums to continue Executive’s coverage (including coverage for eligible dependents, if applicable) (“ COBRA Premiums ”) through the period (the “ COBRA Premium Period ”) starting on the Executive’s Separation from Service and ending on the earliest to occur of: (i) nine (9) months following Executive’s Separation from Service; (ii) the date Executive becomes eligible for group health insurance coverage through a new employer; or (iii) the date Executive ceases to be eligible for COBRA continuation coverage for any reason, including plan termination.  In the event Executive becomes covered under another employer’s group health plan or otherwise cease to be eligible for COBRA during the COBRA Premium Period, Executive must immediately notify the Company of such event.  Notwithstanding the foregoing, if the Company determines, in its sole discretion, that it cannot pay the COBRA Premiums without a substantial risk of violating applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company shall in lieu thereof provide to Executive a taxable monthly payment in an amount equal to the monthly COBRA premium that Executive would be required to pay to continue Executive’s group health coverage in effect on the date of Executive’s employment termination (which amount shall be based on the premium for the first month of COBRA coverage), which payments shall be made on the last day of each month regardless of whether Executive elects COBRA continuation coverage and shall end on the earlier of (x) the date upon which Executive obtains other employment or (y) the last day of the 9th calendar month following Executive’s Separation from Service date.
 
(c)                                100% of all of Executive’s then-outstanding unvested Company equity awards will accelerate and will be deemed vested and exercisable as of Executive’s Separation from Service.
 
7.                                     Conditions to Receipt of Severance Benefits.   The receipt of the Severance Benefits provided in Section 6.3 above will be subject to Executive signing and not revoking a separation
 
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agreement and release of claims in a form reasonably satisfactory to the Company (the “ Separation Agreement ”) within the time period set forth therein, which shall not exceed 50 days from the date of Executive’s Separation from Service (the “ Release Period ”).  No Severance Benefits will be paid or provided until the Separation Agreement becomes effective.  If the Release Period described in the preceding sentence spans two calendar years, then payment of Severance Benefits will in any event commence in the second calendar year.  Executive shall also resign from all positions and terminate any relationships as an employee, advisor, officer or director with the Company and any of its affiliates, each effective on the date of termination.
 
8.                                     Section 409A.    It is intended that all of the severance benefits and other payments payable under this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Code Section 409A provided under Treasury Regulations 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9), and this Agreement will be construed to the greatest extent possible as consistent with those provisions, and to the extent no so exempt, this Agreement (and any definitions hereunder) will be construed in a manner that complies with Section 409A.  For purposes of Code Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), Executive’s right to receive any installment payments under this Agreement (whether severance payments, reimbursements or otherwise) shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.  Notwithstanding any provision to the contrary in this Agreement, if Executive is deemed by the Company at the time of Executive’s Separation from Service to be a “specified employee” for purposes of Code Section 409A(a)(2)(B)(i), and if any of the payments upon Separation from Service set forth herein and/or under any other agreement with the Company are deemed to be “deferred compensation”, then to the extent delayed commencement of any portion of such payments is required in order to avoid a prohibited distribution under Code Section 409A(a)(2)(B)(i) and the related adverse taxation under Section 409A, such payments shall not be provided to Executive prior to the earliest of (i) the expiration of the six-month period measured from the date of Executive’s Separation from Service with the Company, (ii) the date of Executive’s death or (iii) such earlier date as permitted under Section 409A without the imposition of adverse taxation.  Upon the first business day following the expiration of such time period, all payments deferred pursuant to this Paragraph shall be paid in a lump sum to Executive, and any remaining payments due shall be paid as otherwise provided herein or in the applicable agreement. No interest shall be due on any amounts so deferred.
 
