Inphi Corporation
Annual Report 2010

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Table of Contents UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 Form 10-K (Mark One)xANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934For the fiscal year ended December 31, 2010Or ¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934Commission file number 001-34942 Inphi Corporation(Exact Name of Registrant as Specified in Its Charter) Delaware 77-0557980(State or Other Jurisdiction ofIncorporation or Organization) (I.R.S. EmployerIdentification No.)3945 Freedom Circle, Suite 1100,Santa Clara, California 95054(Address of Principal Executive Offices) (Zip Code)Registrant’s telephone number, including area code: (408) 217-7300 Securities registered pursuant to Section 12(b) of the Act: Title of Class Name of Exchange on Which RegisteredCommon Stock, $0.001 par value New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No xIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No xIndicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes x No ¨ Table of ContentsIndicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes ¨ No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein,and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. xIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Seethe definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): Large accelerated filer ¨ Accelerated filer ¨Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2). Yes ¨ No xThe Registrant’s common stock, $0.001 par value per share, first traded on the New York Stock Exchange on November 11, 2010. Accordingly, theRegistrant’s common stock was not trading publicly on June 30, 2010. As of February 23, 2011, the aggregate market value of the Registrant’s common stockheld by non-affiliates of the Registrant was approximately $ 288.8 million, based on the closing price of the common stock as reported on the New YorkStock Exchange for that date.The total number of shares outstanding of the Registrant’s common stock, $0.001 par value per share, as of February 23, 2011 was 25,388,810. Table of ContentsINPHI CORPORATIONANNUAL REPORT ON FORM 10-KFOR THE FISCAL YEAR ENDED DECEMBER 31, 2010TABLE OF CONTENTS Page PART I Item 1. Business 1 Item 1A. Risk Factors 9 Item 1B. Unresolved Staff Comments 24 Item 2. Properties 24 Item 3. Legal Proceedings 25 Item 4. (Removed and Reserved) PART II Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 26 Item 6. Selected Consolidated Financial Data 29 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 31 Item 7A. Quantitative and Qualitative Disclosures about Market Risk 42 Item 8. Financial Statements and Supplementary Data 43 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 75 Item 9A. Controls and Procedures 75 Item 9B. Other Information 75 PART III Item 10. Directors, Executive Officers and Corporate Governance 75 Item 11. Executive Compensation 79 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 89 Item 13. Certain Relationships and Related Transactions, and Director Independence 91 Item 14. Principal Accountant Fees and Services 93 PART IV Item 15. Exhibits and Financial Statement Schedules 94 Table of ContentsPART I ITEM 1.BUSINESSThis report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in thisreport, the terms “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “predict,”“potential,” “plan,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements arestatements that relate to future periods and include statements regarding our anticipated trends and challenges in our business and the markets inwhich we operate, including the market for 40G and 100G high-speed analog semiconductor solutions, our plans for future products, such as ourisolation memory buffer or iMB™, clock and data recovery, or CDR, and serializer/deserializer, or SERDES, products, and enhancements of existingproducts, our expectations regarding our expenses and revenue, including our expectations that our research and development, sales and marketingand general and administrative expenses may increase in absolute dollars, our anticipated cash needs and our estimates regarding our capitalrequirements and our needs for additional financing, our anticipated growth strategies, our ability to retain and attract customers, particularly in lightof our dependence on a limited number of customers for a substantial portion of our revenue, the anticipated costs and benefits of our recentacquisition of Winyatek Technology Inc., and our expectations regarding competition as more and larger semiconductor companies enter our marketsand as existing competitors improve or expand their product offerings. These forward-looking statements involve known and unknown risks,uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results,performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to,those risks discussed below, as well as factors affecting our quarterly results, our ability to manage our growth, our ability to sustain or increaseprofitability, demand for our solutions, the effect of declines in average selling prices for our products, our ability to compete, our ability to rapidlydevelop new technology and introduce new products, our ability to safeguard our intellectual property, trends in the semiconductor industry andfluctuations in general economic conditions, and the risks set forth throughout this Report, including the risks set forth under Item 1A., “RiskFactors.” These forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation or undertaking to releasepublicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto orany change in events, conditions or circumstances on which any such statement is based.All references to “Inphi,” “we,” “us” or “our” mean Inphi Corporation.Inphi, iMB™ and the Inphi logo are trademarks or service marks owned by Inphi. All other trademarks, service marks and trade namesappearing in this report are the property of their respective owners.OverviewOur CompanyWe are a fabless provider of high-speed analog semiconductor solutions for the communications and computing markets. Our analog semiconductorsolutions provide high signal integrity at leading-edge data speeds while reducing system power consumption. Our semiconductor solutions are designed toaddress bandwidth bottlenecks in networks, maximize throughput and minimize latency in computing environments and enable the rollout of next generationcommunications and computing infrastructures. Our solutions provide a vital high-speed interface between analog signals and digital information in high-performance systems such as telecommunications transport systems, enterprise networking equipment, datacenters and enterprise servers, storage platforms,test and measurement equipment and military systems. We provide 40G and 100G high-speed analog semiconductor solutions for the communications marketand high-speed memory interface solutions for the computing market. We have a broad product portfolio with 17 product lines and over 170 products as ofDecember 31, 2010.We leverage our proprietary high-speed analog signal processing expertise and our deep understanding of system architectures to address data bottlenecksin current and emerging communications, enterprise network, computing and storage architectures. We develop these solutions as a result of our competitivestrengths, including our system-level simulation capabilities, analog design expertise, strong relationships with industry leaders, extensive broad processtechnology experience and high-speed package modeling and design expertise. We use our core technology and strength in high-speed analog design to enableour customers to deploy next generation communications and computing systems that operate with high performance at high speed. We believe we are at theforefront of developing semiconductor solutions that deliver 100G speeds throughout the network infrastructure, including core, metro and the datacenter.Furthermore, our analog signal processing expertise enables us to improve throughput in computing systems. For example, some of our computing productsenable up to four times the memory capacity on server platforms while using the current generation of memory devices.We have ongoing, informal collaborative discussions with industry and technology leaders such as Advanced Micro Devices, Inc., Alcatel-Lucent,Huawei Technologies Co., Ltd. and Intel Corporation to design architectures and products that solve bandwidth bottlenecks in existing and next generationcommunications and computing systems. Although we do not have any formal agreement 1® Table of Contentswith these entities, we engage in informal discussions with these entities with respect to anticipated technological challenges, next generation customerrequirements and industry conventions and standards. We help define industry conventions and standards within the markets we target by collaborating withtechnology leaders, original equipment manufacturers or OEMs, systems manufacturers and standards bodies. Our products are designed into systems soldby OEMs, including Agilent Technologies, Inc., Alcatel-Lucent, Cisco Systems, Inc., Danaher Corporation, Dell Inc., EMC Corporation, Hewlett-PackardCompany, Huawei, International Business Machines Corporation and Oracle Corporation. We believe we are one of a limited number of suppliers to theseOEMs, and in some cases we may be the sole supplier for certain applications. We sell both directly to these OEMs and to other intermediary systems ormodule manufacturers that, in turn, sell to these OEMs.Our BusinessOur semiconductor solutions leverage our deep understanding of high-speed analog signal processing and our system architecture knowledge to addressdata bottlenecks in current and emerging network architectures. We design and develop our products for the communications and computing markets, whichtypically have two to three year design cycles, and product life cycles of 10 or more years. We believe our leadership position in developing high-speed analogsemiconductors is a result of the following core strengths: • System-Level Simulation Capabilities. We design our high-speed analog semiconductor solutions to be critical components in complex systems.In order to understand and solve system problems, we work closely with systems vendors to develop proprietary component, channel and systemsimulation models. We use these proprietary simulation and validation tools to accurately predict system performance prior to fabricating thesemiconductor or alternately, to identify and optimize critical semiconductor parameters to satisfy customer system requirements. We use thesesimulation and validation capabilities to reduce our customers’ time to market and engineering investments, thus enabling us to establishdifferentiated design relationships with our customers. • Analog Design Expertise. We believe that we are a leader in developing broadband analog semiconductors operating at high frequencies of up to100 GHz. High-speed analog circuit design is extremely challenging because, as frequencies increase, semiconductors are increasingly sensitive totemperature, power supply noise, process variation and interaction with neighboring circuit elements. Development of components that workrobustly at high frequencies requires an understanding of analog circuit design, including electromagnetic theory and practical experience inimplementation and testing. Our analog design expertise has enabled us to design and commercially ship the first 18 GHz track-and-holdamplifier, 28 GHz linear transimpedance amplifier, 40 GHz transimpedance amplifier and 50 GHz multiplexer, or MUX and demultiplexer, orDEMUX components. • Strong Relationships with Industry Leaders. We develop many of our high-speed analog semiconductor solutions for applications andsystems that are driven by industry leaders in the communications and computing markets. Through our established relationships with industryleaders, we have repeatedly demonstrated the ability to address their technological challenges. As a result, we are designed into several of theircurrent systems and believe we are well-positioned to develop high-speed analog semiconductor solutions for their emerging architectures. Forinstance, our high-speed memory interface designs have been validated for Intel’s Xeon Core i7 and next generation platforms. We have ongoing,informal collaborative discussions with communication companies such as Alcatel-Lucent and Huawei to address their next generation 100Gefforts, although we have not entered into formal agreements with these entities. Specifically, we engage in informal discussions with these entitieswith respect to anticipated technological challenges, next generation customer requirements and industry conventions and standards. As a result ofour development efforts with industry leaders, we help define industry conventions and standards within the markets we target by collaboratingwith technology leaders, OEMs and systems manufacturers, as well as standards bodies such as the Joint Electronic Device EngineeringCouncils, or JEDEC, and the Institute of Electrical and Electronic Engineers, or IEEE, and the Optical Internetworking Forum, or OIF, toestablish industry standards. • Broad Process Technology. We employ process technology experts, device technologists and circuit designers who have extensive experience inmany process technologies including complementary metal oxide semiconductor, or CMOS, silicon germanium, or SiGe and III-V technologiessuch as gallium arsenide, or GaAs or indium phosphide, or InP. We have developed specific internal models and design kits for each process tosupport a uniform design methodology across all of our semiconductor solutions. For example, our products using 40 nanometer CMOStechnology require development of accurate models for sub-circuits such as integrated phase lock loop, or PLLs, varactors and inductors. Asanother example, for III-V materials-based processes, in-house model development is a necessity and we believe also provides a substantialcompetitive advantage because these processes have complex material and device interactions. Combined with our fabless manufacturing strategy,our design expertise, proprietary model libraries and uniform design methodology allow us to use the best possible materials and substrates todesign and develop our semiconductor solutions. We believe that our ability to design high-speed analog semiconductors in a wide range ofmaterials and process technologies allows us to provide superior performance, power, cost and reliability for a specific set of market requirements. 2®® Table of Contents • High-Speed Package Modeling and Design. We have developed deep expertise in high-speed package modeling and design, since introducingthe first high-speed 50 GHz MUX and DEMUX product in 2001. At high frequencies, the interaction between an analog device, its package andthe external environment can significantly affect product performance. Accurately modeling and developing advanced packaging allowssemiconductor solutions to address this challenge. Due to the advanced nature of this work, there is a limited supply of engineers with experiencein high-speed package modeling and design, and therefore this required expertise can be difficult to acquire for companies that have not invested indeveloping such a skill set. We have developed an infrastructure to simulate electrical, mechanical and thermal properties of devices and packagesthat we integrate within our semiconductor design process and implement at our third-party packaging providers. Modeling is an inherentlyiterative process, and since our model libraries are used extensively by our circuit designers, the accuracy and value of these models increases overtime. Our current packaging and modeling techniques enable us to deliver semiconductors that are energy efficient, offer high-speed processingand enable advanced signal integrity, all in a small footprint.We believe that our system-level simulation capabilities, our analog design and broad process technology design capabilities as well as our strengths inpackaging enable us to differentiate ourselves by delivering advanced high-speed analog signal processing solutions. For example, we believe we havesuccessfully demonstrated the feasibility of our next generation 100G Ethernet architecture well ahead of our competitors. Within the server market, we haveapplied our analog signal processing expertise to develop our iMB technology, which is designed to expand the memory capacity in existing server andcomputing platforms. Adoption of the iMB allows up to four times the memory capacity to be installed in a server platform, while using the currentgeneration of memory devices.We believe the key benefits that our solutions provide to our customers are as follows: • High Performance. Our high-speed analog semiconductor solutions are designed to meet the specific technical requirements of our customers intheir respective end-markets. In many cases, our close design relationships and deep engineering expertise put us in a position where we are one ofa limited group of semiconductor vendors that can provide the necessary solution. For instance, in the broadband communications market, webelieve our products achieve the highest signal integrity and attain superior signal transmission distance at required error-free or low error rates. Inthe computing market, we believe our products achieve industry leading data transfer rates at the smallest die size. • Low Power and Small Footprint. In each of the end markets that we serve, the power budget of the overall system is a key consideration forsystems designers. Power consumption greatly impacts system operation cost, footprint and cooling requirements, and is increasingly becoming apoint of focus for our customers. We believe that our high speed analog signal processing solutions enable our customers to implement systemarchitectures that reduce overall system power consumption. We also believe that, at high frequencies, our high-speed analog semiconductordevices typically consume less power than competitors’ standard designs, which often incorporate power-consuming digital signal processing toperform data transfer functions, thereby further reducing overall system power consumption. In addition, in many of our applications, we areable to design and deliver semiconductors that have a smaller footprint and therefore reduce the overall system size. • Faster Time to Market. Our customers compete in markets that require high-speed, reliable semiconductors that can be integrated into theirsystems as soon as new market opportunities develop. To meet our customers’ time-to-market requirements, we work closely with them early intheir design cycles and are actively involved in their development processes. Over the past nine years, we have developed methodologies andsimulation environments that accurately predict the behavior of complex integrated circuits within various communications systems. In addition,we have developed an extensive internal library of proven building block circuits such as amplifiers, phase frequency detectors and transmittersthat are reused to shorten design cycles and reduce risk.ProductsOur products address bandwidth bottlenecks throughout the cloud computing and network communications infrastructure, as depicted in theillustration below. For instance, our high-speed memory interface products can be found in servers where they allow CPUs to better utilize available memoryresources. In addition, our products find application in devices such as dense wavelength division multiplexers that enable core and aggregation networks. 3TMTM Table of ContentsAs of December 31, 2010, we had more than 170 products across 17 product lines, including products that have commercially shipped, products forwhich we have shipped engineering samples and products under development, that perform a wide range of functions such as amplifying, encoding,multiplexing, demultiplexing, retiming and buffering data and clock signals at speeds up to 100 Gbps. These products are key enablers for servers, routers,switches, storage and other equipment that process, store and transport data traffic. Our products are also used in test and measurement equipment andmilitary radar systems that capture and process high-speed and ultra broadband signals. We introduced 8 new products in 2010. We design and develop ourproducts for the communications and computing markets, which typically have two to three year design cycles, and product life cycles as long as 10 years ormore.In 2009, we successfully introduced and began to ship a new product in production which we identify as product number INSSTE32882-GS04, or theGS04 product, and which consists of an integrated PLL and register buffer. Sales of the GS04 product comprised 18% and 43% of our total revenue in 2010and 2009, respectively. In 2010, we also began to ship in production volume a new “low voltage” version of our integrated PLL and register buffer, which isshipping in the form of product number INSSTE32882LV-GS02, or the GS02 product. The GS02 product has been launched and is currently in fullcommercial production and is shipping in commercial volume. Sales of the GS02 product comprised 32% of our total revenue in 2010. There were no otherproducts that generated more than 10% of our total revenue in 2010, 2009 or 2008. 4 Table of ContentsThe table below lists our products, their application speed in gigabits per second, or Gbps or G, and functional description. Product Line Speed Description ApplicationClock and Data Recovery(CDR) 100G Recovers the clock from high-speed signals; used toretime the signal prior to re-transmitting to ensure thehighest signal integrity Enables the next generation of small form factor100G Ethernet modules, line cards and backplaneapplicationsClock fanout 10G to 50G Provides replication and buffering of high-speedclock signals Typically used to distribute a high-speed clock tomultiple chips in a systemDemultiplexer (DEMUX) 10G to 50G De-serializes a high-speed data stream to multiplelower speed data streams for further signal processing Typically used in high-speed data acquisitionapplicationsD Flip Flops 10G to 50G Retimes the input signal to deliver optimal signalintegrity Typically used in high-speed pattern generationapplicationsDifferential Amplifiers 10G Amplifies differential signals and drives high-speedanalog-to-digital converters Typically used to amplify linear broadband signalsor drive high-speed analog-to-digital converters fordata acquisition applicationsDifferential Encoders 10G Provides differential encoding function forDifferential Phase Shift Keying (DPSK)transmission Typically used in 10 Gbps ultra long haul opticaltransceiversIsolation Memory Buffer(iMB) 1.6G Provides critical high-speed interface between thecentral processing unit (CPU) and memory Architecture adopted by the Joint Electronic DeviceEngineering Council as an industry standardLatched Comparator 10G to 50G Used as a high-speed 1-bit analog-to-digital converter Typically used in high-speed data acquisitionapplicationsLogic Gates 10G to 50G Standard logic gates used as general-purpose buildingblocks for high-speed data processing Typically used in test and measurementapplicationsModulator Driver 40G to 100G Amplifies a small signal to 8 volts (or higher) outputvoltage in order to drive optical modulators for verylong distance data transmission Typically used in optical transmission systems andtest and measurement equipmentMultiplexer (MUX) 10G to 50G Serializes multiple data streams to a high-speed datastream prior to transmission Typically used in high-speed pattern generationapplicationsPhase-Lock Loop (PLL)* 1.86G Provides critical high-speed interface between CPUand memory Typically used for all but the lowest capacitymodules in order to install sufficient memoryin computing and storage platformsPrescalers 10G to 50G Divides the high frequency clock to a lowerfrequency clock Typically used in test and measurement,military and ultra long haul optical transmissionequipmentRegister Buffers* 1.86G Regenerates a CPU’s command and address signals Typically used for all but the lowest capacitymodules in order to install sufficient memoryin computing and storage platformsReturn-to-Zero (RZ)Converter 10G Converts a Non-Return-to-Zero (NRZ) digital bitstream to RZ format Typically used in 10 Gbps ultra long haul opticaltransceiversSerializer-Deserializer(SERDES) 100G Combines a serializer, deserializer, equalizer andCDR functions on one chip Enables the next generation of high density 100GEthernet linecards Transimpedance Amplifier(TIA) 10G to100G Amplifies small currents generated by a photodetectorfor further signal processing Typically used in optical transceivers for Ethernet,synchronous optical networking, dense wavelengthdivision multiplexing, as well as other opticalreceiver applications *Product number INSSTE32882-GS04, or the GS04 product, consists of an integrated PLL and register buffer. Sales of the GS04 product comprised 18%and 43% of our total revenue in 2010 and 2009, respectively. In 2010, a new low voltage version of our integrated PLL and register buffer started shippingin volume as product number INSSTE32882LV-GS02. Sales of the GS02 product comprised 32% of our total revenue in 2010. 