9.                                     Parachute Payments.  If any payment or benefit (including payments and benefits pursuant to this Agreement) that Executive would receive in connection with a Change in Control from the Company or otherwise (“ Transaction Payment ”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”), then the Company shall cause to be determined, before any amounts of the Transaction Payment are paid to Service Provider, which of the following two alternative forms of payment would result in Service Provider’s receipt, on an after-tax basis, of the greater amount of the Transaction Payment notwithstanding that all or some portion of the Transaction Payment may be subject to the Excise Tax: (1) payment in full of the entire amount of the Transaction Payment (a “ Full Payment ”), or (2) payment of only a part of the Transaction Payment so that Service Provider receives the largest payment possible without the imposition of the Excise Tax (a “ Reduced Payment ”).  For purposes of determining whether to make a Full Payment or a Reduced Payment, the Company shall cause to be taken into account all applicable federal, state and local income and employment taxes and the Excise Tax (all computed at the highest applicable marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes).  If a Reduced Payment is made, (x) Executive shall have no rights to any additional payments and/or benefits constituting the Transaction Payment, and (y) reduction in payments and/or benefits shall
 
4. 

 
occur in the manner that results in the greatest economic benefit to Executive as determined in this paragraph.  If more than one method of reduction will result in the same economic benefit, the portions of the Transaction Payment shall be reduced pro rata . Unless Executive and the Company otherwise agree in writing, any determination required under this section shall be made in writing by the Company’s independent public accountants (the “ Accountants ”), whose determination shall be conclusive and binding upon Executive and the Company for all purposes.  For purposes of making the calculations required by this section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  Executive and the Company shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this section.  The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this section as well as any costs incurred by Executive with the Accountants for tax planning under Sections 280G and 4999 of the Code.
 
10.                             Definitions.
 
10.1                     Cause.   For purposes of this Agreement, “Cause” for termination will mean:  (a) Executive’s willful failure substantially to perform his duties and responsibilities to the Company or willful, material violation of a policy of the Company; (b) Executive’s commission of any act of fraud, embezzlement, dishonesty or any other willful misconduct that has caused or is reasonably expected to result in material injury to the Company; (c) Executive’s willful breach of any of his obligations under any written agreement or covenant with the Company; (d) Executive’s material and willful violation of a federal or state law or regulation applicable to the business of the Company; and (e) Executive’s conviction or plea of guilty or no contest to a felony.
 
10.2                     Change in Control.  For purposes of this Agreement, “Change in Control” shall have the meaning provided in the Company’s 2014 Equity Incentive Plan.
 
10.3                     Good Reason.  For purposes of this Agreement, Executive shall have “ Good Reason ” for resignation from employment with the Company if any of the following actions are taken by the Company without Executive’s affirmative prior written consent to such adverse change (which specifically acknowledges Executive’s waiver of the Good Reason condition with respect to the individual action that would otherwise form the basis of a resignation for Good Reason):  (a) a material reduction in Executive’s base salary of 10% or more in the aggregate during the 12-month period following the closing of a Change in Control; (b) a material reduction in Executive’s duties (including responsibilities and/or authorities), provided, however, that a change in job position (including a change in title) shall not be deemed a “material reduction” in and of itself unless Executive’s new duties are materially reduced from the prior duties; or (c) relocation of Executive’s principal place of employment to a place that increases Executive’s one-way commute by more than fifty (50) miles as compared to Executive’s then-current principal place of employment immediately prior to such relocation.  In order to resign for Good Reason, Executive must provide written notice to the Company’s Chief Executive Officer within 30 days after the first occurrence of the event giving rise to Good Reason setting forth the basis for Executive’s resignation, allow the Company at least 30 days from receipt of such written notice to cure such event, and if such event is not reasonably cured within such period, Executive must resign from all positions Executive then holds with the Company not later than 60 days after the expiration of the cure period.
 
11.                             Proprietary Information Obligations. Regardless of the reason of Executive’s termination of employment with the Company, Executive will continue to comply with the Employee
 
5. 

 
Confidentiality, Inventions and Non-Interference Agreement dated June 1, 2007 (the “ Confidentiality Agreement ”) .
 
12.                             No Adverse Interests.   Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise.
 
13.                             Non-Solicitation.  Executive agrees that during the period of employment with the Company and for twelve (12) months after the date Executive’s employment is terminated for any reason, Executive will not, either directly or through others, solicit or encourage or attempt to solicit or encourage any employee, independent contractor, or consultant of the Company to terminate his or her relationship with the Company in order to become an employee, consultant or independent contractor to or for any other person or entity.
 