5TM Table of ContentsEach of the products listed in the table above are currently in commercial production except for our iMB product, for which we are currently shippingengineering samples and expect to commence commercial production in 2011, and our CDR and SERDES products, which are under development. Wecurrently expect to commence shipments of engineering samples of our CDR and SERDES products in 2011, and commercial production of these products in2012.CustomersWe sell our products directly to OEMs and indirectly to OEMs through module manufacturers, ODMs and sub-systems providers. We work closelywith technology leaders, including microprocessor and communications equipment companies, to design architectures and products that help solve bandwidthbottlenecks in and between systems. These technology leaders often design our products into reference designs, which they provide to their customers andsuppliers. For example, in the server market we work closely with major CPU manufacturers to address the bottleneck between their CPU and the increasingamount of memory attached to it. These CPU manufacturers then provide their server CPU customers and memory module partners with a validation report,including validation of our memory interface products. These server OEMs and memory module companies then design our memory interface products intotheir production systems. Ultimately, our sales into these servers are to memory module companies, including Hynix, Micron, Samsung and others. In thenetworking market, we work closely with OEMs to deliver high performance communication links. These OEMs design our product into their systems andthen require their ODM and electronics manufacturing services suppliers to purchase and use that specific product from us. We also work directly withmodule manufacturers to design our products into their modules, which they sell to OEMs.We work closely with our customers throughout design cycles that often last two to three years and we are able to develop long-term relationships withthem as our technology becomes embedded in their products. As a result, we believe we are well-positioned to not only be designed into their current systems,but also to continually develop next generation high-speed analog semiconductor solutions for their future products. During the year ended December 31, 2010,we sold our products to more than 160 customers.Sales to customers in Asia accounted for 80%, 77% and 64% of our total revenue in 2010, 2009 and 2008, respectively. Because many of our customersor their OEM manufacturers are located in Asia, we anticipate that a majority of our future revenue will continue to come from sales to that region. Although alarge percentage of our sales are made to customers in Asia, we believe that a significant number of the systems designed by these customers and incorporatingour semiconductor products are then sold to end users outside Asia.We currently rely, and expect to continue to rely, on a limited number of customers for a significant portion of our revenue. In the year endedDecember 31, 2010, Samsung accounted for 34% of our total revenue, and our 10 largest customers collectively accounted for 76% of our total revenue. Inaddition, sales directly and through distributors to Micron accounted for 11% of our total revenue in the year ended December 31, 2010. Samsung directlyaccounted for 36% of our total revenue and sales directly and through distributors to Micron accounted for 17% of our total revenue for the year endedDecember 31, 2009. No other single customer directly or indirectly accounted for more than 10% of our total revenue in 2010 or 2009.Sales and MarketingOur design cycle from initial engagement to volume shipment is typically two to three years, with product life cycles in the markets we serve rangingfrom two to 10 years or more. For many of our products, early engagement with our customers’ technical staff is necessary for success. To ensure an adequatelevel of early engagement, our application and development engineers work closely with our customers to identify and propose solutions to their systemschallenges.In addition to our direct customers, we work closely with technology leaders such as Intel and AMD for the computing and storage markets and Alcatel-Lucent, Cisco, Huawei for the networking and communications market to anticipate and solve next generation challenges facing our customers. As part of thesales and product development process, we often design our products in close collaboration with these industry leaders and help define their architecture. Wealso participate actively in setting industry standards with organizations such as IEEE, JEDEC and OIF to have a voice in the definition of future markettrends.We sell our products worldwide through multiple channels, including our direct sales force and a network of sales representatives and distributors. Forthe year ended December 31, 2010, 79% of our revenue was generated by our direct sales team and third-party sales representatives. We operate direct salesoffices in Japan, Korea, Singapore, Taiwan and the United States and employ sales personnel that cover our direct customers and manage our channelpartners. We utilize two sales representatives and two distributors in Asia, a distributor in Europe, a distributor in Israel, nine sales representatives in NorthAmerica and a distributor in Japan. Our channel network includes more than 100 sales professionals to support our products and customers, including sevenin Japan, 21 in Asia (other than Japan), 62 in North America and 26 in Europe, the Middle East and Africa, or EMEA. All of these sales professionals aresales agents and are employed by our distributors and sales representatives except for 10 sales agents who are our direct employees, including two in Japan,three in Asia, four in North America and one in EMEA. We believe these distributors and sales representatives have the requisite technical experience in ourtarget markets and are able to leverage existing relationships and 6™ Table of Contentsunderstanding of our customers’ products to effectively sell our products. Given the breadth of our target markets, customers and products, we provide ourdirect and indirect sales teams with regular training and share product information with our customers and sales team using web-based tools.ManufacturingWe operate a fabless business model and use third-party foundries and assembly and test manufacturing contractors to manufacture, assemble and testour semiconductor products. We also inspect and test parts in our Westlake Village, California, facility. This outsourced manufacturing approach allows us tofocus our resources on the design, sale and marketing of our products. In addition, we believe outsourcing many of our manufacturing and assembly activitiesprovides us the flexibility needed to respond to new market opportunities, simplifies our operations and significantly reduces our capital requirements.We subject our third-party manufacturing contractors to qualification requirements in order to meet the high quality and reliability standards required ofour products. We carefully qualify each of our partners and processes before applying the technology to our products. Our engineers work closely with ourfoundries and other contractors to increase yield, lower manufacturing costs and improve product quality. • Wafer Fabrication. We currently utilize a wide range of semiconductor processes to develop and manufacture our products. Each of ourfoundries tends to specialize in a particular semiconductor wafer process technology. We choose the semiconductor process and foundry that webelieve provides the best combination of performance attributes for any particular product. For most of our products, we utilize a single foundryfor semiconductor wafer production. Our principal foundries are Taiwan Semiconductor Manufacturing Company Ltd., or TSMC, in Taiwan,Sumitomo Electric Device Innovations Inc., or SEDI, in Japan, WIN Semiconductors Corp. in Taiwan, Global CommunicationsSemiconductors, Inc., or GCS, in North America and United Monolithic Semiconductors S.A.S, or UMS, in France. • Package and Assembly. Upon the completion of processing at the foundry, the finished wafers are shipped to our third-party assemblers forpackaging and assembly. Currently, our principal packaging and assembly contractors are Orient Semiconductor Electronics Ltd., or OSE inTaiwan, STATS ChipPAC Ltd. in Korea, Signetics Korea Co., Ltd. in Korea, Kyocera Corporation in North America and Japan, and NatelEngineering Co., Inc., in North America. • Test. At the last stage of integrated circuit production, our third-party test service providers test the packaged and assembled integrated circuits.Currently, OSE in Taiwan, STATS ChipPAC in Korea, Signetics in Korea and Presto Engineering in North America are our test partners. Wealso perform testing in our Westlake Village, California, facility.We are committed to maintaining the highest level of quality in our products. Our objective is that our products meet all of our customer requirements,are delivered on-time and function reliably throughout their useful lives. As part of our total quality assurance program, our quality management system hasbeen certified to ISO 9001:2008 standards. Our manufacturing partners are also ISO 9001 certified.Research and DevelopmentWe focus our research and development efforts on developing products that address bandwidth bottlenecks in networks and minimize latency incomputing environments. We believe that our continued success depends on our ability to both introduce improved versions of our existing products and todevelop new products for the markets that we serve. We devote a portion of our resources to expanding our core technology including efforts in system-levelsimulation, high-speed analog design, supporting a broad range of process technologies and high-speed package modeling and design.We develop models that are used as an input to a combination of proprietary and commercially available simulation tools. We use these tools to predictoverall system performance based on the performance of our product. After our product is manufactured, we perform system measurements and refine ourmodel set to improve the model’s accuracy and predictive ability. As a result, our models and simulation tools have improved over time and we have been ableto very accurately predict overall system performance prior to fabricating a part.We have assembled a core team of experienced engineers and systems designers in three design centers located in the United States, the United Kingdomand Taiwan. Our technical team typically has, on average, more than 20 years of industry experience with more than 75% having advanced degrees and morethan 25% having Ph.Ds. These engineers and designers are involved in advancing our core technologies, as well as applying these core technologies to ourproduct development activities across a number of areas including telecommunications transport systems, enterprise networking equipment, datacenters andenterprise servers, storage platforms, test and measurement and military systems. In 2010, 2009 and 2008, our research and development expenses were $23.8million, $17.8 million and $17.5 million, respectively. 7 Table of ContentsCompetitionThe global semiconductor market in general, and the communications and computing markets in particular, are highly competitive. We expectcompetition to increase and intensify as more and larger semiconductor companies enter our markets. Increased competition could result in price pressure,reduced profitability and loss of market share, any of which could materially and adversely affect our business, revenue and operating results.Currently, our competitors range from large, international companies offering a wide range of semiconductor products to smaller companies specializingin narrow markets. Our primary competitors include Broadcom Corporation, Hittite Microwave Corporation, Integrated Device Technology, Inc., or IDT, andTexas Instruments Incorporated, as well as other smaller analog signal processing companies. We expect competition in our target markets to increase in thefuture as existing competitors improve or expand their product offerings. In addition, as we continue to develop our 100G semiconductor solutions forenterprise networks, we may face competition from companies such as Broadcom and NetLogic Microsystems, Inc.Our ability to compete successfully depends on elements both within and outside of our control, including industry and general economic trends. Duringpast periods of downturns in our industry, competition in the markets in which we operate intensified as our customers reduced their purchase orders. Manyof our competitors are significantly larger, have greater financial, technical, marketing, distribution, customer support and other resources, are moreestablished than we are, and have significantly better brand recognition and broader product offerings with which to withstand similar adverse economic ormarket conditions in the future. These developments may materially and adversely affect our current and future target markets and our ability to competesuccessfully in those markets.We compete or plan to compete in different target markets to various degrees on the basis of a number of principal competitive factors, including: • product performance; • power budget; • features and functionality; • customer relationships; • size; • ease of system design; • product roadmap; • reputation and reliability; • customer support; and • price.We believe we compete favorably with respect to each of these factors. We maintain our competitive position through our ability to successfully design,develop and market complex high-speed analog solutions for the customers that we serve.Intellectual PropertyWe rely on a combination of intellectual property rights, including patents, trade secrets, copyrights and trademarks, and contractual protections, toprotect our core technology and intellectual property. As of December 31, 2010, we had 30 issued and allowed patents in the United States and other patentapplications pending in the United States. The 30 issued and allowed patents in the United States expire in the years beginning in 2021 through 2027. Many ofour issued patents and pending patent applications relate to high-speed circuit and package designs.We may not receive competitive advantages from any rights granted under our patents, and our patent applications may not result in the issuance of anypatents. In addition, any future patent may be opposed, contested, circumvented, designed around by a third party or found to be unenforceable orinvalidated. Others may develop technologies that are similar or superior to our proprietary technologies, duplicate our proprietary technologies or designaround patents owned or licensed by us.In addition to our own intellectual property, we also use third-party licensors for certain technologies embedded in our semiconductor solutions. Theseare typically non-exclusive contracts provided under paid-up licenses. These licenses are generally perpetual or automatically renewed for so long as wecontinue to pay any maintenance fees that may be due. To date, maintenance 8 Table of Contentsfees have not constituted a significant portion of our capital expenditures. We have entered into a number of licensing arrangements pursuant to which welicense third-party technologies. We do not believe our business is dependent to any significant degree on any individual third-party license.We generally control access to and use of our confidential information through the use of internal and external controls, including contractual protectionswith employees, contractors and customers. We rely in part on United States and international copyright laws to protect our mask work. All employees andconsultants are required to execute confidentiality agreements in connection with their employment and consulting relationships with us. We also require themto agree to disclose and assign to us all inventions conceived or made in connection with the employment or consulting relationship.Despite our efforts to protect our intellectual property, unauthorized parties may still copy or otherwise obtain and use our software, technology or otherinformation that we regard as proprietary intellectual property. In addition, we intend to expand our international operations, and effective patent, copyright,trademark and trade secret protection may not be available or may be limited in foreign countries.The semiconductor industry is characterized by vigorous protection and pursuit of intellectual property rights and positions, which has resulted inprotracted and expensive litigation for many companies. We have in the past received and, particularly as a public company, we expect that in the future wemay receive, communications from various industry participants alleging our infringement of their patents, trade secrets or other intellectual property rights.Any lawsuits could subject us to significant liability for damages, invalidate our proprietary rights and harm our business and our ability to compete. Anylitigation, regardless of success or merit, could cause us to incur substantial expenses, reduce our sales and divert the efforts of our technical and managementpersonnel. In the event we receive an adverse result in any litigation, we could be required to pay substantial damages, seek licenses from third parties, whichmay not be available on reasonable terms or at all, cease sale of products, expend significant resources to develop alternative technology or discontinue the useof processes requiring the relevant technology.EmployeesAt December 31, 2010, we employed 166 full-time equivalent employees, including 93 in research, product development and engineering, 28 in salesand marketing and 19 in general and administrative management and 26 in manufacturing logistics. We consider relations with our employees to be good andhave never experienced a work stoppage. None of our employees are either represented by a labor union or subject to a collective bargaining agreement.OtherWe were incorporated in Delaware in November 2000 as TCom Communications, Inc. and changed our name to Inphi Corporation in February 2001.Our principal executive offices are located at 3945 Freedom Circle, Suite 1100, Santa Clara, California 95054. Our telephone number at that location is(408) 217-7300. Our website address is www.inphi.com. Information on our website is not part of this report and should not be relied upon in determiningwhether to make an investment decision. The inclusion of our website address in this report does not include or incorporate by reference into this report anyinformation on our website.We electronically file our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K pursuant to Section 13(a) or15(d) of the Securities Exchange Act of 1934, as amended with the SEC. The public may read or copy any materials we file with the SEC at the SEC’s PublicReference Room at 100 F Street, NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling theSEC at 1-800-SEC-0330. The SEC maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuersthat file electronically with the SEC. The address of that site is http://www.sec.gov. You may obtain a free copy of our annual reports on Form 10-K, quarterlyreports on Form 10-Q and current reports on Form 8-K and amendments to those reports with the SEC on our website. ITEM 1A.RISK FACTORSRisks Related to Our BusinessOur revenue and operating results can fluctuate from period to period, which could cause our share price to fluctuate.Our revenue and operating results have fluctuated in the past and may fluctuate from period to period in the future due to a variety of factors, many ofwhich are beyond our control. Factors relating to our business that may contribute to these fluctuations include the following factors, as well as other factorsdescribed elsewhere in this report: • the receipt, reduction or cancellation of orders by customers; • fluctuations in the levels of component inventories held by our customers; 9 Table of Contents • the gain or loss of significant customers; • market acceptance of our products and our customers’ products; • our ability to develop, introduce and market new products and technologies on a timely basis; • the timing and extent of product development costs; • new product announcements and introductions by us or our competitors; • incurrence of research and development and related new product expenditures; • fluctuations in sales by module manufacturers who incorporate our semiconductor solutions in their products, such as memory modules; • cyclical fluctuations in our markets; • fluctuations in our manufacturing yields; • significant warranty claims, including those not covered by our suppliers; • changes in our product mix or customer mix; • intellectual property disputes; and • loss of key personnel or the inability to attract qualified engineers.As a result of these and other factors, the results of any prior quarterly or annual periods should not be relied upon as indications of our future revenueor operating performance. Fluctuations in our revenue and operating results could cause our share price to decline.We have an accumulated deficit and have incurred net losses in the past. We may incur net losses in the future.As of December 31, 2010, we had an accumulated deficit of $34.6 million. We have incurred net losses in each year through 2008. We generated netincome (loss) of $26.1 million, $7.3 million and $(3.4) million for the years ended December 31, 2010, 2009 and 2008, respectively. We may incur net lossesin the future.We depend on a limited number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in ordersfrom, one or more of our major customers could negatively impact our revenue and operating results. In addition, if we offer more favorableprices to attract or retain customers, our average selling prices and gross margins would decline.For the year ended December 31, 2010, our 10 largest customers collectively accounted for 76% of our total revenue. Sales directly to Samsungaccounted for 34% and 36% of our total revenue and sales directly and through distributors to Micron accounted for 11% and 17% of our total revenue for theyears ended December 31, 2010 and 2009, respectively. Some of our customers, including Samsung and Micron, use our products primarily in high-speedmemory devices. We believe our operating results for the foreseeable future will continue to depend on sales to a relatively small number of customers. In thefuture, these customers may decide not to purchase our products at all, may purchase fewer products than they did in the past or may alter their purchasingpatterns.In addition, our relationships with some customers may deter other potential customers who compete with these customers from buying our products. Toattract new customers or retain existing customers, we may offer these customers favorable prices on our products. In that event, our average selling prices andgross margins would decline. The loss of a key customer, a reduction in sales to any key customer or our inability to attract new significant customers couldnegatively impact our revenue and materially and adversely affect our results of operations.We do not have long-term purchase commitments from our customers and if our customers cancel or change their purchase commitments,our revenue and operating results could suffer.Substantially all of our sales to date, including sales to Samsung and Micron, have been made on a purchase order basis. We do not have any long-termcommitments with any of our customers. As a result, our customers may cancel, change or delay product purchase commitments with little or no notice to usand without penalty. This in turn could cause our revenue to decline and materially and adversely affect our results of operations. 10 Table of ContentsWe may face claims of intellectual property infringement, which could be time-consuming, costly to defend or settle and result in the loss ofsignificant rights and which could harm our relationships with our customers and distributors.The semiconductor industry is characterized by companies that hold patents and other intellectual property rights and that vigorously pursue, protectand enforce intellectual property rights. From time to time, third parties may assert against us and our customers and distributors their patent and otherintellectual property rights to technologies that are important to our business.Claims that our products, processes or technology infringe third-party intellectual property rights, regardless of their merit or resolution, could be costlyto defend or settle and could divert the efforts and attention of our management and technical personnel. For example, Netlist, Inc. filed suit against us in theUnited States District Court, Central District of California, in September 2009, alleging that our iMB and certain other memory module components infringethree of Netlist’s patents. For more details, see Item 3., “Legal Proceedings.”Infringement claims also could harm our relationships with our customers or distributors and might deter future customers from doing business withus. We do not know whether we will prevail in these proceedings given the complex technical issues and inherent uncertainties in intellectual property litigation.If any pending or future proceedings result in an adverse outcome, we could be required to: • cease the manufacture, use or sale of the infringing products, processes or technology; • pay substantial damages for infringement; • expend significant resources to develop non-infringing products, processes or technology, which may not be successful; • license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all; • cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor; or • pay substantial damages to our customers or end users to discontinue their use of or to replace infringing technology sold to them with non-infringing technology, if available.Any of the foregoing results could have a material adverse effect on our business, financial condition and results of operations.Winning business is subject to lengthy competitive selection processes that require us to incur significant expenditures prior to generatingany revenue or without any guarantee of any revenue related to this business. Even if we begin a product design, a customer may decide to cancelor change its product plans, which could cause us to generate no revenue from a product. If we fail to generate revenue after incurringsubstantial expenses to develop our products, our business and operating results would suffer.We are focused on winning more competitive bid processes, known as “design wins,” that enable us to sell our high-speed analog semiconductorsolutions for use in our customers’ products. These selection processes typically are lengthy and can require us to incur significant design and developmentexpenditures and dedicate scarce engineering resources in pursuit of a single customer opportunity. We may not win the competitive selection process and maynever generate any revenue despite incurring significant design and development expenditures. Failure to obtain a design win could prevent us from offering anentire generation of a product. This could cause us to lose revenue and require us to write off obsolete inventory, and could weaken our position in futurecompetitive selection processes. Even after securing a design win, we may experience delays in generating revenue from our products as a result of the lengthydevelopment cycle typically required. Our customers generally take a considerable amount of time to evaluate our products. Our design cycle from initialengagement to volume shipment is typically two to three years.The delays inherent in these lengthy sales cycles increase the risk that a customer will decide to cancel, curtail, reduce or delay its product plans oradopt a competing design from one of our competitors, causing us to lose anticipated revenue. In addition, any delay or cancellation of a customer’s planscould materially and adversely affect our financial results, as we may have incurred significant expense without generating any revenue. Finally, ourcustomers’ failure to successfully market and sell their products could reduce demand for our products and materially and adversely affect our business,financial condition and results of operations. If we were unable to generate revenue after incurring substantial expenses to develop any of our products, ourbusiness would suffer.Our customers require our products and our third-party contractors to undergo a lengthy and expensive qualification process which doesnot assure product sales. If we are unsuccessful in or delayed in qualifying any of our products with a customer, our business and operatingresults would suffer.Prior to purchasing our products, our customers require that both our products and our third-party contractors undergo extensive qualificationprocesses, which involve testing of our products in the customers’ systems, as well as testing for reliability. This 11™ Table of Contentsqualification process may continue for several months. However, qualification of a product by a customer does not assure any sales of the product to thatcustomer. Even after successful qualification and sales of a product to a customer, a subsequent revision in our third party contractors’ manufacturingprocess or our selection of a new supplier may require a new qualification process with our customers, which may result in delays and in our holding excessor obsolete inventory. After our products are qualified, it can take several months or more before the customer commences volume production of components orsystems that incorporate our products. Despite these uncertainties, we devote substantial resources, including design, engineering, sales, marketing andmanagement efforts, to qualifying our products with customers in anticipation of sales. If we are unsuccessful or delayed in qualifying any of our productswith a customer, sales of those products to the customer may be precluded or delayed, which may impede our growth and cause our business to suffer.The complexity of our products could result in undetected defects and we may be subject to warranty claims and product liability, whichcould result in a decrease in customers and revenue, unexpected expenses and loss of market share. In addition, our product liability insurancemay not adequately cover our costs arising from products defects or otherwise.Our products are sold as components or as modules for use in larger electronic equipment sold by our customers. A product usually goes through anintense qualification and testing period performed by our customers before being used in production. We primarily outsource our product testing to thirdparties and also perform some testing in our Westlake Village, California, facility. We inspect and test parts, or have them inspected and tested in order toscreen out parts that may be weak or potentially suffer a defect incurred through the manufacturing process. From time to time, we are subject to warranty orproduct liability claims that may require us to make significant expenditures to defend these claims or pay damage awards. For example, in September 2010,we were informed of a claim related to repair and replacement costs in connection with shipments of over 4,000 integrated circuits made by us during thesummer and fall of 2009. Of these shipments, approximately 4% were later confirmed or suspected to have random manufacturing process anomalies in thewafer die in the product. Based on our standard warranty provisions, we provided replacement parts to the customer for the known and suspected failures thathad occurred. In addition, and without informing us, in the fall of 2009, the customer instituted its own larger scale replacement program that covered thereplacement of entire subassemblies in which our product was only one component. In September 2010, the customer made an initial claim for approximately$18 million against us for the costs incurred relative to that program. We believe the amount of the claim is without merit as our warranty liability iscontractually limited to the repair or replacement of the affected Inphi products, which, to the extent the customer has requested replacement, has already beencompleted. A formal claim has yet to be made and discussions with the customer are ongoing. However, claims of this nature are subject to various risks anduncertainties and there can be no assurance that this matter will be resolved without further significant costs to us, including the potential for arbitration orlitigation.Generally, our agreements seek to limit our liability to the replacement of the part or to the revenue received for the product, but these limitations onliability may not be effective or sufficient in scope in all cases. If a customer’s equipment fails in use, the customer may incur significant monetary damagesincluding an equipment recall or associated replacement expenses, as well as lost revenue. The customer may claim that a defect in our product caused theequipment failure and assert a claim against us to recover monetary damages. The process of identifying a defective or potentially defective product in systemsthat have been widely distributed may be lengthy and require significant resources, and we may incur significant replacement costs and contract damageclaims from our customers as well as harm to our reputation. In certain situations, circumstances might warrant that we consider incurring the costs orexpense related to a recall of one of our products in order to avoid the potential claims that may be raised should the customer reasonably rely upon our productonly to suffer a failure due to a design or manufacturing process defect. Defects in our products could harm our relationships with our customers and damageour reputation. Customers may be reluctant to buy our products, which could harm our ability to retain existing customers and attract new customers and ourfinancial results. In addition, the cost of defending these claims and satisfying any arbitration award or judicial judgment with respect to these claims couldharm our business prospects and financial condition. Although we carry product liability insurance, this insurance may not adequately cover our costsarising from defects in our products or otherwise.We rely on our relationships with industry and technology leaders to enhance our product offerings and our inability to continue to developor maintain such relationships in the future would harm our ability to remain competitive.We develop many of our semiconductor products for applications in systems that are driven by industry and technology leaders in the communicationsand computing markets. We also work with OEMs, system manufacturers and standards bodies to define industry conventions and standards within ourtarget markets. We believe these relationships enhance our ability to achieve market acceptance and widespread adoption of our products. If we are unable tocontinue to develop or maintain these relationships, our semiconductor solutions would become less desirable to our customers, our sales would suffer and ourcompetitive position could be harmed.If we fail to accurately anticipate and respond to market trends or fail to develop and introduce new or enhanced products to address thesetrends on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed. 12 Table of ContentsWe operate in industries characterized by rapidly changing technologies and industry standards as well as technological obsolescence. We havedeveloped products that may have long product life cycles of 10 years or more, as well as other products in more volatile high growth or rapidly changingareas, which may have shorter life cycles of only two to three years. We believe that our future success depends on our ability to develop and introduce newtechnologies and products that generate new sources of revenue to replace, or build upon, existing product revenue streams that may be dependent upon limitedproduct life cycles. If we are not able to repeatedly introduce, in successive years, new products that ship in volume, our revenue will likely not grow and maydecline significantly and rapidly. In 2009, we successfully introduced and began to ship a new product in production which we identify as product numberINSSTE32882-GS04, or the GS04 product, and which consists of an integrated phase lock loop, or PLL, and register buffer. Sales of the GS04 productcomprised 18% and 43% of our total revenue in 2010 and 2009, respectively. In 2010, we also began to ship in production volume a new “low voltage” versionof our integrated PLL and register buffer, which is shipping in the form of product number INSSTE32882LV-GS02, or the GS02 product. Sales of the GS02product comprised 32% of our total revenue in 2010. There were no other products that generated more than 10% of our total revenue in 2010, 2009 or 2008. Aswe continued to grow our business in 2010, the GS04 product matured. As a result, sales of the GS04 product are now declining in volume. We currentlyexpect that by 2011 the GS04 product will no longer be material to our total revenue. This underscores the importance of the need for us to continually developand introduce new products to diversify our revenue base as well as generate new revenue to replace and build upon the success of previously introducedproducts which may be rapidly maturing.To compete successfully, we must design, develop, market and sell new or enhanced products that provide increasingly higher levels of performanceand reliability while meeting the cost expectations of our customers. The introduction of new products by our competitors, the delay or cancellation of aplatform for which any of our semiconductor solutions are designed, the market acceptance of products based on new or alternative technologies or theemergence of new industry standards could render our existing or future products uncompetitive from a pricing standpoint, obsolete and otherwiseunmarketable. Our failure to anticipate or timely develop new or enhanced products or technologies in response to technological shifts could result in decreasedrevenue and our competitors winning design wins. In particular, we may experience difficulties with product design, manufacturing, marketing or certificationthat could delay or prevent our development, introduction or marketing of new or enhanced products. Although we believe our products are fully compliantwith applicable industry standards, proprietary enhancements may not in the future result in full conformance with existing industry standards under allcircumstances. Due to the interdependence of various components in the systems within which our products and the products of our competitors operate,customers are unlikely to change to another design, once adopted, until the next generation of a technology. As a result, if we fail to introduce new or enhancedproducts that meet the needs of our customers or penetrate new markets in a timely fashion, and our designs do not gain acceptance, we will lose market shareand our competitive position, very likely on an extended basis, and operating results will be adversely affected.If sufficient market demand for 100G solutions does not develop or develops more slowly than expected, or if we fail to accurately predictmarket requirements or market demand for 100G solutions, our business, competitive position and operating results would suffer.We are currently investing significant resources to develop semiconductor solutions supporting 100G data transmission rates in order to increase thenumber of such solutions in our product line. If we fail to accurately predict market requirements or market demand for 100G semiconductor solutions, or ifour 100G semiconductor solutions are not successfully developed or competitive in the industry, our business will suffer. If 100G networks are deployed to alesser extent or more slowly than we currently anticipate, we may not realize any benefits from our investment. As a result, our business, competitive position,market share and operating results would suffer.Our target markets may not grow or develop as we currently expect and are subject to market risks, any of which could materially harm ourbusiness, revenue and operating results.To date, a substantial portion of our revenue has been attributable to demand for our products in the communications and computing markets and thegrowth of these overall markets. These markets have fluctuated in size and growth in recent times. Our operating results are impacted by various trends inthese markets. These trends include the deployment and broader market adoption of next generation technologies, such as 40 gigabits per second, or Gbps orG, and 100G, in communications and enterprise networks, timing of next generation network upgrades, the introduction and broader market adoption of nextgeneration server platforms, timing of enterprise upgrades and the introduction and deployment of high-speed memory interfaces in computing platforms. Weare unable to predict the timing or direction of the development of these markets with any accuracy. For example, we expect that the deployment of differenttypes of memory devices for which our iMB product is designed will be substantially dependent on the development of next generation server platforms. Wehave not generated any significant revenue from our iMB product to date, and if the development or adoption of next generation server platforms is delayed,or if these server platforms do not interoperate with memory devices for which our iMB product is designed, we may not realize revenue from our iMBproduct. In addition, because some of our products are not limited in the systems or geographic areas in which they may be deployed, we cannot alwaysdetermine with accuracy how, where or into which applications our products are being deployed. If our target markets do not grow or develop in ways that wecurrently expect, demand for our semiconductor products may decrease and our business and operating results could suffer. 13™™™™ Table of ContentsWe rely on a limited number of third parties to manufacture, assemble and test our products, and the failure to manage our relationshipswith our third-party contractors successfully could adversely affect our ability to market and sell our products and our reputation. Our revenueand operating results would suffer if these third parties fail to deliver products or components in a timely manner and at reasonable cost or ifmanufacturing capacity is reduced or eliminated as we may be unable to obtain alternative manufacturing capacity.We operate an outsourced manufacturing business model. As a result, we rely on third-party foundry wafer fabrication and assembly and test capacity.We also perform testing in our Westlake Village, California, facility. We generally use a single foundry for the production of each of our varioussemiconductors. Currently, our principal foundries are GCS, SEDI, TSMC, TowerJazz Semiconductor Ltd., UMS and WIN Semiconductors. We also usethird-party contract manufacturers for a significant majority of our assembly and test operations, including Kyocera, Natel, OSE, Presto, Signetics andSTATS ChipPAC.Relying on third-party manufacturing, assembly and testing presents significant risks to us, including the following: • failure by us, our customers or their end customers to qualify a selected supplier; • capacity shortages during periods of high demand; • reduced control over delivery schedules and quality; • shortages of materials; • misappropriation of our intellectual property; • limited warranties on wafers or products supplied to us; and • potential increases in prices.The ability and willingness of our third-party contractors to perform is largely outside our control. If one or more of our contract manufacturers or otheroutsourcers fails to perform its obligations in a timely manner or at satisfactory quality levels, our ability to bring products to market and our reputation couldsuffer. For example, if that manufacturing capacity is reduced or eliminated at one or more facilities, including as a response to the recent worldwide decline inthe semiconductor industry, or any of those facilities are unable to keep pace with the growth of our business, we could have difficulties fulfilling ourcustomer orders and our revenue could decline. In addition, if these third parties fail to deliver quality products and components on time and at reasonableprices, we could have difficulties fulfilling our customer orders, our revenue could decline and our business, financial condition and results of operationswould be adversely affected.Additionally, as many of our fabrication and assembly and test contractors are located in the Pacific Rim region, principally in Taiwan, ourmanufacturing capacity may be similarly reduced or eliminated due to natural disasters, political unrest, war, labor strikes, work stoppages or public healthcrises, such as outbreaks of H1N1 flu. This could cause significant delays in shipments of our products until we are able to shift our manufacturing,assembly or test from the affected contractor to another third-party vendor. There can be no assurance that alternative capacity could be obtained on favorableterms, if at all.Our costs may increase substantially if the wafer foundries that supply our products do not achieve satisfactory product yields or quality.The wafer fabrication process is an extremely complicated process where the slightest changes in the design, specifications or materials can result inmaterial decreases in manufacturing yields or even the suspension of production. From time to time, our third-party wafer foundries have experienced, and arelikely to experience manufacturing defects and reduced manufacturing yields related to errors or problems in their manufacturing processes or theinterrelationship of their processes with our designs. In some cases, our third-party wafer foundries may not be able to detect these defects early in thefabrication process or determine the cause of such defects in a timely manner. We may incur substantial research and development expense for prototype ordevelopment stage products as we qualify the products for production.Generally, in pricing our semiconductors, we assume that manufacturing yields will continue to increase, even as the complexity of our semiconductorsincreases. Once our semiconductors are initially qualified with our third-party wafer foundries, minimum acceptable yields are established. We are responsiblefor the costs of the wafers if the actual yield is above the minimum. If actual yields are below the minimum we are not required to purchase the wafers. Theminimum acceptable yields for our new products are generally lower at first and increase as we achieve full production. Unacceptably low product yields orother product manufacturing problems could substantially increase the overall production time and costs and adversely impact our operating results on salesof our products. Product yield losses will increase our costs and reduce our gross margin. In addition to significantly harming our operating 14 Table of Contentsresults and cash flow, poor yields may delay shipment of our products and harm our relationships with existing and potential customers.We do not have any long-term supply contracts with our contract manufacturers or suppliers, and any disruption in our supply of productsor materials could have a material adverse affect on our business, revenue and operating results.We currently do not have long-term supply contracts with any of our third-party contract manufacturers. We make substantially all of our purchases ona purchase order basis, and our contract manufacturers are not required to supply us products for any specific period or in any specific quantity. We expectthat it would take approximately nine to 12 months to transition from our current foundry or assembly services to new providers. Such a transition wouldlikely require a qualification process by our customers or their end customers. We generally place orders for products with some of our suppliers severalmonths prior to the anticipated delivery date, with order volumes based on our forecasts of demand from our customers. Accordingly, if we inaccuratelyforecast demand for our products, we may be unable to obtain adequate and cost-effective foundry or assembly capacity from our third-party contractors tomeet our customers’ delivery requirements, or we may accumulate excess inventories. On occasion, we have been unable to adequately respond to unexpectedincreases in customer purchase orders and therefore, were unable to benefit from this incremental demand. None of our third-party contract manufacturershave provided any assurance to us that adequate capacity will be available to us within the time required to meet additional demand for our products.Our foundry vendors and assembly and test vendors may allocate capacity to the production of other companies’ products while reducing deliveries tous on short notice. In particular, other customers that are larger and better financed than us or that have long-term agreements with our foundry vendor orassembly and test vendors may cause our foundry vendor or assembly and test vendors to reallocate capacity to those customers, decreasing the capacityavailable to us. We do not have long-term supply contracts with our third-party contract manufacturers and if we enter into costly arrangements with suppliersthat include nonrefundable deposits or loans in exchange for capacity commitments, commitments to purchase specified quantities over extended periods orinvestment in a foundry, our operating results could be harmed. We may not be able to make any such arrangement in a timely fashion or at all, and anyarrangements may be costly, reduce our financial flexibility, and not be on terms favorable to us. Moreover, if we are able to secure foundry capacity, we maybe obligated to use all of that capacity or incur penalties. These penalties may be expensive and could harm our financial results. To date, we have not enteredinto such arrangements with our suppliers. If we need another foundry or assembly and test subcontractor because of increased demand, or if we are unable toobtain timely and adequate deliveries from our providers, we might not be able to cost effectively and quickly retain other vendors to satisfy our requirements.Many of our customers depend on us as the sole source for a number of our products. If we are unable to deliver these products as the solesupplier or as one of a limited number of suppliers, our relationships with these customers and our business would suffer.A number of our customers do not have alternative sources for our semiconductor solutions and depend on us as the sole supplier or as one of a limitednumber of suppliers for these products. Since we outsource our manufacturing to third-party contractors, our ability to deliver our products is substantiallydependent on the ability and willingness of our third-party contractors to perform, which is largely outside our control. A failure to deliver our products insufficient quantities or at all to our customers that depend on us as a sole supplier or as one of a limited number of suppliers may be detrimental to theirbusiness and, as a result, our relationship with the customer would be negatively impacted. If we are unable to maintain our relationships with these customersafter such failure, our business and financial results may be harmed.If we are unable to attract, train and retain qualified personnel, particularly our design and technical personnel, we may not be able toexecute our business strategy effectively.Our future success depends on our ability to attract and retain qualified personnel, including our management, sales and marketing, and finance, andparticularly our design and technical personnel. We do not know whether we will be able to retain all of these personnel as we continue to pursue our businessstrategy. Historically, we have encountered difficulties in hiring qualified engineers because there is a limited pool of engineers with the expertise required in ourfield. Competition for these personnel is intense in the semiconductor industry. As the source of our technological and product innovations, our design andtechnical personnel represent a significant asset. The loss of the services of one or more of our key employees, especially our key design and technicalpersonnel, or our inability to attract and retain qualified design and technical personnel, could harm our business, financial condition and results ofoperations.We may not be able to effectively manage our growth, and we may need to incur significant expenditures to address the additionaloperational and control requirements of our growth, either of which could harm our business and operating results.To effectively manage our growth, we must continue to expand our operational, engineering and financial systems, procedures and controls and toimprove our accounting and other internal management systems. This may require substantial managerial and financial resources, and our efforts in thisregard may not be successful. Our current systems, procedures and controls may not be adequate to support our future operations. If we fail to adequatelymanage our growth, or to improve our operational, financial and 15 Table of Contentsmanagement information systems, or fail to effectively motivate or manage our new and future employees, the quality of our products and the management ofour operations could suffer, which could adversely affect our operating results.We face intense competition and expect competition to increase in the future. If we fail to compete effectively, it could have an adverse effecton our revenue, revenue growth rate, if any, and market share.The global semiconductor market in general, and the communications and computing markets in particular, are highly competitive. We compete or planto compete in different target markets to various degrees on the basis of a number of principal competitive factors, including product performance, powerbudget, features and functionality, customer relationships, size, ease of system design, product roadmap, reputation and reliability, customer support andprice. We expect competition to increase and intensify as more and larger semiconductor companies enter our markets. Increased competition could result inprice pressure, reduced profitability and loss of market share, any of which could materially and adversely affect our business, revenue and operating results.Currently, our competitors range from large, international companies offering a wide range of semiconductor products to smaller companies specializingin narrow markets. Our primary competitors include Broadcom Corporation, Hittite Microwave Corporation, Integrated Device Technology, Inc. and TexasInstruments Incorporated, as well as other analog signal processing companies. We expect competition in the markets in which we participate to increase in thefuture as existing competitors improve or expand their product offerings. In addition, as we develop our 100G semiconductor solution, we may facecompetition from companies such as Broadcom and NetLogic Microsystems, Inc.Our ability to compete successfully depends on elements both within and outside of our control, including industry and general economic trends. Duringpast periods of downturns in our industry, competition in the markets in which we operate intensified as our customers reduced their purchase orders. Manyof our competitors have substantially greater financial and other resources with which to withstand similar adverse economic or market conditions in thefuture. These developments may materially and adversely affect our current and future target markets and our ability to compete successfully in thosemarkets.We use a significant amount of intellectual property in our business. Monitoring unauthorized use of our intellectual property can bedifficult and costly and if we are unable to protect our intellectual property, our business could be adversely affected.Our success depends in part upon our ability to protect our intellectual property. To accomplish this, we rely on a combination of intellectual propertyrights, including patents, copyrights, trademarks and trade secrets in the United States and in selected foreign countries where we believe filing for suchprotection is appropriate. Effective protection of our intellectual property rights may be unavailable, limited or not applied for in some countries. Some of ourproducts and technologies are not covered by any patent or patent