14.                             Dispute Resolution.   To ensure the timely and economical resolution of disputes that may arise in connection with Executive’s employment with the Company, Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance, negotiation, execution, or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, including but not limited to statutory claims, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in Los Angeles, California, conducted by JAMS, Inc. (“ JAMS ”) under the then applicable JAMS rules (which can be found at the following web address: http://www.jamsadr.com/rulesclauses ).  By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding.  The Company acknowledges that Executive will have the right to be represented by legal counsel at any arbitration proceeding.  The arbitrator shall:  (a) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (b) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award.  The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law.  The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required of the Executive if the dispute were decided in a court of law.  Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.  Any awards or orders in such arbitrations may be entered and enforced as judgments in the federal and state courts of any competent jurisdiction.
 
15.                             General Provisions.
 
15.1                     Notices.   Any notices provided must be in writing and will be deemed effective upon the earlier of personal delivery (including personal delivery by fax) or the next day after sending by overnight carrier, to the Company at its primary office location and to Executive at the address as listed on the Company payroll.
 
15.2                     Severability.   Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction to the extent possible in keeping with the intent of the parties.
 
6. 

 
15.3                     Waiver.   Any waiver of any breach of any provisions of this Agreement must be in writing to be effective, and it shall not thereby be deemed to have waived any preceding or succeeding breach of the same or any other provision of this Agreement.
 
15.4                     Complete Agreement.   This Agreement, together with the Confidentiality Agreement, constitutes the entire agreement between Executive and the Company with regard to this subject matter.  It supersedes all previous agreements and understandings between the parties with respect to the subject matter hereof and is the complete, final, and exclusive embodiment of the Parties’ agreement with regard to this subject matter.  This Agreement is entered into without reliance on any promise or representation, written or oral, other than those expressly contained herein, and it supersedes any other such promises, warranties or representations.  This Agreement cannot be modified or amended except in a writing signed by a duly authorized officer of the Company.
 
15.5                     Counterparts.   This Agreement may be executed in separate counterparts, any one of which need not contain signatures of more than one party, but all of which taken together will constitute one and the same Agreement.
 
15.6                     Headings.   The headings of the paragraphs hereof are inserted for convenience only and shall not be deemed to constitute a part hereof nor to affect the meaning thereof.
 
15.7                     Successors and Assigns.   This Agreement is intended to bind and inure to the benefit of and be enforceable by Executive and the Company, and their respective successors, assigns, heirs, executors and administrators, except that Executive may not assign any of his duties hereunder and he may not assign any of his rights hereunder without the written consent of the Company, which shall not be withheld unreasonably.
 
15.8                     Tax Withholding and Indemnification.  All payments and awards contemplated or made pursuant to this Agreement will be subject to withholdings of applicable taxes in compliance with all relevant laws and regulations of all appropriate government authorities.  Executive acknowledges and agrees that the Company has neither made any assurances nor any guarantees concerning the tax treatment of any payments or awards contemplated by or made pursuant to this Agreement.  Executive has had the opportunity to retain a tax and financial advisor and fully understands the tax and economic consequences of all payments and awards made pursuant to the Agreement.
 
15.9                     Choice of Law.   All questions concerning the construction, validity and interpretation of this Agreement will be governed by the laws of the State of California.
 
7. 

 
IN WITNESS WHEREOF , the Parties have executed this Agreement on the day and year first written above.

 	SIENTRA, INC.	 	

 	By:	/s/ Hani Zeini	 	
 	Hani Zeini	 	
 	Founder and Chief Executive Officer	 	

 	EXECUTIVE	 	
 	 	 	
 	/s/ Joel Smith	 	
 	Joel Smith	 	
 
1. 

Exhibit 23.1
 
Consent of Independent Registered Public Accounting Firm
 
The Board of Directors
Sientra, Inc:
 
We consent to the use of our report included herein and to the reference to our firm under the heading “Experts” in the prospectus.

/s/ KPMG LLP
 
Woodland Hills, California
October 17, 2014