application, as we do not believe patent protection of these products and technologies iscritical to our business strategy at this time. A failure to timely seek patent protection on products or technologies generally precludes us from seeking futurepatent protection on these products or technologies. We cannot guarantee that: • any of our present or future patents or patent claims will not lapse or be invalidated, circumvented, challenged or abandoned; • our intellectual property rights will provide competitive advantages to us; • our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by ouragreements with third parties; • any of our pending or future patent applications will be issued or have the coverage originally sought; • our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak; • any of the trademarks, copyrights, trade secrets or other intellectual property rights that we presently employ in our business will not lapse or beinvalidated, circumvented, challenged or abandoned; or • we will not lose the ability to assert our intellectual property rights against or to license our technology to others and collect royalties or otherpayments.For example, we filed a complaint against Netlist in Federal District Court in November 2009 alleging that Netlist infringes two of our patents. Netlistasserts in its amended answer to the complaint that it does not infringe the patents, that the patents are invalid and that one of the patents is unenforceable dueto inequitable conduct before the United States Patent and Trademark Office, or the USPTO. For more details, see Item 3., “Legal Proceedings.”In addition, our competitors or others may design around our protected patents or technologies. Effective intellectual property protection may beunavailable or more limited in one or more relevant jurisdictions relative to those protections available in the United 16 Table of ContentsStates, or may not be applied for in one or more relevant jurisdictions. If we pursue litigation to assert our intellectual property rights, an adverse decision inany of these legal actions could limit our ability to assert our intellectual property rights, limit the value of our technology or otherwise negatively impact ourbusiness, financial condition and results of operations.Monitoring unauthorized use of our intellectual property is difficult and costly. Unauthorized use of our intellectual property may have occurred or mayoccur in the future. Although we have taken steps to minimize the risk of this occurring, any such failure to identify unauthorized use and otherwiseadequately protect our intellectual property would adversely affect our business. Moreover, if we are required to commence litigation, whether as a plaintiff ordefendant, not only would this be time-consuming, but we would also be forced to incur significant costs and divert our attention and efforts of ouremployees, which could, in turn, result in lower revenue and higher expenses.We also rely on contractual protections with our customers, suppliers, distributors, employees and consultants, and we implement security measuresdesigned to protect our trade secrets. We cannot assure you that these contractual protections and security measures will not be breached, that we will haveadequate remedies for any such breach or that our suppliers, employees or consultants will not assert rights to intellectual property arising out of suchcontracts.In addition, we have a number of third-party patent and intellectual property license agreements. Some of these license agreements require us to makeone-time payments or ongoing royalty payments. We cannot guarantee that the third-party patents and technology we license will not be licensed to ourcompetitors or others in the semiconductor industry. In the future, we may need to obtain additional licenses, renew existing license agreements or otherwisereplace existing technology. We are unable to predict whether these license agreements can be obtained or renewed or the technology can be replaced onacceptable terms, or at all.Average selling prices of our products often decrease over time, which could negatively impact our revenue and gross margins.Our operating results may be impacted by a decline in the average selling prices of our semiconductors. If competition increases in our target markets,we may need to reduce the average unit price of our products in anticipation of competitive pricing pressures, new product introductions by us or ourcompetitors and for other reasons. If we are unable to offset any reductions in our average selling prices by increasing our sales volumes or introducing newproducts with higher margins, our revenue and gross margins will suffer. To maintain our revenue and gross margins, we must develop and introduce newproducts and product enhancements on a timely basis and continually reduce our costs as well as our customers’ costs. Failure to do so would cause ourrevenue and gross margins to decline.We are subject to order and shipment uncertainties, and differences between our estimates of customer demand and product mix and ouractual results could negatively affect our inventory levels, sales and operating results.Our revenue is generated on the basis of purchase orders with our customers rather than long-term purchase commitments. In addition, our customerscan cancel purchase orders or defer the shipments of our products under certain circumstances. Our products are manufactured using semiconductorfoundries according to our estimates of customer demand, which requires us to make separate demand forecast assumptions for every customer, each ofwhich may introduce significant variability into our aggregate estimates. It is difficult for us to forecast the demand for our products, in part because of thecomplex supply chain between us and the end-user markets that incorporate our products. Due to our lengthy product development cycle, it is critical for us toanticipate changes in demand for our various product features and the applications they serve to allow sufficient time for product development and design. Wehave limited visibility into future customer demand and the product mix that our customers will require, which could adversely affect our revenue forecastsand operating margins. Moreover, because some of our target markets are relatively new, many of our customers have difficulty accurately forecasting theirproduct requirements and estimating the timing of their new product introductions, which ultimately affects their demand for our products. Our failure toaccurately forecast demand can lead to product shortages that can impede production by our customers and harm our customer relationships. Conversely, ourfailure to forecast declining demand or shifts in product mix can result in excess or obsolete inventory. The rapid pace of innovation in our industry could alsorender significant portions of our inventory obsolete. Excess or obsolete inventory levels could result in unexpected expenses or increases in our reserves thatcould adversely affect our business, operating results and financial condition. In contrast, if we were to underestimate customer demand or if sufficientmanufacturing capacity were unavailable, we could forego revenue opportunities, potentially lose market share and damage our customer relationships. Inaddition, any significant future cancellations or deferrals of product orders or the return of previously sold products due to manufacturing defects couldmaterially and adversely impact our profit margins, increase our write-offs due to product obsolescence and restrict our ability to fund our operations.We rely on third-party sales representatives and distributors to assist in selling our products. If we fail to retain or find additional salesrepresentatives and distributors, or if any of these parties fail to perform as expected, it could reduce our future sales.In 2010, we derived 79% of our total revenue from sales by our direct sales team and third-party sales representatives. In addition, in 2010 and 2009,approximately 21% and 22% of our sales were made through third-party distributors, respectively. Two of 17 Table of Contentsour distributors, which sell solely to Micron, accounted for 11% and 17% of our total revenue in 2010 and 2009, respectively. We are unable to predict theextent to which these third-party sales representatives and distributors will be successful in marketing and selling our products. Moreover, many of thesethird-party sales representatives and distributors also market and sell competing products, which may affect the extent to which they promote our products.Even where our relationships are formalized in contracts, our third-party sales representatives and distributors often have the right to terminate theirrelationships with us at any time. Our future performance will also depend, in part, on our ability to attract additional third-party sales representatives anddistributors who will be able to market and support our products effectively, especially in markets in which we have not previously sold our products. If wecannot retain our current distributors or find additional or replacement third-party sales representatives and distributors, our business, financial condition andresults of operations could be harmed. Additionally, if we terminate our relationship with a distributor, we may be obligated to repurchase unsold products. Werecord a reserve for estimated returns and price credits. If actual returns and credits exceed our estimates, our operating results could be harmed.The facilities of our third-party contractors and distributors are located in regions that are subject to earthquakes and other naturaldisasters.The facilities of our third-party contractors and distributors are subject to risk of catastrophic loss due to fire, flood or other natural or man-madedisasters. A number of our facilities and those of our contract manufacturers are located in areas with above average seismic activity and also subject totyphoons and other Pacific storms. Several foundries that manufacture our wafers are located in Taiwan, Japan and California, and a majority of our third-party contractors who assemble and test our products are located in Asia. In addition, our headquarters are located in California. The risk of an earthquake inthe Pacific Rim region or California is significant due to the proximity of major earthquake fault lines. For example, in 2002 and 2003, major earthquakesoccurred in Taiwan. Any catastrophic loss to any of these facilities would likely disrupt our operations, delay production, shipments and revenue and resultin significant expenses to repair or replace the facility. In particular, any catastrophic loss at our California locations would materially and adversely affect ourbusiness.We rely on third-party technologies for the development of our products and our inability to use such technologies in the future would harmour ability to remain competitive.We rely on third parties for technologies that are integrated into our products, such as wafer fabrication and assembly and test technologies used by ourcontract manufacturers, as well as licensed architecture technologies. If we are unable to continue to use or license these technologies on reasonable terms, or ifthese technologies fail to operate properly, we may not be able to secure alternatives in a timely manner or at all, and our ability to remain competitive would beharmed. In addition, if we are unable to successfully license technology from third parties to develop future products, we may not be able to develop suchproducts in a timely manner or at all.Our business would be adversely affected by the departure of existing members of our senior management team and other key personnel.Our success depends, in large part, on the continued contributions of our senior management team, in particular, the services of Young K. Sohn, ourPresident and Chief Executive Officer, as well as other key personnel, including Dr. Loi Nguyen, one of our founders and our Vice President of Networking,Communications and Multi-Market Products. In February 2011, our Chief Technology Officer resigned and we promoted our Vice President of Engineeringfor New Business Initiatives to serve as our new Chief Technology Officer. This change could negatively affect our operations and our relationships with ourcustomers, employees and market leaders. In addition, we have not entered into non-compete agreements with members of our senior management team. Theloss of any member of our senior management team or key personnel could harm our ability to implement our business strategy and respond to the rapidlychanging market conditions in which we operate.Potential future acquisitions could be difficult to integrate, divert attention of key personnel, disrupt our business, dilute stockholder valueand impair our operating results.As part of our business strategy, we have pursued and may continue to pursue acquisitions in the future that we believe will complement our business,semiconductor solutions or technologies. For example, we recently acquired all of the outstanding shares of Winyatek Technology Inc., a Taiwanese company.Any acquisition involves a number of risks, many of which could harm our business, including: • difficulties in integrating the operations, technologies, products, existing contracts, accounting and personnel of the target company; • realizing the anticipated benefits of any acquisition; • difficulties in transitioning and supporting customers, if any, of the target company; • diversion of financial and management resources from existing operations; 18 Table of Contents • the price we pay or other resources that we devote may exceed the value we realize, or the value we could have realized if we had allocated thepurchase price or other resources to another opportunity; • potential loss of key employees, customers and strategic alliances from either our current business or the target company’s business; • assumption of unanticipated problems or latent liabilities, such as problems with the quality of the target company’s products; • inability to generate sufficient revenue to offset acquisition costs; • dilutive effect on our stock as a result of any equity-based acquisitions; • inability to successfully complete transactions with a suitable acquisition candidate; and • in the event of international acquisitions, risks associated with accounting and business practices that are different from applicable U.S. practicesand requirements.Acquisitions also frequently result in the recording of goodwill and other intangible assets that are subject to potential impairments, which could harmour financial results. As a result, if we fail to properly evaluate acquisitions or investments, we may not achieve the anticipated benefits of any suchacquisitions, and we may incur costs in excess of what we anticipate. The failure to successfully evaluate and execute acquisitions or investments or otherwiseadequately address these risks could materially harm our business and financial results.Tax benefits that we receive may be terminated or reduced in the future, which would increase our costs.In 2010, we began to expand our international presence to take advantage of the opportunity to recruit additional engineering design talent, as well as tomore closely align our operations geographically with our customers and suppliers in Asia. In certain international jurisdictions, we have also entered intoagreements with local governments to provide us with, among other things, favorable local tax rates if certain minimum criteria are met. These agreements mayrequire us to meet several requirements as to investment, headcount and activities to retain this status. We currently believe that we will be able to meet all theterms and conditions specified in these agreements. However, if adverse changes in the economy or changes in technology affect international demand for ourproducts in an unforeseen manner or if we fail to otherwise meet the conditions of the local agreements, we may be subject to additional taxes, which in turnwould increase our costs.Changes in our effective tax rate may harm our results of operations. A number of factors may increase our future effective tax rates, including: • the jurisdictions in which profits are determined to be earned and taxed; • the resolution of issues arising from tax audits with various tax authorities; • changes in the valuation of our deferred tax assets and liabilities and in deferred tax valuation allowances; • changes in the value of assets or services transferred or provided from one jurisdiction to another; • adjustments to income taxes upon finalization of various tax returns; • increases in expenses not deductible for tax purposes, including write-offs of acquired in-process research and development and impairments ofgoodwill in connection with acquisitions; • changes in available tax credits; • changes in tax laws or the interpretation of such tax laws, and changes in U.S. generally accepted accounting principles; and • a decision to repatriate non-U.S. earnings for which we have not previously provided for U.S. taxes.We are subject to additional regulatory compliance requirements, including Section 404 of the Sarbanes-Oxley Act of 2002, as a result ofbecoming a public company and our management has limited experience managing a public company.As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. The individuals whoconstitute our management team have limited experience managing a publicly traded company, and limited experience complying with the increasingly complexand changing laws pertaining to public companies. Our management team and 19 Table of Contentsother personnel will need to devote a substantial amount of time to new compliance initiatives and we may not successfully or efficiently manage our transitioninto a public company. We expect rules and regulations such as the Sarbanes-Oxley Act of 2002 to increase our legal and finance compliance costs and to makesome activities more time-consuming and costly. We will need to hire a number of additional employees with public accounting and disclosure experience inorder to meet our ongoing obligations as a public company. For example, Section 404 of the Sarbanes-Oxley Act of 2002 requires that our management reporton, and our independent registered public accounting firm attest to, the effectiveness of our internal control over financial reporting in our annual report onForm 10-K for the fiscal year ending December 31, 2011. Section 404 compliance may divert internal resources and will take a significant amount of time andeffort to complete. We may not be able to successfully complete the procedures and certification and attestation requirements of Section 404 by the time we willbe required to do so. If we fail to do so, or if in the future our Chief Executive Officer, Chief Financial Officer or independent registered public accounting firmdetermines that our internal controls over financial reporting are not effective as defined under Section 404, we could be subject to sanctions or investigationsby The New York Stock Exchange, or NYSE, the Securities and Exchange Commission, or the SEC, or other regulatory authorities. Furthermore, investorperceptions of our company may suffer, and this could cause a decline in the market price of our stock. Irrespective of compliance with Section 404, anyfailure of our internal controls could have a material adverse effect on our stated results of operations and harm our reputation. If we are unable to implementthese changes effectively or efficiently, it could harm our operations, financial reporting or financial results and could result in an adverse opinion on internalcontrols from our independent auditors.Our insiders who are significant stockholders may control the election of our board and may have interests that conflict with those of otherstockholders.Our directors and executive officers, together with members of their immediate families and affiliated funds, beneficially owned, in the aggregate, morethan 35.5% of our outstanding capital stock as of December 31, 2010. In addition, entities affiliated with Walden International and Tallwood I, L.P.beneficially owned 14.0% and 13.8%, respectively, of our outstanding capital stock as of December 31, 2010. Lip-Bu Tan and Diosdado Banatao, who areaffiliated with Walden International and Tallwood I, L.P., respectively, are currently two of the eight members of our board of directors. As a result, actingtogether, this group has the ability to exercise significant control over most matters requiring our stockholders’ approval, including the election and removal ofdirectors and significant corporate transactions.Risks Related to Our IndustryWe may be unable to make the substantial and productive research and development investments which are required to remain competitive inour business.The semiconductor industry requires substantial investment in research and development in order to develop and bring to market new and enhancedtechnologies and products. Many of our products originated with our research and development efforts and have provided us with a significant competitiveadvantage. Our research and development expense was $23.8 million in 2010, $17.8 million in 2009 and $17.5 million in 2008. We are committed toinvesting in new product development in order to remain competitive in our target markets. We do not know whether we will have sufficient resources tomaintain the level of investment in research and development required to remain competitive. In addition, we cannot assure you that the technologies which arethe focus of our research and development expenditures will become commercially successful.Our business, financial condition and results of operations could be adversely affected by worldwide economic conditions, as well as politicaland economic conditions in the countries in which we conduct business.Our business and operating results are impacted by worldwide economic conditions, including the current European debt crisis. Uncertainty aboutcurrent global economic conditions may cause businesses to continue to postpone spending in response to tighter credit, unemployment or negative financialnews. This in turn could have a material negative effect on the demand for our semiconductor products or the products into which our semiconductors areincorporated. Although the United States economy has recently shown signs of recovery, the strength and duration of any economic recovery will be impactedby the European debt crisis and the reaction to any efforts to address the crisis. Multiple factors relating to our international operations and to particularcountries in which we operate could negatively impact our business, financial condition and results of operations. These factors include: • changes in political, regulatory, legal or economic conditions; • restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments and trade protectionmeasures, including export duties and quotas and customs duties and tariffs; • disruptions of capital and trading markets; • changes in import or export requirements; • transportation delays; 20 Table of Contents • civil disturbances or political instability; • geopolitical turmoil, including terrorism, war or political or military coups; • public health emergencies; • differing employment practices and labor standards; • limitations on our ability under local laws to protect our intellectual property; • local business and cultural factors that differ from our customary standards and practices; • nationalization and expropriation; • changes in tax laws; • currency fluctuations relating to our international operating activities; and • difficulty in obtaining distribution and support.A significant portion of our products are manufactured, assembled and tested outside the United States. Any conflict or uncertainty in these countries,including due to natural disasters, public health concerns, political unrest or safety concerns, could harm our business, financial condition and results ofoperations. In addition, if the government of any country in which our products are manufactured or sold sets technical standards for products manufacturedin or imported into their country that are not widely shared, it may lead some of our customers to suspend imports of their products into that country, requiremanufacturers in that country to manufacture products with different technical standards and disrupt cross-border manufacturing relationships which, ineach case, could harm our business.Changes in current or future laws or regulations or the imposition of new laws or regulations, including new or changed tax regulations,environmental laws and export control laws, or new interpretations thereof, by federal or state agencies or foreign governments could impair ourability to compete in international markets.Changes in current laws or regulations applicable to us or the imposition of new laws and regulations in the United States or other jurisdictions in whichwe do business, such as China, Japan, Korea, Singapore and Taiwan, could materially and adversely affect our business, financial condition and results ofoperations. For example, we have entered into agreements with local governments to provide us with, among other things, favorable local tax rates if certainminimum criteria are met, as discussed in our risk factor entitled “Tax benefits that we received may be terminated or reduced in the future, which wouldincrease our costs.” These agreements may require us to meet several requirements as to investment, headcount and activities to retain this status. If we fail tootherwise meet the conditions of the local agreements, we may be subject to additional taxes, which in turn would increase our costs. In addition, potentialfuture U.S. tax legislation could impact the tax benefits we effectively realize under these agreements.Due to environmental concerns, the use of lead and other hazardous substances in electronic components and systems is receiving increased attention. Inresponse, the European Union passed the Restriction on Hazardous Substances, or RoHS, Directive, legislation that limits the use of lead and other hazardoussubstances in electrical equipment. The RoHS Directive became effective July 1, 2006. We believe that our current product designs and material supply chainsare in compliance with the RoHS Directive. If our product designs or material supply chains are deemed not to be in compliance with the RoHS Directive, weand our third party manufacturers may need to redesign products with components meeting the requirements of the RoHS Directive and we may incuradditional expense as well as loss of market share and damage to our reputation.In addition, we are subject to export control laws, regulations and requirements that limit which products we sell and where and to whom we sell ourproducts. In some cases, it is possible that export licenses would be required from U.S. government agencies for some of our products in accordance with theExport Administration Regulations and the International Traffic in Arms Regulations. We may not be successful in obtaining the necessary export licenses inall instances. Any limitation on our ability to export or sell our products imposed by these laws would adversely affect our business, financial condition andresults of operations. In addition, changes in our products or changes in export and import laws and implementing regulations may create delays in theintroduction of new products in international markets, prevent our customers from deploying our products internationally or, in some cases, prevent the exportor import of our products to certain countries altogether. While we are not aware of any other current or proposed export or import regulations which wouldmaterially restrict our ability to sell our products in countries such as China, Japan, Korea, Singapore or Taiwan, any change in export or import regulationsor related legislation, shift in approach to the enforcement or scope of existing regulations, or change in the countries, persons or technologies targeted by theseregulations, could result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential customers withinternational operations. In such event, our business and results of operations could be adversely affected. 21 Table of ContentsWe are subject to the cyclical nature of the semiconductor industry, which has suffered and may suffer from future recessionary downturns.The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and priceerosion, evolving standards and wide fluctuations in product supply and demand. The industry experienced a significant downturn during the current globalrecession. These downturns have been characterized by diminished product demand, production overcapacity, high inventory levels and accelerated erosion ofaverage selling prices. The most recent downturn and any future downturns could negatively impact our business and operating results. Furthermore, anyupturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly capacity. We are dependent on theavailability of this capacity to manufacture and assemble our integrated circuits. None of our third-party foundry or assembly contractors has providedassurances that adequate capacity will be available to us in the future.Our products must conform to industry standards in order to be accepted by end users in our markets.Our products comprise only a part of larger electronic systems. All components of these systems must uniformly comply with industry standards inorder to operate efficiently together. These industry standards are often developed and promoted by larger companies who are industry leaders and provideother components of the systems in which our products are incorporated. In driving industry standards, these larger companies are able to develop and fosterproduct ecosystems within which our products can be used. We work with a number of these larger companies in helping develop industry standards withwhich our products are compatible. If larger companies do not support the same industry standards that we do, or if competing standards emerge, marketacceptance of our products could be adversely affected, which would harm our business.Some industry standards may not be widely adopted or implemented uniformly, and competing standards may still emerge that may be preferred by ourcustomers. Products for communications and computing applications are based on industry standards that are continually evolving. Our ability to compete inthe future will depend on our ability to identify and ensure compliance with these evolving industry standards. The emergence of new industry standardscould render our products incompatible with products developed by other suppliers or make it difficult for our products to meet the requirements of certainOEMs. As a result, we could be required to invest significant time and effort and to incur significant expense to redesign our products to ensure compliancewith relevant standards. If our products are not in compliance with prevailing industry standards for a significant period of time, we could miss opportunitiesto achieve crucial design wins. We may not be successful in developing or using new technologies or in developing new products or product enhancements thatachieve market acceptance. Our pursuit of necessary technological advances may require substantial time and expense.Risks Related to our Common StockThe trading price and volume of our common stock is subject to price volatility.The trading price of our common stock has experienced wide fluctuations. For example, since our initial public offering the closing price of our commonstock ranged from $15.12 on November 23, 2010 to $26.63 on February 17, 2011. Volatility in the market price of our common stock may occur in thefuture. The market price of shares of our common stock could be subject to wide fluctuations in response to many risk factors listed in this report and othersbeyond our control, including: • actual or anticipated fluctuations in our financial condition and operating results; • changes in the economic performance or market valuations of other companies that provide high-speed analog semiconductor solutions; • loss of a significant amount of existing business; • actual or anticipated changes in our growth rate relative to our competitors; • actual or anticipated fluctuations in our competitors’ operating results or changes in their growth rates; • issuance of new or updated research or reports by securities analysts; • our announcement of actual results for a fiscal period that are higher or lower than projected results or our announcement of revenue or earningsguidance that is higher or lower than expected; • regulatory developments in our target markets affecting us, our customers or our competitors; • fluctuations in the valuation of companies perceived by investors to be comparable to us; • share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; 22 Table of Contents • sales or expected sales of additional common stock; • terrorist attacks or natural disasters or other such events impacting countries where we or our customers have operations; and • general economic and market conditions.Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices ofequity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of those companies. Thesebroad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest rate changes or internationalcurrency fluctuations, may cause the market price of shares of our common stock to decline. In the past, companies that have experienced volatility in themarket price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigationagainst us could result in substantial costs and divert our management’s attention from other business concerns, which could seriously harm our business.If securities or industry analysts do not publish research or reports about our business, or if they change their recommendations regardingour stock adversely, 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 ourbusiness. If one or more of the analysts who cover us downgrade our stock, our stock price would likely decline. If one or more of these analysts ceasecoverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock priceor trading volume to decline.Substantial future sales of our common stock in the public market could cause our stock price to fall.Sales of our common stock in the public market or the perception that sales could occur, could cause the market price of our common stock to declinesignificantly. As of December 31, 2010, we had 25,088,122 shares of common stock outstanding, of which 17,233,838 shares are eligible for sale at varioustimes upon the expiration of lock-up agreements in May 2011 and subject to vesting requirements and the requirements of Rule 144.Our directors, executive officers and substantially all of our stockholders have agreed with limited exceptions that they will not sell any shares ofcommon stock owned by them without the prior written consent of Morgan Stanley & Co. Incorporated and Deutsche Bank Securities Inc., on behalf of theunderwriters, until May 9, 2011. At any time and without public notice, Morgan Stanley and Deutsche Bank may in their sole discretion release some or allof the securities from these lock-up agreements prior to the expiration of the lock-up period. As resale restrictions end, the market price of our common stockcould decline if the holders of those shares sell them or are perceived by the market as intending to sell them.We may not be able to obtain capital when desired on favorable terms, if at all, or without dilution to our stockholders and our failure toraise capital when needed could prevent us from executing our growth strategy.We believe that our existing cash and cash equivalents, and cash flows from our operating activities, will be sufficient to meet our anticipated cash needsfor at least the next 12 months. We operate in an industry, however, that makes our prospects difficult to evaluate. It is possible that we may not generatesufficient cash flow from operations or otherwise have the capital resources to meet our future capital needs. If this occurs, we may need additional financingto execute on our current or future business strategies, including to: • invest in our research and development efforts by hiring additional technical and other personnel; • expand our operating infrastructure; • acquire complementary businesses, products, services or technologies; or • otherwise pursue our strategic plans and respond to competitive pressures.If we raise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could besignificantly diluted, and these newly-issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we raise additionalfunds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our businessthat could impair our operational flexibility, and would also require us to incur interest expense. We have not made arrangements to obtain additional financingand there is no assurance that additional financing will be available on terms favorable to us, or at all. If adequate funds are not available or are not availableon 23 Table of Contentsacceptable terms, if and when needed, our ability to fund our operations, take advantage of unanticipated opportunities, develop or enhance our products, orotherwise respond to competitive pressures could be significantly limited.Delaware law and our corporate charter and bylaws contain anti-takeover provisions that could delay or discourage takeover attempts thatstockholders may consider favorable.Provisions in our certificate of incorporation and bylaws, may have the effect of delaying or preventing a change of control or changes in ourmanagement. These provisions include the following: • the right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors; • the classification of our board of directors so that only a portion of our directors are elected each year, with each director serving a three-year term; • the requirement for advance notice for nominations for election to our board of directors or for proposing matters that can be acted upon at astockholders’ meeting; • the ability of our board of directors to alter our bylaws without obtaining stockholder approval; • the ability of our board of directors to issue, without stockholder approval, up to 10,000,000 shares of preferred stock with rights set by our boardof directors, which rights could be senior to those of common stock; • the required approval of holders of at least two-thirds of the shares entitled to vote at an election of directors to adopt, amend or repeal our bylawsor amend or repeal the provisions of our certificate of incorporation regarding the election and removal of directors and the ability of stockholdersto take action by written consent; and • the elimination of the right of stockholders to call a special meeting of stockholders and to take action by written consent.In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law. Theseprovisions may prohibit or restrict large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combiningwith us. These provisions in our certificate of incorporation and bylaws and under Delaware law could discourage potential takeover attempts and couldreduce the price that investors might be willing to pay for shares of our common stock in the future and result in our market price being lower than it wouldwithout these provisions.We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment willdepend on appreciation in the price of our common stock.We have never declared or paid any cash dividends on our common stock and do not currently intend to do so for the foreseeable future. We currentlyintend to invest our future earnings, if any, to fund our growth. Therefore, you are not likely to receive any dividends on your common stock for theforeseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is noguarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares. ITEM 1B.UNRESOLVED STAFF COMMENTSNone. ITEM 2.PROPERTIESWe currently lease our principal executive office in Santa Clara, California, under a lease for 14,578 square feet of office space that expires in July 31,2015. The total minimum lease payments under this lease are $2.1 million. We also lease 29,090 square feet of office space in Westlake Village, Californiaunder a lease that expires on December 31, 2016. The total minimum lease payments under this lease are $3.6 million. Our Singapore subsidiary currentlyleases 2,368 square feet of office space in Singapore under a lease that expires on March 14, 2012. Our United Kingdom subsidiary currently leases officespace in Northamptonshire, England under a lease that expires on September 24, 2011. We also lease 8,640 square feet of office space in Hsinchu, Taiwanunder a lease that expires on March 31, 2013. We believe that current facilities are sufficient to meet our needs for the foreseeable future. For additionalinformation regarding our obligations under property leases, see Note 15 of Notes to Consolidated Financial Statements, included in Part II, Item 8 of thisreport. 24 Table of ContentsITEM 3.LEGAL PROCEEDINGSWe are currently a party to the following legal proceedings:Netlist, Inc. v. Inphi Corporation, Case No. 09-cv-6900 (C.D. Cal.)On September 22, 2009, Netlist filed suit in the United States District Court, Central District of California, or the Court, asserting that we infringeU.S. Patent No. 7,532,537. Netlist filed an amended complaint on December 22, 2009, further asserting that we infringe U.S. Patent Nos. 7,619,912 and7,636,274, collectively with U.S. Patent No. 7,532,537, the patents-in-suit, and seeking both unspecified monetary damages to be determined and aninjunction to prevent further infringement. These infringement claims allege that our iMB™ and certain other memory module components infringe the patents-in-suit. We answered the amended complaint on February 11, 2010 and asserted that we do not infringe the patents-in-suit and that the patents-in-suit areinvalid. We have since filed inter partes requests for reexamination with the USPTO asserting that the patents-in-suit are invalid.On August 27, 2010, the USPTO granted the Request for Inter Partes Reexamination for U.S. Patent No. 7,636,274 and found a substantial newquestion of patentability based upon each of the different issues that we raised as the reexamination requestor. The USPTO has not, however, accompanied itsReexamination Order of U.S. Patent No. 7,636,274 with its own evaluation of the validity of this patent, indicating that such evaluation will be forthcomingat a later time. With respect to the granted reexamination request for U.S. Patent No. 7,636,274, the USPTO will evaluate the validity of this patent inreexamination proceedings.On September 8, 2010, the USPTO ordered the Inter Partes Request for Reexamination for U.S. Patent No. 7,532,537 and found a substantial newquestion of patentability based upon different issues that we raised as the reexamination requestor. The USPTO accompanied this Reexamination Order ofU.S. Patent No. 7,532,537 with its own evaluation of the validity of this patent, and rejected some but not all of claims. In a response dated October 8, 2010,Netlist responded to the USPTO determination by amending some but not all of the claims, adding new claims and making arguments why the claims werenot invalid in view of the cited references. We provided rebuttal comments to the USPTO on January 27, 2011, which the USPTO will consider, and theproceeding will continue in accordance with established inter partes reexamination procedures.On September 8, 2010, the USPTO ordered the Inter Partes Request for Reexamination for U.S. Patent No. 7,619,912 and found a substantial newquestion of patentability based upon different issues that we raised as the reexamination requestor. The USPTO accompanied this Reexamination Order ofU.S. Patent No. 7,619,912 with its own evaluation of the validity of this patent, and determined that all of the claims were patentable based upon ourreexamination. Netlist has not commented upon this Reexamination Order. The USPTO on February 28, 2011 also merged the Proceedings of ourReexamination of U.S. Patent No. 7,619,912, bearing Control No. 90/001,339 with Inter Partes Reexamination Proceeding 95/000,578 filed October 20, 2010on behalf of SMART Modular Technologies, Inc. and Inter Partes Reexamination Proceeding 95/000,579 filed October 21, 2010 on behalf of Google, Inc. Ineach of these other Reexamination Proceedings, the USPTO had indicated that there existed a substantial new question of patentability with respect to certainclaims of U.S. Patent No. 7,619,912, but had not accompanied the Reexamination Orders related thereto with its own evaluation of the validity of this patent,indicating that such evaluation would be forthcoming at a later time. The merged Reexamination Proceeding will be conducted in accordance with establishedprocedures for merged Reexamination Proceedings. As part of the merged Reexamination Proceeding, once the USPTO issues a Right of Notice of Appeal, wewill have the opportunity to appeal the USPTO determination of our Reexamination Request in accordance with these established procedures for mergedReexamination Proceedings.The reexamination proceedings could result in a determination that the patents-in-suit, in whole or in part, are valid or invalid, as well as modificationsof the scope of the patents-in-suit.A third party, Sanmina-SCI Corporation, or SSC, has also requested interference proceedings with the USPTO with respect to each of the patents-in-suit. In its April 21, 2010 Request for Continued Examination of U.S. Application No. 11/142,989, or SSC ’989 patent application, SSC asserted that ithas priority to the inventions claimed by the patents-in-suit and should be granted rights to those inventions. We have entered into an agreement with SSC for anon-exclusive license to those rights, if any, that SSC may obtain to the inventions claimed by the patents-in-suit if the USPTO agrees to commenceinterference proceedings and if SSC prevails in those proceedings.The USPTO, in a communication dated July 7, 2010, acknowledged that claims were submitted in a filing made in the SSC ‘989 patent application toinvoke an Interference with each of the patents-in-suit, but has declined to declare an Interference at this time. The July 7, 2010 USPTO communicationrejected the claims submitted to invoke the Interference based upon 35 USC 112, with the rejection asserting that these claims contain “subject matter whichwas not described in the specification in such a way as to reasonably convey to one skilled in the relevant art that the inventor(s), at the time the applicationwas filed, had possession of the 25 Table of Contentsclaimed invention.” SSC responded to this USPTO communication on December 24, 2010, and a further communication from the USPTO is anticipated.In connection with the reexamination requests and the interference proceedings, we also filed a motion to stay proceedings with the Court, which wasgranted on May 18, 2010, whereby the Court stayed the proceedings until at least February 14, 2011, requested that Netlist notify the Court within one weekof any action taken by the USPTO in connection with the reexamination or interference proceedings, and requested that the parties file papers by January 31,2011 stating their position on whether the stay should be extended. We filed our paper on January 31, 2011 stating the reasons we believe the stay should bemaintained and Netlist, having been given leave to file its paper later, filed its paper on February 21, 2011. Based on these papers the Court ordered acontinued stay of the proceedings until February 24, 2012, that the parties file papers by January 30, 2012 stating their position on whether the stay should beextended, and that Netlist notify the Court within one week of any action taken by the USPTO in the reexamination or interference proceedings. While theCourt granted the stay until February 24, 2012, the Court could lift the stay before then. For example, if the USPTO confirms that all claims of the patents-in-suit are patentable, the Court may decide to lift the stay.If this litigation results in an adverse outcome, we may be required to cease the manufacture, use or sale of any product held to infringe Netlist’s patents,including our iMB product, unless and until we or our customers obtain a license from Netlist. A license from Netlist may or may not be available oncommercially reasonable terms. An adverse outcome could also result in our having to pay damages for infringement and the expenditure of significantresources to redesign any infringing product, including our iMB product, in a non-infringing manner, which may or may not be successful. To date, we haveonly sampled our iMB product and, as a result, we have generated very little revenue. Our ability to generate future revenue from our iMB product, could beadversely affected, though it is currently difficult to estimate the level at which this may affect our revenue.Inphi Corporation v. Netlist, Inc, Case No. 09-cv-8749 (C.D. Cal.).On November 30, 2009, we filed suit in the United States District Court, Central District of California asserting that Netlist infringes U.S. Patent Nos.7,307,863 and 7,479,799, collectively the patents-in-suit, and are seeking both unspecified monetary damages and an injunction to prevent furtherinfringement. Netlist answered the complaint on January 15, 2010 and filed an amended answer on April 22, 2010, asserting that it does not infringe thepatents-in-suit, that the patents-in-suit are invalid and that U.S. Patent No. 7,479,799 is unenforceable due to inequitable conduct before the USPTO.Discovery is currently proceeding, and the Court has set a trial date of October 11, 2011.While we intend to defend and prosecute these lawsuits vigorously, litigation, whether or not determined in our favor or settled, could be costly and time-consuming and could divert our attention and resources, which could adversely affect our business. We are unable to assess the possible outcome of thesematters. However, because of the nature and inherent uncertainties of litigation, should the outcome of these actions be unfavorable, our business, financialcondition, results of operations or cash flows could be materially and adversely affected.We are not currently a party to any other material litigation. The semiconductor industry is characterized by frequent claims and litigation, includingclaims regarding patent and other intellectual property rights as well as improper hiring practices. We may from time to time become involved in litigationrelating to claims arising from our ordinary course of business. These claims, even if not meritorious, could result in the expenditure of significant financialand managerial resources. ITEM 4.(REMOVED AND RESERVED)PART II ITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESMarket for Registrant’s Common EquityOur common stock is traded on the New York Stock Exchange under the symbol “IPHI” and has been since our initial public offering on November 11,2010. Prior to that date, our common stock was not traded on any public exchange. The following table sets forth the range of high and low sales prices for ourcommon stock in each quarter since our stock began trading: 26 Table of Contents2010 Low High Fourth Quarter (from November 11, 2010) $14.73 $20.94 As of March 3, 2011, we had approximately 189 holders of record of our common stock. This number does not include the number of persons whoseshares are in nominee or in “street name” accounts through brokers.We have never declared or paid any cash dividends on shares of our capital stock. We expect to retain all of our earnings to finance the expansion anddevelopment of our business and we do not currently intend to pay any cash dividends on our capital stock in the foreseeable future. Our board of directorswill determine future dividends, if any.Recent Sales of Unregistered SecuritiesThe following sets forth information regarding all unregistered securities sold during the year ended December 31, 2010 and give effect to reflect the 3-for-7 reverse stock split of our outstanding shares of capital stock on November 3, 2010 and the conversion of all preferred stock into common stock effectedimmediately prior to the completion of our initial public offering: • On various dates between January 1, 2010 and November 16, 2010, the closing of our initial public offering, we issued and sold anaggregate of 395,253 shares of our common stock to employees, directors and consultants pursuant to options granted under 2000 StockOption/Stock Issuance Plan, or 2000 Stock Plan. The exercise prices ranged from $0.70 to $3.74 per share, for aggregate consideration of$483,837. * • In April 2010, we granted a restricted stock award for 17,142 shares of our common stock, with a fair value of $9.29 per share to amember of our Board of Directors.* • In August 2010, we granted a restricted stock award for 17,142 shares of our common stock, with a fair value of $12.02 per share, to amember of our Board of Directors.* • On June 30, 2010, we issued an aggregate of 313,713 shares of our former Series E preferred stock as part of the consideration to acquireall outstanding shares of Winyatek Technology Inc.**None of the foregoing transactions involved any underwriters, underwriting discounts or commission, or any public offering, and the registrant believesthat each transaction was exempt from the registration requirements of the Securities Act in reliance on the following exemptions: *with respect to these transactions, Rule 701, Rule 506 of Regulation D or Regulation S promulgated under the Securities Act as transactions pursuant toa compensatory benefit plan approved by the registrant’s board of directors; and**with respect to this transaction, Rule 506 of Regulation D promulgated under the Securities Act as a transactions by an issuer not involving a publicoffering. Each recipient of the securities in these transactions represented his or her intention to acquire the securities for investment only and not with aview to, or for resale in connection with, any distribution thereof.Use of Proceeds from Registered SecuritiesOur initial public offering of 7,820,000 shares of common stock was effected through a Registration Statement on Form S-1 (File No. 333-167564) thatwas declared effective by the Securities and Exchange Commission on November 10, 2010. We issued all 7,820,000 shares on November 16, 2010 for grossproceeds of $93,840,000. The underwriters of the offering were Morgan Stanley & Co. Incorporated, Deutsche Bank Securities Inc., Jefferies & Company,Inc., Stifel Nicolaus & Company, Incorporated and Needham & Company, LLC. We paid the underwriters a commission of $6,568,800 and incurredadditional offering expenses of approximately $2,573,169. After deducting the underwriters’ commission and the offering expenses, we received net proceedsof approximately $84,698,031. No payments for such expenses were made directly or indirectly to (i) any of our directors, officers or their associates, (ii) anyperson(s) owning 10% or more of any class of our equity securities or (iii) any of our affiliates. All of the net proceeds from the initial public offering remaininvested in short-term, interest-bearing, investment-grade securities, as described in our prospectus dated November 10, 2010.Securities Authorized for Issuance under Equity Compensation PlansInformation regarding the securities authorized for issuance under our equity compensation plans can be found under Item 12 of this Annual Report onForm 10-K. 27 Table of ContentsShare Performance GraphThe following information is not deemed to be “soliciting material” or to be “filed” with the Securities and Exchange Commission or subject toRegulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and will not bedeemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent wespecifically incorporate it by reference into such a filing.Set forth below is a line graph showing the cumulative total stockholder return (change in stock price plus reinvested dividends) assuming theinvestment of $100 on November 11, 2010 (the day of our initial public offering) in each of our common stock, the S&P 500 Index and PHLXSemiconductor Index for the period commencing on November 11, 2010 and ending on December 31, 2010. The comparisons in the table are required by theSecurities and Exchange Commission and are not intended to forecast or be indicative of future performance of our common stock 28 Table of ContentsITEM 6.SELECTED CONSOLIDATED FINANCIAL DATAThe following selected consolidated financial data should be read together with Item 7., “Management’s Discussion and Analysis of Financial Conditionand Results of Operations” and our consolidated financial statements and related notes included elsewhere in this report. The selected balance sheet data as ofDecember 31, 2010 and 2009, and the selected statements of operations data for each of the years ended December 31, 2010, 2009 and 2008, have beenderived from our audited financial statements included elsewhere in this report. The selected balance sheet data as of December 31, 2008, 2007 and 2006 andthe selected statements of operations data for the years ended December 31, 2007 and 2006 have been derived from our audited financial statements notincluded in this report. Historical results are not necessarily indicative of the results to be expected in the future. Year Ended December 31, 2010 2009 2008 2007 2006 (in thousands, except share and per share data) Statement of Operations Data: Revenue $55,253 $37,617 $32,727 $31,681 $19,741 Revenue from related party 27,940 21,235 10,227 4,556 1,557 Total revenue 83,193 58,852 42,954 36,237 21,298 Cost of revenue 29,438 21,269 19,249 16,028 11,244 Gross profit 53,755 37,583 23,705 20,209 10,054 Operating expense: Research and development 23,781 17,847 17,501 17,332 11,645 Sales and marketing 8,823 7,704 6,339 5,157 3,190 General and administrative 9,212 3,947 3,169 2,966 2,446 Total operating expense 41,816 29,498 27,009 25,455 17,281 Income (loss) from operations 11,939 8,085 (3,304) (5,246) (7,227) Other income (expense) (50) 73 (124) (95) 405 Income (loss) before income taxes 11,889 8,158 (3,428) (5,341) (6,822) Provision (benefit) for income taxes (14,242) 829 — — — Net income (loss) $26,131 $7,329 $(3,428) $(5,341) $(6,822) Net income (loss) allocable to common stockholders $5,240 $130 $(3,428) $(5,341) $(6,822) Earnings per share: Basic $1.03 $0.08 $(2.66) $(6.57) $(16.35) Diluted $0.61 $0.05 $(2.66) $(6.57) $(16.35) Weighted-average shares used in computing earnings per share: Basic 5,086,169 1,668,876 1,289,431 813,290 417,232 Diluted 8,546,537 2,785,277 1,289,431 813,290 417,232 (1)Revenue from related party consists of revenue from Samsung, which together with associated entities, held over 13% of our outstanding shares ofcommon stock before our initial public offering. After our initial public offering in November 2010, Samsung, together with associated entities, holdsless than 10% of our outstanding shares of common stock. Revenue from Samsung for the entire year of 2010 was presented as revenue from relatedparty.Footnotes continued on the following page. 29(1)(2)(2)(2)(2)(3) Table of Contents As of December 31, 2010 2009 2008 2007 2006 (in thousands) Balance Sheet Data: Cash and cash equivalents $110,172 $19,061 $9,052 $3,268 $5,587 Working capital 116,887 20,055 10,721 3,010 7,504 Total assets 158,957 34,472 20,373 16,190 15,785 Total liabilities 16,271 11,588 6,558 10,522 6,180 Convertible preferred stock — 77,616 77,616 67,680 67,680 Total stockholders’ equity (deficit) $142,686 $(54,732) $(63,801) $(62,012) $(58,076) Footnotes continued from the prior page. (2)Stock-based compensation expense is included in our results of operations as follows: As of December 31, 2010 2009 2008 2007 2006 (in thousands) Operating expenses: Cost of revenue $107 $31 $119 $19 $9 Research and development 1,381 475 358 168 76 Sales and marketing 526 238 101 66 133 General and administrative 691 421 417 574 280 (3)The provision (benefit) for income taxes for the years ended December 31, 2010 and 2009 included the releases and reversals of valuation allowancesagainst deferred tax assets provided in prior periods. Please see note 7 to the notes to our consolidated financial statements. 30 Table of ContentsITEM 7.MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThis report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When used in thisreport, the terms “may,” “might,” “will,” “objective,” “intend,” “should,” “could,” “can,” “would,” “expect,” “believe,” “estimate,” “predict,”“potential,” “plan,” or the negative of these terms, and similar expressions intended to identify forward-looking statements. These statements arestatements that relate to future periods and include statements regarding our anticipated trends and challenges in our business and the markets inwhich we operate, including the market for 40G and 100G high-speed analog semiconductor solutions, our plans for future products, such as ourisolation memory buffer or iMB™, clock and data recovery, or CDR, and serializer/deserializer, or SERDES, products, and enhancements of existingproducts, our expectations regarding our expenses and revenue, including our expectations that our research and development, sales and marketingand general and administrative expenses may increase in absolute dollars, our anticipated cash needs and our estimates regarding our capitalrequirements and our needs for additional financing, our anticipated growth strategies, our ability to retain and attract customers, particularly in lightof our dependence on a limited number of customers for a substantial portion of our revenue, the anticipated costs and benefits of our recentacquisition of Winyatek Technology Inc., and our expectations regarding competition as more and larger semiconductor companies enter our marketsand as existing competitors improve or expand their product offerings. These forward-looking statements involve known and unknown risks,uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results,performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to,those risks discussed below, as well as factors affecting our quarterly results, our ability to manage our growth, our ability to sustain or increaseprofitability, demand for our solutions, the effect of declines in average selling prices for our products, our ability to compete, our ability to rapidlydevelop new technology and introduce new products, our ability to safeguard our intellectual property, trends in the semiconductor industry andfluctuations in general economic conditions, and the risks set forth throughout this Report, including the risks set forth under Item 1A., “RiskFactors.” These forward-looking statements speak only as of the date of this report. We expressly disclaim any obligation or undertaking to releasepublicly any updates or revisions to any forward-looking statements contained herein to reflect any change in our expectations with regard thereto orany change in events, conditions or circumstances on which any such statement is based.OverviewWe are a fabless provider of high-speed analog semiconductor solutions for the communications and computing markets. Our analog semiconductorsolutions provide high signal integrity at leading-edge data speeds while reducing system power consumption. Our semiconductor solutions are designed toaddress bandwidth bottlenecks in networks, maximize throughput and minimize latency in computing environments and enable the rollout of next generationcommunications and computing infrastructures. Our solutions provide a vital high-speed interface between analog signals and digital information in high-performance systems such as telecommunications transport systems, enterprise networking equipment, datacenter and enterprise servers, storage platforms,test and measurement equipment and military systems. We provide 40G and 100G high-speed analog semiconductor solutions for the communications marketand high-speed memory interface solutions for the computing market. We have a broad product portfolio with 17 product lines and over 170 products as ofDecember 31, 2010. We have ongoing, informal collaborative discussions with industry and technology leaders such as AMD, Alcatel-Lucent, Huawei andIntel to design architectures and products that solve bandwidth bottlenecks in existing and next generation communications and computing systems. Althoughwe do not have any formal agreements with these entities, we engage in informal discussions with these entities with respect to anticipated technologicalchallenges, next generation customer requirements and industry conventions and standards. We help define industry conventions and standards within themarkets we target by collaborating with technology leaders, OEMs, systems manufacturers and standards bodies.The history of our product development and sales and marketing efforts is as follows: • From 2000 to 2002, we were primarily engaged in the development of our core high-speed analog products and proprietary system architecturemodels to address bottlenecks in emerging network architectures. Specifically, during this period, we developed and shipped our 50 GHz MUXand DEMUX products. During this period, we also began development work on our initial 40G products. • In 2003, we introduced and shipped 13G, 25G and 50G logic products, 20G MUX and 40G transimpedance amplifiers and modulator driversfor the communications, test and measurement and military markets. During this period, we also began the development of our first generationhigh-speed PLLs and register solution used primarily in conjunction with double data rate 2, or DDR2, modules for the computing market. • In 2005, we introduced and shipped our high-speed PLLs and register solution used primarily in conjunction with DDR2 modules for thecomputing market. • In 2006, we began development of our second generation single chip high-speed PLLs and register solution to be used primarily in conjunctionwith double data rate 3, or DDR3, modules for the computing market and were the first to introduce this product to the market. In addition, weintroduced and shipped track-and-hold amplifiers for the communications market. 31 Table of Contents • In 2007, we began volume shipments of our high-speed PLLs and register solution used primarily in conjunction with DDR2 modules, andcontinued development of our single chip high-speed PLLs and register solution, used primarily in conjunction with DDR3 modules. • In 2008, we began volume shipments of our 40G drivers for the communications market and commenced shipments of our high-speed PLLs andregister solution used primarily in conjunction with DDR3 modules for the computing market. • In 2009, due to the launch of Intel’s Nehalem-based platform servers, we began volume shipments of our single chip high-speed PLLs and registersolution to be used primarily in conjunction with DDR3 modules. We also shipped engineering samples of the first generation of our isolationmemory buffer, or iMB, for the computing market. We also began development of our second generation iMB product, the architecture forwhich has been adopted by the Joint Electronic Device Engineering Council, or JEDEC, and development of our low power CMOS SERDESproduct for next generation 100G Ethernet in enterprise networks. • In 2010, we began to ship in production volume a new “low voltage” version of our integrated PLL and register buffer. We also shipped engineeringsamples of the second generation iMB product.Our products are designed into systems sold by OEMs, including Agilent, Alcatel-Lucent, Cisco, Danaher, Dell, EMC, HP, Huawei, IBM and Oracle.We believe we are one of a limited number of suppliers to these OEMs, and in some cases we may be the sole supplier for certain applications. We sell bothdirectly to these OEMs and to module manufacturers, original design manufacturers, or ODMs, and subsystems providers that, in turn, sell to these OEMs.During the year ended December 31, 2010, we sold our products to more than 160 customers. A significant portion of our revenue has been generated by alimited number of customers. Sales directly to Samsung accounted for 34% and 36% of our total revenue and sales directly and through distributors to Micronaccounted for 11% and 17% of our total revenue for the years ended December 31, 2010 and 2009, respectively. Substantially all of our sales to date,including our sales to Samsung and Micron, are made on a purchase order basis. Since the beginning of 2006, we have shipped more than 100 million high-speed analog semiconductors. Our total revenue increased to $83.2 million for the year ended December 31, 2010 from $58.9 million for the year endedDecember 31, 2009. As of December 31, 2010, our accumulated deficit was $34.6 million.Sales to customers in Asia accounted for 80%, 77% and 64% of our total revenue in 2010, 2009 and 2008, respectively. Because many of our customersor their OEM manufacturers are located in Asia, we anticipate that a majority of our future revenue will continue to come from sales to that region. Although alarge percentage of our sales are made to customers in Asia, we believe that a significant number of the systems designed by these customers are then sold toend users outside Asia.In April 2010, we received approval from the government of Singapore to set up an international headquarters from which to conduct our internationaloperations. Because of its geographic alignment with suppliers and customers, we established our operations in Singapore to become a new internationalheadquarters office for receiving and fulfilling orders for product shipped to locations outside the United States. Singapore has a strong university system andan established group of technology-based companies from which to recruit new engineers. We intend to build a team of engineering capability in Singapore bothfor development as well as testing associated with manufacturing. International operations in Singapore commenced on May 1, 2010 and during 2010, wetransitioned our international operations from the United States to our Singapore subsidiary.Demand for new features changes rapidly. It is difficult for us to forecast the demand for our products, in part because of the complex supply chainbetween us and the end-user markets that incorporate our products. Due to our lengthy product development cycle, it is critical for us to anticipate changes indemand for our various product features and the applications they serve to allow sufficient time for product development and design. Our failure to accuratelyforecast demand can lead to product shortages that can impede production by our customers and harm our customer relationships. Conversely, our failure toforecast declining demand or shifts in product mix can result in excess or obsolete inventory.Although revenue generated by each design win and the timing of the recognition of that revenue can vary significantly, we consider ongoing design winsto be a key factor in our future success. We consider a design win to occur when an OEM or contract manufacturer notifies us that it has selected our productsto be incorporated into a product or system under development. The design win process is typically lengthy, and as a result, our sales cycles will vary basedon the market served, whether the design win is with an existing or new customer and whether our product is under consideration for inclusion in a first orsubsequent generation product. In addition, our customers’ products that incorporate our semiconductors can be complex and can require a substantialamount of time to define, design and produce in volume. As a result, we can incur significant design and development expenditures in circumstances where wedo not ultimately recognize, or experience delays in recognizing revenue. Our customers generally order our products on a purchase order basis. We do not haveany long-term purchase commitments (in excess of one year) from any of our customers. Once our product is incorporated into a customer’s design, however,we believe that our product is likely to continue to be purchased for that design throughout that product’s life cycle because of the time and expense associatedwith redesigning the product or substituting 32™™™ Table of Contentsan alternative semiconductor. Our design cycle from initial engagement to volume shipment is typically two to three years. Product life cycles in the markets weserve typically range from two to 10 years or more and vary by application.On June 30, 2010, we acquired all of the outstanding shares of Winyatek Technology Inc., in exchange for $3.3 million in cash, 313,713 shares of ourSeries E preferred stock and earn-out consideration up to $2,000,000 to be determined based on certain operating metrics.Critical Accounting Policies and Significant Management EstimatesOur consolidated financial statements are prepared in accordance with U.S. Generally Accepted Accounting Principles, or GAAP. In connection with thepreparation of our consolidated financial statements, we are required to make assumptions and estimates about future events, and apply judgments that affectthe reported amounts of assets, liabilities, revenue, expenses and the related disclosures. We base our assumptions, estimates and judgments on historicalexperience, current trends and other factors that management believes to be relevant at the time our consolidated financial statements are prepared. On a regularbasis, we review the accounting policies, assumptions, estimates and judgments to ensure that our consolidated financial statements are presented fairly and inaccordance with GAAP. However, because future events and their effects cannot be determined with certainty, actual results could differ from our assumptionsand estimates, and such differences could be material.Our significant accounting policies are discussed in note 1 of the notes to our consolidated financial statements. We believe that the following accountingestimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require our most difficult, subjective orcomplex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. We have reviewed these criticalaccounting estimates and related disclosures with our audit committee.Revenue RecognitionOur products are fully functional at the time of shipment and do not require production, modification or customization. We recognize revenue fromproduct sales when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collection is reasonably assured.Our fee is considered fixed or determinable at the execution of an agreement, based on specific products and quantities to be delivered at specified prices, whichis evidenced by a customer purchase order or other persuasive evidence of an arrangement. Our agreements with non-distributor customers do not includerights of return or acceptance provisions. Product revenue is recognized upon shipment of product to end customers.Approximately 21% of our sales were made through distributors in 2010. Sales to distributors are included in deferred revenue and we include the relatedcosts in inventory until sales and delivery to the end customers occurs. Two distributor arrangements, which together accounted for 11% of our total revenuein 2010, allow for limited price protection and rights of stock rotation on product unsold by the distributors. The price protection rights allow distributors theright to a credit in the event of declines in the price of our product that they hold prior to the sale to a specific end customer. In the event that we reduce theselling price of products held by distributors, deferred revenue related to distributors with price protection rights is reduced upon notification to the customer ofthe price change. Stock rotation in the two distributor arrangements is limited to returns for exchange only for a small percentage of product (5%-10%)purchased over a limited period of time (during the immediately prior three to nine months). Other than these two arrangements, no other customerarrangements include any rights of return or acceptance provisions. There were no material product returns or price protection credits in 2010, 2009 and 2008.Revenue recognition on product sales through distributors is highly dependent on receiving pertinent and accurate data from our distributors in a timelyfashion. Distributors provide us periodic data prior to the release of our consolidated financial statements regarding the product, price, quantity and endcustomer when products are resold, as well as the quantities of our products they still have in stock.We have not experienced any significant sales returns from end customers due to our stringent quality control standards. We monitor collectability ofaccounts receivable primarily through review of the accounts receivable aging. Our policy is to record an allowance for doubtful accounts based on specificcollection issues we have identified, aging of underlying receivables and historical experience of uncollectible balances. As of December 31, 2010 and 2009,our allowance for doubtful accounts was $68,000.We have not made any material changes in the accounting methodology we use to record the allowance for doubtful accounts during the past three years.If actual results are not consistent with the assumptions and estimates used, for example, if the financial condition of the customer deteriorated, we may berequired to record additional expense that could materially negatively impact our operating results. To date, however, substantially all of our receivables havebeen collected within the credit term of 30 to 45 days.Inventory ValuationWe value our inventory, which includes materials, labor and overhead, at the lower of cost or market. Cost is computed using standard cost, whichapproximates actual cost, on a first-in, first-out basis. We periodically write-down our inventory to the lower of cost or market based on our estimates thatconsider historical usage and future demand. These factors are impacted by market and economic conditions, technology changes, new product introductionsand changes in strategic direction. The calculation of our inventory valuation requires management to make assumptions and to apply judgment regardingforecasted customer demand and 33 Table of Contentstechnological obsolescence that may turn out to be inaccurate. Inventory valuation reserves were $1,372,000, $916,000 and $938,000, as of December 31,2010, 2009 and 2008, respectively. Inventory valuation reserves, once established, are not reversed until the related inventory has been sold or scrapped.We have not made any material changes in the accounting methodology we use to record inventory reserves during the past three years. We do not believethere is a reasonable likelihood that there will be a material change in the future estimates or assumptions that we use to calculate our inventory reserve.However, if estimates regarding customer demand are inaccurate or changes in technology affect demand for certain products in an unforeseen manner, wemay be exposed to losses or gains that could be material.Product WarrantyOur products are under warranty against defects in material and workmanship generally for a period of one or two years. We accrue for estimatedwarranty cost at the time of sale based on anticipated warranty claims and actual historical warranty claims experience including knowledge of specificproduct failures that are outside of our typical experience. The warranty obligation is determined based on product failure rates, cost of replacement and failureanalysis cost. We monitor product returns for warranty-related matters and monitor an accrual for the related warranty expense based on historical experience.Our warranty obligation requires management to make assumptions regarding failure rates and failure analysis costs. If actual warranty costs differsignificantly from these estimates, adjustments may be required in the future, which would adversely affect our gross margins and operating results. Thewarranty liability as of December 31, 2010 and 2009, were $602,000 and $450,000, respectively, and was immaterial in 2008.In September 2010, we were informed of a claim related to repair and replacement costs in connection with shipments of over 4,000 integrated circuitsmade by us during the summer and fall of 2009. Of these shipments, approximately 4% were later confirmed or suspected to have random manufacturingprocess anomalies in the wafer die in the product. These anomalies made the circuitry of a small number of random die per foundry wafer susceptible tofailure under certain customer specific system operating conditions. At the time of shipment in 2009 and early 2010, we established an initial warranty reserveand added to that accrual as the problem was identified and reliable information became available. The foundry who produced the wafers has informed us thatthe random anomalies are normal in a Gallium Arsenide, or GaAs, manufacturing process.In March 2010, we developed additional tests to screen out the wafer die that might be susceptible to this type of failure and resumed shipments to thecustomer with no subsequent additional reported incidents. Based on our standard warranty provisions, we have provided replacement parts to the customerfor the known and suspected failures that had occurred.In addition and without informing us, in the fall of 2009 the customer instituted its own larger scale replacement program that covered the replacement ofentire subassemblies in which our product was only one component. In September 2010, the customer made an initial claim for approximately $18 millionagainst us for the costs incurred relative to that program. We believe the amount of the claim is without merit as our warranty liability is contractually limitedto the repair or replacement of our affected products, which to the extent the customer has requested replacement, has already been completed. A formal claimhas yet to be made and discussions with the customer are ongoing. At this time, we believe our current warranty reserves are adequate to address the matter andthat our obligations under our standard warranty provisions have been fulfilled. However, claims of this nature are subject to various risks and uncertaintiesand there can be no assurance that this matter will be resolved without further significant costs to us, including the potential for arbitration or litigation. If andwhen the amount of any additional loss, if any, becomes both probable and determinable, we may be required to record an incremental reserve. We currentlyexpect to continue to do business with this customer for both current and future products.Goodwill and Purchased Intangible Assets.Goodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired net tangibleand intangible assets. The amounts and useful lives assigned to intangible assets acquired, other than goodwill, impact the amount and timing of futureamortization. The value of our intangible assets, including goodwill, could be impacted by future adverse changes such as: (a) any future declines in ouroperating results, (b) a decline in the valuation of technology company stocks, including the valuation of our common stock, (c) a further significantslowdown in the worldwide economy or the semiconductor industry, (d) any failure to meet the performance projections included in our forecasts of futureoperating results or (e) the abandonment of any of our acquired in-process research and development projects. We evaluate goodwill and purchased intangibleassets deemed to have indefinite lives, on an annual basis in the fourth quarter or more frequently if we believe indicators of impairment exist. Significantmanagement judgment is required in performing periodic impairment tests. The testing for a potential impairment of goodwill involves a two-step process. Thefirst step involves comparing the estimated fair values of our reporting units with their respective book values, including goodwill. If the estimated fair valueexceeds book value, goodwill is considered not to be impaired and no additional steps are necessary. If, however, the fair value of the reporting unit is less thanbook value, then the carrying amount of the goodwill is compared with its implied fair value. The estimate of implied fair value of goodwill may requirevaluations of certain internally generated and unrecognized intangible assets such as our technology, customer 34 Table of Contentsrelationships, patents and trademarks. If the carrying amount of goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized inan amount equal to the excess. If our actual results, or the plans and estimates used in future impairment analyses, are lower than the original estimates used toassess the recoverability of these assets, we could incur additional impairment charges. On June 30, 2010, we acquired all of the outstanding shares ofWinyatek Technology Inc. for which we recorded goodwill and identifiable intangible assets of $5,281,000 and $1,640,000, respectively. See note 2 to thenotes to our consolidated financial statements.Stock-Based CompensationEffective January 1, 2006, we adopted authoritative guidance for stock-based compensation which requires the measurement and recognition ofcompensation expense for all share-based payment awards made to employees and directors based on the grant date fair values of the awards. The fair value isestimated using the Black-Scholes option pricing model. The value of the award that is ultimately expected to vest is recognized as expense over the requisiteservice periods in our consolidated statements of operations. We elected to treat share-based payment awards with graded vesting schedules and time-basedservice conditions as a single award and recognize stock-based compensation expense on a straight-line basis (net of estimated forfeitures) over the requisiteservice period. Stock-based compensation expenses are classified in the statement of operations based on the department to which the related employee reports.We account for stock options issued to non-employees in accordance with the guidance for equity-based payments to non-employees. Stock optionawards to non-employees are accounted for at fair value using the Black-Scholes option pricing model. Our management believes that the fair value of stockoptions is more reliably measured than the fair value of the services received. The fair value of the unvested portion of the options granted to non-employees isre-measured each period. The resulting increase in value, if any, is recognized as expense during the period the related services are rendered.The Black-Scholes option pricing model requires management to make assumptions and to apply judgment in determining the fair value of our awards.The most significant assumptions and judgments include estimating the fair value of underlying stock, expected volatility and expected term. In addition, therecognition of stock-based compensation expense is impacted by estimated forfeiture rates.We estimated the expected volatility from the historical volatilities of several unrelated public companies within the semiconductor industry because ourcommon stock has no trading history. When selecting the public companies used in the volatility calculation, we selected companies in the semiconductorindustry with comparable characteristics to us, including stage of development, lines of business, market capitalization, revenue and financial leverage. Theweighted average expected life of options was calculated using the simplified method of prescribed guidance provided by the SEC. This decision was based onthe lack of relevant historical data due to our limited experience and the lack of active market for our common stock. The risk-free interest rate is based on theU.S. Treasury yields in effect at the time of grant for periods corresponding to the expected term of the options. The expected dividend rate is zero based on thefact that we have not historically paid dividends and have no intention to pay cash dividends in the foreseeable future. The forfeiture rate is established basedon the historical average period of time that options were outstanding and adjusted for expected changes in future exercise patterns.We do not believe there is a reasonable likelihood that there will be material changes in the estimates and assumptions we use to determine stock-basedcompensation expense. In the future, if we determine that other option valuation models are more reasonable, the stock-based compensation expense that werecord in the future may differ significantly from what we have recorded using the Black-Scholes option pricing model.Income TaxesDeferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws that will be in effect when and where the differences are expected to reverse. We record a valuation allowance toreduce deferred tax assets to the amount that we believe is more likely than not to be realized. In assessing the need for a valuation allowance, we consideredhistorical levels of income, projections of future income, expectations and risk associated with estimates of future taxable income and ongoing prudent andpractical tax planning strategies. To the extent that we believe it is more likely than not that some portion of our deferred tax assets will not be realized, wewould increase the valuation allowance against deferred tax assets. Although, we believe that the judgment we used is reasonable, actual results can differ dueto a change in market conditions, changes in tax laws and other factors.From inception through 2008, we incurred annual losses, and accordingly, we determined that a valuation allowance should be recorded against all ofour deferred tax assets. We considered future taxable income and prudent and feasible tax planning strategies in determining the need for a valuation allowanceand evaluated the need for a valuation allowance on a regular basis. The determination of recording or releasing a tax valuation allowance is made, in part,pursuant to an assessment performed by management regarding the likelihood that we will generate sufficient future taxable income against which the benefitsof our deferred tax assets may or may not be realized. This assessment requires management to exercise significant judgment and make estimates with respectto our ability 35 Table of Contentsto generate revenue, gross profits, operating income and taxable income in future periods. Among other factors, management must make assumptions regardingcurrent and projected overall business and semiconductor industry conditions, operating efficiencies, our ability to timely develop, introduce and consistentlymanufacture new products to meet our customers’ needs and specifications, our ability to adapt to technological changes and the competitive environment,which may impact our ability to generate taxable income and, in turn, realize the value of our deferred tax assets. Significant cumulative operating losses in2008 and prior years, uncertainty with respect to the acceptance of our products by end customers and significant economic uncertainties in the market madeour ability to project future taxable income highly uncertain and volatile at December 31, 2009. Although 2009 was our first profitable year, only the last threequarters of the year were profitable and the vast majority of our pre-tax income was generated in the last two quarters of the year. Based upon management’sassessment of all available evidence, including a relatively short period of recent profitability coupled with significant uncertainties associated with our 2010business outlook, we concluded, as of December 31, 2009, that it was not more likely than not that our net deferred tax assets would be realized. See note 7 ofthe notes to our consolidated financial statements.In March 2010, we received our first substantial quantity of production orders for a new low voltage product, product number INSSTE32882LV-GS02,or the GS02 product, which was a new low voltage version of our integrated PLL and register buffer. This new low voltage product was widely expected in themarket to be significant and is expected to begin shipping in high volumes for both us and our competitors with a new Intel platform in the second half of2010. This GS02 product has been launched and is currently in full commercial production and is shipping in commercial volume. The arrival of theseproduction orders from one of our largest customers reduced concerns and increased our confidence in the strength of our business outlook for the balance of2010. In addition, certain other new product introductions began to gain traction with customers, providing additional confidence in our longer term outlook.We also achieved further clarity around certain contingencies related to ongoing litigation and certain other product acceptance concerns that existed atDecember 31, 2009. Furthermore, during the first quarter of 2010, we unexpectedly received additional orders for an older product that allowed us to exceed theoverall plan for the quarter and continue our recent trend of profitability into the first quarter of 2010. At its April 30, 2010 meeting, based on a review of thepositive developments that materialized in the first quarter of 2010, our board of directors decided to authorize management to retain investment bankers andproceed with plans to pursue a potential initial public offering. Based on these positive developments and an additional quarter of profitable operation, wereassessed the need for a valuation allowance at March 31, 2010 and concluded that a change in circumstances had occurred. Management determined that,based on our prospects and business outlook, it was then reasonable to conclude that it is more likely than not that our deferred tax assets will be realized.Accordingly, we released the full valuation allowance recorded against our deferred tax assets based on the weight of positive evidence that existed at March 31,2010. Significant judgment is required to determine the timing and extent of a valuation allowance release and our ability to utilize deferred tax assets willcontinue to be dependent on our ability to generate sufficient taxable income in future periods.In accordance with FASBs guidance on Accounting for Uncertainty in Income Taxes, we perform a comprehensive review of uncertain tax positionsregularly. The guidance prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax positiontaken, or expected to be taken, in a tax return. We determine the tax liability for uncertain tax positions based on a two-step process. The first step is todetermine whether it is more likely than not based on technical merits that each income tax position would be sustained upon examination. The second step isto measure the tax benefit as the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement with a tax authority that hasfull knowledge of all relevant information. The assessment of each tax position requires significant judgment and estimates. We believe our tax return positionsare fully supported, but tax authorities could challenge certain positions, which may not be fully sustained. All tax positions are periodically analyzed andadjusted as a result of events, such as the resolution of tax audits, issuance of new regulations or new case law, negotiations with tax authorities, andexpiration of statutes of limitations.Results of Operations and Key Operating MetricsThe following describes the line items in the statements of operations, which we consider to be our key operating metrics.Revenue. We generate revenue from sales of our semiconductor products to end customers. A portion of our products is sold indirectly to customersthrough distributors.We design and develop high-speed analog semiconductor solutions for the communications and computing markets. Our revenue is driven by varioustrends in these markets. These trends include the deployment and broader market adoption of next generation 40G and 100G technologies in communicationsand enterprise networks, the timing of next generation network and enterprise server upgrades in different geographic locations worldwide, the introduction andbroader market adoption of next generation server platforms such as Intel’s Nehalem-based platform, and the deployment of high-speed memory interfaces inserver and computing platforms.Our revenue is also impacted by changes in the number and average selling prices of our semiconductor products. Our products are typicallycharacterized by a life cycle that begins with higher average selling prices and lower volumes, followed by broader market adoption, higher volumes, andaverage selling prices that are lower than initial levels. 36 Table of ContentsWe operate in industries characterized by rapidly changing technologies and industry standards as well as technological obsolescence. Our revenuegrowth is dependent on our ability to continually develop and introduce new products to meet the changing technology and performance requirements of ourcustomers, diversify our revenue base and generate new revenue to replace, or build upon, the success of previously introduced products which may berapidly maturing. As a result, our revenue is impacted to a more significant extent by product life cycles for a variety of products and to a much lesser extent,if any, by any single product. In 2008, there were no products that represented more than 10% of our total revenue. In 2009, we successfully introduced andbegan to ship a new product in production which integrated a new PLL, along with a new register buffer. Sales of this newly introduced part comprised 18%and 43% of our total revenue in 2010 and 2009, respectively. In 2010, this product has matured. As a result, sales of this product in 2010 declined in volume.We currently expect that by 2011 the new product introduced in 2009 will no longer be material to our total revenue. In 2010, we also began to ship inproduction volume a new “low voltage” version of our integrated PLL and register buffer, which is shipping in the form of product number INSSTE32882LV-GS02, or the GS02 product. Sales of the GS02 product comprised 32% of our total revenue in 2010. In 2011, we expect that revenue from sales of GS02 willcontinue to be significant.The following table is based on the geographic location to which our product is initially shipped. In most cases this will differ from the ultimate locationof the end user of a product containing our technology. For sales to our distributors, their geographic location may be different from the geographic locations ofthe ultimate end customer. Sales by geography for the periods indicated were: Year Ended December 31, 2010 2009 2008 (in thousands) Korea $14,319 $18,307 $15,147 United States 13,528 10,727 12,265 China 29,238 9,924 2,258 Japan 6,557 5,688 5,903 Taiwan 6,838 5,687 1,544 Other 12,713 8,519 5,837 $83,193 $58,852 $42,954 In 2009, we were shipping products to a customer in Korea. However, in 2010, this customer requested to ship majority of the products to their facilityin China, which resulted in a significant shift in revenue between China and Korea.Cost of revenue. Cost of revenue includes cost of materials such as wafers processed by third-party foundries, costs associated with packaging andassembly, test and shipping, cost of personnel, including stock-based compensation, as well as equipment associated with manufacturing support, logisticsand quality assurance, warranty costs, write down of inventories, amortization of production mask costs, overhead and other indirect costs, such as allocatedoccupancy and information technology, or IT, costs.As some semiconductor products mature and unit volumes increase, their average selling prices may decline. These declines are often paired withimprovements in manufacturing yields and lower wafer, assembly and test costs, which offset some of the margin reduction that results from lower prices.However, our gross profit, period over period, may fluctuate as a result of changes in average selling prices due to new product introductions or existingproduct transitions into larger scale commercial volumes, manufacturing costs as well as our product mix.Research and development. Research and development expense includes personnel-related expenses, including salaries, stock-based compensation andemployee benefits. It also includes pre-production engineering mask costs, software license expenses, prototype wafer, packaging and test costs, design anddevelopment costs, testing and evaluation costs, depreciation expense and other indirect costs. All research and development costs are expensed as incurred. Weexpect research and development expense to increase as a result of the establishment of a design center in the United Kingdom and our acquisition of WinyatekTechnology Inc. In addition, we expect research and development expense to increase in absolute dollars as we continue to invest resources to develop moreproducts and enhance our existing product portfolio.Sales and marketing. Sales and marketing expense consists primarily of salaries, stock-based compensation, employee benefits, travel, promotions,trade shows, marketing and customer support, commission payments to employees, depreciation expense and other indirect costs. We expect sales andmarketing expense to increase in absolute dollars to support the growth of our business and promote our products to current and potential customers.General and administrative. General and administrative expense consists primarily of salaries, stock-based compensation, employee benefits andexpenses for executive management, legal, finance and human resources. In addition, general and administrative expenses include fees for professional servicesand other indirect costs. We expect general and administrative expense 37 Table of Contentsto increase in absolute dollars due to the general growth of our business and the costs associated with becoming a public company for, among other things,SEC reporting and compliance, including compliance with the Sarbanes-Oxley Act of 2002, director fees, insurance, transfer agent fees and similar expenses.Provision (benefit) for income taxes. In each period since our inception to December 31, 2009, we have recorded a valuation allowance for the fullamount of our deferred tax asset, as the realization of the full amount of our deferred tax asset was uncertain. Therefore, no deferred tax expense or benefit wasrecognized in the consolidated financial statements. In 2009, a provision for current income tax was recorded primarily due to our inability to use net operatingloss carryforwards for state tax purposes in California and alternative minimum tax for federal tax purposes. For the year ended December 31, 2010, werecorded a net tax benefit of $14.2 million, which reflects an effective tax rate benefit of 120%. The effective tax rate benefit of 120% differs from the statutoryrate of 35% primarily due to a release of our deferred tax valuation allowance and, to a lesser extent, foreign income taxes provided at lower rates, geographicmix in profitability and recognition of federal research and development credits. In 2011, we expect the effective tax rate to be lower than 35% due to foreignoperations subject to lower tax rates.The following table sets forth a summary of our statement of operations for the periods indicated: Year Ended December 31, 2010 2009 2008 (in thousands) Total revenue $83,193 $58,852 $42,954 Cost of revenue 29,438 21,269 19,249 Gross profit 53,755 37,583 23,705 Operating expense: Research and development 23,781 17,847 17,501 Sales and marketing 8,823 7,704 6,339 General and administrative 9,212 3,947 3,169 Total operating expenses 41,816 29,498 27,009 Income (loss) from operations 11,939 8,085 (3,304) Other income (expense) (50) 73 (124) Income (loss) before income taxes 11,889 8,158 (3,428) Provision (benefit) for income taxes (14,242) 829 — Net income (loss) $26,131 $7,329 $(3,428) The following table sets forth a summary of our statement of operations as a percentage of each line item to the revenue: Year Ended December 31, 2010 2009 2008 Total revenue 100% 100% 100% Cost of revenue 35 36 45 Gross profit 65 64 55 Operating expense: Research and development 29 30 41 Sales and marketing 11 13 15 General and administrative 11 7 7 Total operating expenses 51 50 63 Income (loss) from operations 14 14 (8) Other income (expense) — — — Income (loss) before income taxes 14 14 (8) Provision (benefit) for income taxes (17) 2 — Net income (loss) 31% 12% (8)% 38 Table of ContentsComparison of the Years Ended December 31, 2010, 2009 and 2008Revenue Year Ended December 31, Change 2010 2009 2010 2009 2008 Amount % Amount % (dollars in thousands) Total revenue $83,193 $58,852 $42,954 $24,341 41% $15,898 37% Total revenue for the year ended December 31, 2010 increased by $24.3 million due to a 66% increase in the number of units sold, partially offset by adecrease in average selling price of 15%. The increase in unit volumes was a result of a wider acceptance of our products and technology in new serverplatforms, such as Intel’s Nehalem-based platform servers. This increase was partially offset by a year-over-year decrease in average selling price of certainproducts of approximately 15%. Our average selling price decreased primarily as a result change in product mix.Total revenue for the year ended December 31, 2009 increased by $15.9 million due to a combination of a 7% increase in the number of units sold andan increase in average selling price of 29%, primarily due to changes in product mix. The increase in revenue was primarily driven by the increased adoptionof high-speed memory interfaces by our end customers.Cost of Revenue and Gross Profit Year Ended December 31, Change 2010 2009 2010 2009 2008 Amount % Amount % (dollars in thousands) Cost of revenue $29,438 $21,269 $19,249 $8,169 38% $2,020 10% Gross profit 53,755 37,583 23,705 16,172 43% 13,878 59% Gross profit as a percentage of revenue 65% 64% 55% — 1% — 9% Cost of revenue and gross profit for the year ended December 31, 2010 increased by $8.2 million and $16.2 million, respectively, compared to the prioryear primarily due to an increase in the number of units purchased by customers consistent with the overall increase in revenue. Product costs as a percentageof revenue were relatively unchanged compared to the prior year.Cost of revenue in 2009 increased by $2.0 million as a result of an increase in the number of units sold in 2009, compared to 2008 specifically for ourhigh-speed memory interface products. Gross profit and gross profit as a percentage of revenue increased in 2009 relative to 2008 primarily because of a shiftin product mix to newer higher margin products shipping in volume.Research and Development Year Ended December 31, Change 2010 2009 2010 2009 2008 Amount % Amount % (dollars in thousands) Research and development $23,781 $17,847 $17,501 $5,934 33% $346 2% Research and development expense for the year ended December 31, 2010 increased by $5.9 million due to the increase in research and developmentheadcount, establishment of a design center in United Kingdom and the acquisition of Winyatek Technology Inc., which together resulted in a $3.7 millionincrease in personnel costs and stock-based compensation expense, a $0.7 million increase in pre-production engineering mask costs and packagingdevelopment expense and engineering software expense of $0.2 million. The increase in personnel and development expense was primarily driven by ourstrategy to expand our product offerings and enhance our existing products. Specifically, we accelerated the development of our products for next generationcommunications networks and high-speed memory interfaces. In addition, rent expense increased by $0.2 million due to new building leases for two offices inCalifornia.Research and development expense for the year ended December 31, 2009 increased by $0.3 million primarily due to continued product enhancementsinitiatives. Specifically, the increase is related to pre-production engineering mask costs of $0.3 million and additional personnel costs, including stock-basedcompensation of $0.2 million. These increases were partially offset by a reduction in recruiting expenses by $0.2 million due to payment of fees to an outsiderecruitment company for new employees hired in 2008. 39 Table of ContentsSales and Marketing Change Year Ended December 31, 2010 2009 2010 2009 2008 Amount % Amount % (dollars in thousands) Sales and marketing $8,823 $7,704 $6,339 $1,119 15% $1,365 22% Sales and marketing expense for the year ended December 31, 2010 increased by $1.1 million primarily due to an increase in personnel costs, includingstock-based compensation expense, to support the increased sales activities.Sales and marketing expense for the year ended December 31, 2009 increased by $1.4 million from 2008 primarily due to an increase in sales activities.Personnel costs, including stock-based compensation expense increased by $0.2 million and commission expense increased by $0.5 million. In addition,marketing expenses increased by $0.3 million.General and Administrative Year Ended December 31, Change 2010 2009 2010 2009 2008 Amount % Amount % (dollars in thousands) General and administrative $9,212 $3,947 $3,169 $5,265 133% $778 25% General and administrative expenses for the year ended December 31, 2010 increased by $5.3 million primarily due to third-party professional fees andpersonnel costs. Outside legal fees increased by $1.8 million related primarily to litigation matters described in note 15 of the notes to our consolidatedfinancial statements. Accounting and consulting fees increased by $0.8 million due to expenses incurred for our 2009 audit and quarterly reviews and theestablishment of our subsidiary in Singapore. Other professional fees increased by $0.4 million for consulting services in information technology and humanresource functions. General and administrative headcount increased, resulting in a $1.4 million increase in personnel costs and stock-based compensationexpense.General and administrative expense for the year ended December 31, 2009 increased compared to 2008 due to additional personnel costs of $0.6 millionwhich consist of salaries of new employees, stock-based compensation and incentive pay.Provision (benefit) for Income Taxes Year Ended December 31, Change 2008 2009 2010 2009 2008 Amount % Amount % (dollars in thousands) Provision (benefit) for income taxes $(14,242) $829 $— $(15,071) N/M $829 N/M The income tax benefit of $14.2 million for the year ended December 31, 2010 reflects an effective tax rate benefit of 120%. The effective tax rate benefitof 120% for the year ended December 31, 2010 differs from the statutory rate of 35% primarily due to a release of our deferred tax valuation allowance $24million and, to a lesser extent, foreign income taxes provided at lower rates, geographic mix in profitability and recognition of federal research and developmentcredits.The provision for income taxes in 2009 consisted of state income taxes recorded due to our inability to use net operating loss carryforwards for state taxpurposes in California and federal income taxes related to alternative minimum tax.During 2008, we did not record a provision for income tax primarily due to net losses realized and a full valuation allowance on our deferred tax assets.Liquidity and Capital ResourcesWe have historically financed our operating activities and capital expenditures primarily through proceeds from the issuances of capital stock. Weachieved profitability on an annual basis beginning in 2009 and on a quarterly basis in the second quarter of 2009. We have funded our operating activitiesand capital expenditures primarily through cash generated from operations since 2009. As of December 31, 2010, we had cash and cash equivalents of $110.2million.Our primary uses of cash are to fund operating expenses, purchase inventory and acquire property and equipment. Cash used to fund operatingexpenses is impacted by the timing of when we pay these expenses, as reflected in the changes in our outstanding accounts payable and accrued expenses. Ourprimary sources of cash are cash receipts on accounts receivable from our revenue. Aside 40 Table of Contentsfrom the growth in amounts billed to our customers, net cash collections of accounts receivable are impacted by the efficiency of our cash collections process,which can vary from period to period, depending on the payment cycles of our major customers.The following table summarizes our cash flows for the periods indicated: Years Ended December 31, 2010 2009 2008 (in thousands) Net cash provided by operating activities $12,361 $9,849 $1,377 Net cash used in investing activities (7,664) (556) (2,478) Net cash provided by financing activities 86,365 716 6,885 Effect of currency exchange rate on cash 49 — — Net increase in cash and cash equivalents $91,111 $10,009 $5,784 Net Cash Provided by Operating ActivitiesNet cash provided by operating activities in 2010 primarily reflected net income of $26.1 million, increases to accounts payable and accrued expensesof $1.3 million, depreciation and amortization of $1.8 million and stock-based compensation of $2.7 million offset by increases in inventory of $0.6 million,accounts receivable of $1.9 million, deferred income taxes and deferred charge of $16.1 million and decrease in income tax payable of $1.4 million. Ouraccounts payable and accrued expenses increased as a result of increased production volumes. Our inventories increased as a result of growing production forimmediate delivery to customers in the first quarter of 2011, and accounts receivable increased as a result of increased shipments.Net cash provided by operating activities in 2009 primarily reflected net income of $7.3 million, increases to accounts payable of $1.4 million, accruedexpense of $1.1 million and deferred revenue of $1.6 million, depreciation of $1.3 million and stock-based compensation of $1.2 million. These were offsetby an increase in receivables of $4.6 million. Our accounts payable and accrued expenses increased in 2009 to support our increased production volumes andoverall operational growth. Our deferred revenue increased due to payments received from customers for future shipments. Our accounts receivable increasedas a result of significantly higher product shipments in the fourth quarter of 2009 to meet customer demand.Net cash provided by operating activities in 2008 primarily reflected the decline in receivables and inventory of $1.8 million and $0.6 million,respectively, increases to accrued expenses by $0.5 million and deferred revenue by $0.4 million, depreciation of $1.4 million and stock-based compensationof $1 million. These were partially offset by a net loss of $3.4 million and a decrease in accounts payable of $1.2 million. Receivables decreased due toimproved collection efforts. Inventory decreased due to increased shipment of products to customers. The decrease in accounts payable was due to the timingof payments of vendors as a result of purchasing activities.Net Cash Used in Investing ActivitiesIn 2010, net cash used in investing activities consisted of net cash used to acquire all of the outstanding shares of Winyatek Technology Inc. of $2.5million and purchases of property, equipment of $5.2 million, of which $1.9 million was invested in leasehold improvements, including new laboratories, inconnection with our move to our new facilities.Net cash used in investing activities during the years ended December 31, 2009 and 2008 consisted of purchases of property and equipment of $0.6million and $2.5 million, respectively.Net Cash Provided by Financing ActivitiesNet cash provided by financing activities in 2010 consisted primarily of $85.7 million net proceeds from the sale of common stock in our initial publicoffering, the proceeds from the exercise of stock options of $0.5 million and the excess tax benefit related to stock-based payment of $0.2 million.Net cash provided by financing activities in 2009 consisted primarily of $0.7 million in proceeds from the exercise of stock options.Net cash provided by financing activities in 2008 consisted of net proceeds of $9.9 million from our sale of Series E preferred stock and $0.6 millionof net proceeds from the exercise of stock options, offset by the repayment on our line of credit of $3.7 million. 41 Table of ContentsOperating and Capital Expenditure RequirementsOur principal source of liquidity as of December 31, 2010 consisted of $110.2 million of cash and cash equivalents. Based on our current operatingplan, we believe that our existing cash and cash equivalents from operations will be sufficient to finance our operational cash needs through at least the next 12to 18 months. In the future, we expect our operating and capital expenditures to increase as we increase headcount, expand our business activities and grow ourend customer base which will result in higher needs for working capital. Our ability to generate cash from operations is also subject to substantial risksdescribed in “Item 1A. Risk Factors.” If any of these risks occur, we may be unable to generate or sustain positive cash flow from operating activities. Wewould then be required to use existing cash and cash equivalents to support our working capital and other cash requirements. If additional funds are requiredto support our working capital requirements, acquisitions or other purposes, we may seek to raise funds through debt financing or from other sources. If weraise additional funds through the issuance of equity or convertible debt securities, the percentage ownership of our stockholders could be significantlydiluted, and these newly-issued securities may have rights, preferences or privileges senior to those of existing stockholders. If we raise additional funds byobtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that couldimpair our operating flexibility, and would also require us to incur interest expense. We can provide no assurance that additional financing will be available atall or, if available, that we would be able to obtain additional financing on terms favorable to us.Contractual Obligations, Commitments and ContingenciesThe following table summarizes our outstanding contractual obligations as of December 31, 2010: Payments due by period Total LessThan1 Year 1-3Years 3-5Years MoreThan5 Years (in thousands) Operating lease obligations $10,801 $3,726 $4,145 $2,194 $736 As of December 31, 2010, we had noncancelable purchase obligations consisting primarily of research and development contracts and commitments topurchase services of $0.9 million, which are payable in 2011 for $0.7 million and in 2012 for $0.2 million.As of December 31, 2010, we recorded a liability for our uncertain tax position of $1.0 million. We are unable to reasonably estimate the timing ofpayments in individual years due to uncertainties in the timing of the effective settlement of tax positions.Off-Balance Sheet ArrangementsSince our inception, we have not engaged in any off-balance sheet arrangements, such as the use of structured finance, special purpose entities orvariable interest entities.Recent Authoritative Accounting GuidanceSee note 1 of the notes to our consolidated financial statements for information regarding recently issued accounting pronouncements. ITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKInterest Rate SensitivityWe had cash and cash equivalents of $110.2 million and $19.1 million at December 31, 2010 and 2009, respectively, which was held for workingcapital purposes. We do not enter into investments for trading or speculative purposes. We do not believe that we have any material exposure to changes in thefair value of these investments as a result of changes in interest rates due to their short-term nature. Declines in interest rates, however, will reduce futureinvestment income.Foreign Currency RiskTo date, our international customer and vendor agreements have been denominated almost exclusively in United States dollars. Accordingly, we havelimited exposure to foreign currency exchange rates and do not currently enter into foreign currency hedging transactions. 42 Table of ContentsITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAIndex to Consolidated Financial Statements Report of Independent Registered Public Accounting Firm 44 Consolidated Balance Sheets 45 Consolidated Statements of Operations 46 Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit) 47 Consolidated Statements of Cash Flows 48 Notes to Consolidated Financial Statements 49 43 Table of ContentsReport of Independent Registered Public Accounting FirmTo the board of directors and stockholders of Inphi Corporation:In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of convertible preferred stock andstockholders’ equity (deficit) and of cash flows present fairly, in all material respects, the financial position of Inphi Corporation and its subsidiaries (the“Company”) at December 31, 2010 and 2009, and the results of their operations and their cash flows for each of the three years in the period endedDecember 31, 2010 in conformity with accounting principles generally accepted in the United States of America. These financial statements are theresponsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted ouraudits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used andsignificant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basisfor our opinion./s/ PricewaterhouseCoopers LLPLos Angeles, CaliforniaMarch 4, 2011 44 Table of ContentsInphi CorporationConsolidated Balance Sheets(in thousands, except share and per share amounts) December 31, 2010 2009 Assets Current assets: Cash and cash equivalents $110,172 $19,061 Accounts receivable, net 6,666 4,570 Accounts receivable from related party 3,386 3,411 Inventories 5,095 3,942 Deferred tax assets 1,665 — Income tax receivable 2,214 — Prepaid expenses and other current assets 1,366 374 Total current assets 130,564 31,358 Property and equipment, net 7,206 3,114 Goodwill 5,847 — Identifiable intangible assets 1,624 — Deferred tax assets 6,182 — Deferred tax charge 7,293 — Other assets, net 241 — Total assets $158,957 $34,472 Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit) Current liabilities: Accounts payable $6,692 $4,438 Income tax payable — 444 Deferred revenue 2,647 3,383 Accrued employee expenses 1,749 1,274 Other accrued expenses 1,843 1,248 Other current liabilities 746 516 Total current liabilities 13,677 11,303 Other liabilities 2,594 285 Total liabilities 16,271 11,588 Commitments and contingencies (Note 15) Convertible Preferred Stock: Series A Convertible Preferred Stock, $0.001 par value; 528,858 shares authorized; 518,555 shares issued andoutstanding at December 31, 2009 — 12,016 Series B Redeemable Convertible Preferred Stock, $0.001 par value; 2,926,670 shares authorized; 2,905,783 sharesissued and outstanding at December 31, 2009 — 24,985 Series C Redeemable Convertible Preferred Stock, $0.001 par value; 6,503,902 shares authorized; 6,503,882 sharesissued and outstanding at December 31, 2009 — 18,690 Series D Redeemable Convertible Preferred Stock, $0.001 par value; 3,512,880 shares authorized; 3,509,749 sharesissued and outstanding at December 31, 2009 — 11,989 Series E Redeemable Convertible Preferred Stock, $0.001 par value; 1,045,714 shares authorized; 1,043,731 sharesissued and outstanding at December 31, 2009 — 9,936 Total convertible preferred stock — 77,616 Stockholders’ equity (deficit): Preferred stock, $0.001 par value; 10,000,000 shares authorized; no shares issued — — Common stock, $0.001 par value; 500,000,000 shares authorized; 25,088,122 and, 2,033,542 issued and outstandingat December 31, 2010 and 2009, respectively 25 2 Additional paid-in capital 176,505 6,041 Accumulated deficit (34,644) (60,775) Accumulated other comprehensive income 800 — Total stockholders’ equity (deficit) 142,686 (54,732) Total liabilities, convertible preferred stock and stockholders’ equity (deficit) $158,957 $34,472 The accompanying notes are an integral part of these consolidated financial statements. 45 Table of ContentsInphi CorporationConsolidated Statements of Operations(in thousands, except share and per share amounts) Year Ended December 31, 2010 2009 2008 Revenue $55,253 $37,617 $32,727 Revenue from related party 27,940 21,235 10,227 Total revenue 83,193 58,852 42,954 Cost of revenue 29,438 21,269 19,249 Gross profit 53,755 37,583 23,705 Operating expense: Research and development 23,781 17,847 17,501 Sales and marketing 8,823 7,704 6,339 General and administrative 9,212 3,947 3,169 Total operating expense 41,816 29,498 27,009 Income (loss) from operations 11,939 8,085 (3,304) Other income (expense) (50) 73 (124) Income (loss) before income taxes 11,889 8,158 (3,428) Provision (benefit) for income taxes (14,242) 829 — Net income (loss) $26,131 $7,329 $(3,428) Net income (loss) allocable to common stockholders $5,240 $130 $(3,428) Net income (loss) per share: Basic $1.03 $0.08 $(2.66) Diluted $0.61 $0.05 $(2.66) Weighted-average shares used in computing net income (loss) per share: Basic 5,086,169 1,668,876 1,289,431 Diluted 8,546,537 2,785,277 1,289,431 The accompanying notes are an integral part of these consolidated financial statements. 46 Table of ContentsInphi CorporationConsolidated Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)(in thousands, except share amounts) Series AConvertiblePreferredStock Series BRedeemableConvertiblePreferredStock Series CRedeemableConvertiblePreferredStock Series DRedeemableConvertiblePreferredStock Series ERedeemableConvertiblePreferredStock TotalPreferredStock Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Balance at December 31, 2007 518,555 $12,016 2,905,783 $24,985 6,503,882 $18,690 3,509,749 $11,989 — $— $67,680 Exercise of stock options — — — — — — — — — — — Stock-based compensation expense — — — — — — — — — — — Issuance of preferred stock, net — — — — — — — — 1,043,731 9,936 9,936 Net loss — — — — — — — — — — — Balance at December 31, 2008 518,555 12,016 2,905,783 24,985 6,503,882 18,690 3,509,749 11,989 1,043,731 9,936 77,616 Exercise of stock options — — — — — — — — — — — Stock-based compensation expense — — — — — — — — — — — Net income — — — — — — — — — — — Balance at December 31, 2009 518,555 12,016 2,905,783 24,985 6,503,882 18,690 3,509,749 11,989 1,043,731 9,936 77,616 Exercise of stock options, warrant and restricted stock award grant — — — — — — — — — — — Income tax benefit from stock option exercises — — — — — — — — — — — Stock-based compensation expense — — — — — — — — — — — Issuance of preferred stock — — — — — — — — 313,713 4,538 4,538 Issuance of common stock in connection with initial public offering, net — — — — — — — — — — — Conversion of preferred stock to common stock (518,555) (12,016) (2,905,783) (24,985) (6,503,882) (18,690) (3,509,749) (11,989) (1,357,444) (14,474) (82,154) Conversion of preferred stock warrant to common stock warrant — — — — — — — — — — — Net income — — — — — — — — — — — Currency translation adjustment — — — — — — — — — — — Total comprehensive income — — — — — — — — — — — Balance at December 31, 2010 — $— — $— — $— — $— — $— $— Common Stock AdditionalPaid-inCapital AccumulatedDeficit AccumulatedOtherComprehensiveIncome TotalStockholders’Equity(Deficit) Shares Amount Balance at December 31, 2007 986,056 $1 $2,663 $(64,676) — $(62,012) Exercise of stock options 591,919 1 643 — — 644 Stock-based compensation expense — — 995 — — 995 Issuance of preferred stock, net — — — — — — Net loss — — — (3,428) (3,428) Balance at December 31, 2008 1,577,975 2 4,301 (68,104) — (63,801) Exercise of stock options 455,567 — 575 — — 575 Stock-based compensation expense — — 1,165 — — 1,165 Net income — — — 7,329 — 7,329 Balance at December 31, 2009 2,033,542 2 6,041 (60,775) — (54,732) Exercise of stock options, warrant and restricted stock award grant 439,167 — 584 — — 584 Income tax benefit from stock option exercises — — 216 — — 216 Stock-based compensation expense — — 2,705 — — 2,705 Issuance of preferred stock — — — — — — Issuance of common stock in connection with initial public offering, net 7,820,000 8 84,690 — — 84,698 Conversion of preferred stock to common stock 14,795,413 15 82,139 — — 82,154 Conversion of preferred stock warrant to common stock warrant — — 130 — — 130 Net income — — — 26,131 — 26,131 Currency translation adjustment — — — — 800 800 Total comprehensive income — — — — — 26,931 Balance at December 31, 2010 25,088,122 $25 $176,505 $(34,644) $800 $142,686 The accompanying notes are an integral part of these consolidated financial statements. 47 Table of ContentsInphi CorporationConsolidated Statements of Cash Flows(in thousands) Year Ended December 31, 2010 2009 2008 Cash flows from operating activities Net income (loss) $26,131 $7,329 $(3,428) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 1,820 1,291 1,430 Stock-based compensation 2,705 1,165 995 Deferred income taxes and deferred tax charge (16,054) — — Amortization of deferred tax charge 746 — — Excess tax benefit related to stock-based compensation (216) — — Other noncash items 89 27 51 Changes in assets and liabilities (net of effect of acquisition): Accounts receivable (1,890) (4,588) 1,766 Inventories (627) 143 635 Prepaid expenses and other assets (1,083) (88) 245 Income tax payable/receivable (1,442) 444 — Accounts payable 344 1,413 (1,185) Accrued expenses 965 1,062 492 Deferred revenue (736) 1,605 373 Other liabilities 1,609 46 3 Net cash provided by operating activities 12,361 9,849 1,377 Cash flows from investing activities Purchases of property and equipment (5,165) (560) (2,550) Proceeds from sale of property and equipment — 4 72 Acquisition, net of cash acquired (2,499) — — Net cash used in investing activities (7,664) (556) (2,478) Cash flows from financing activities Repayment of capital lease obligations — (17) (45) Repayment of line of credit — — (3,650) Proceeds from exercise of stock options 485 733 644 Excess tax benefit related to stock-based compensation 216 — — Net proceeds from issuance of preferred stock issuance — — 9,936 Proceeds from initial public offering, net of costs paid 85,664 — — Net cash provided by financing activities 86,365 716 6,885 Effect of currency exchange rates on cash and cash equivalents 49 — — Net increase in cash and cash equivalents 91,111 10,009 5,784 Cash and cash equivalents at beginning of year 19,061 9,052 3,268 Cash and cash equivalents at end of year $110,172 $19,061 $9,052 Supplemental Cash Flow Information Interest paid $— $— $63 Income taxes paid 2,502 381 — Noncash investing and financing activities Acquisition of Winyatek Technology Inc. in exchange for Series E preferred shares $4,538 — — Conversion of preferred stock to common stock 82,154 — — Conversion of preferred stock warrant to common stock warrant 130 — — The accompanying notes are an integral part of these consolidated financial statements. 48 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts)1. Organization and Summary of Significant Accounting PoliciesInphi Corporation (the “Company”), a Delaware corporation, was incorporated in November 2000. The Company is a fabless provider of high-speedanalog semiconductor solutions for the communications and computing markets. The Company’s semiconductor solutions are designed to address bandwidthbottlenecks in networks, maximize throughput and minimize latency in computing environments and enable the rollout of next generation communications andcomputing infrastructures. In addition, the semiconductor solutions provide a vital high-speed interface between analog signals and digital information in high-performance systems such as telecommunications transport systems, enterprise networking equipment, datacenter and enterprise servers, storage platforms,test and measurement equipment and military systems.The Company is subject to certain risks and uncertainties and believes changes in any of the following areas could have a material adverse effect on theCompany’s future financial position or results of operations or cash flows: ability to sustain profitable operations due to history of losses and accumulateddeficit, dependence on limited number of customers for a substantial portion of revenue, product defects, risks related to intellectual property matters, lengthysales cycle and competitive selection process, lengthy and expensive qualification process, ability to develop new or enhance products in a timely manner,market development of and demand for the Company’s products, reliance on third parties to manufacture, assemble and test products and ability to compete.Basis of PresentationThe accompanying financial statements through December 31, 2009 reflect the stand-alone operations of the Company. During the year endedDecember 31, 2010, the Company established subsidiaries in the United Kingdom and Singapore. In addition, on June 30, 2010, the Company completed theacquisition of all of the outstanding shares of Winyatek Technology Inc. (“WTI”). Accordingly, for the year ended December 31, 2010, the financialstatements reflect the consolidated financial position, results of operations and cash flows of the Company. All significant intercompany balances andtransactions have been eliminated in consolidation.Reverse Stock SplitIn October 2010, the Company’s Board of Directors approved a 3-for-7 reverse stock split of the Company’s issued and outstanding shares of commonstock and preferred stock, which was effected on November 3, 2010. All common stock and preferred stock data and stock option plan information have beenadjusted to reflect the split.Initial Public OfferingIn November 2010, the Company completed the initial public offering, or IPO, of its common stock in which it sold and issued 7,820,000 shares ofcommon stock, including 1,020,000 shares related to the exercise of the underwriters’ over-allotment, at an issue price of $12.00 per share. The Companyraised a total of $93.8 million in gross proceeds in the IPO, or approximately $84.7 million in net proceeds after deducting underwriting discounts andcommissions of $6.5 million and other offering costs of $2.6 million. Immediately prior to the closing of the IPO, all shares of the Company’s then-outstanding convertible preferred stock outstanding automatically converted into 14,795,413 shares of common stock and the warrants to purchase preferredstock converted into warrants to purchase common stock.Use of EstimatesThe preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of Americarequires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets andliabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ fromthose estimates.On an ongoing basis, management evaluates its estimates, including those related to (i) the collectibility of accounts receivable; (ii) write down for excessand obsolete inventories; (iii) warranty obligations; (iv) the value assigned to and estimated useful lives of long-lived assets; (v) the realization of tax assets andestimates of tax liabilities and tax reserves; (vi) the valuation of equity securities; (vii) amounts recorded in connection with acquisitions; (viii) recoverabilityof intangible assets and goodwill and (ix) the recognition and disclosure of contingent liabilities. These estimates are based on historical data and experience, aswell as various other factors that management believes to be reasonable under the circumstances, the results of which form the basis for making judgmentsabout the carrying value of assets and liabilities that are not readily apparent from other sources. The Company engages third party valuation specialists toassist with estimates related to the valuation of financial instruments and assets associated with various contractual arrangements, the underlying value ofpreferred and common equity prior to the Company’s IPO and valuation of assets acquired in connection with acquisitions. Such estimates often require theselection of appropriate valuation methodologies and models, and 49 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) significant judgment in evaluating ranges of assumptions and financial inputs. Actual results may differ from those estimates under different assumptions orcircumstances.Foreign Currency TranslationThe Company and its subsidiaries except WTI use the U.S. dollar as its functional currency. Foreign currency assets and liabilities are remeasured intoU.S. dollars at the end-of-period exchange rates except for non-monetary assets and liabilities, which are remeasured at historical exchange rates. Revenue andexpenses are remeasured at the exchange rate in effect during the period the transaction occurred, except for those expenses related to balance sheet amounts,which are remeasured at historical exchange rates. Gains or losses from foreign currency transactions are included in the Consolidated Statements ofOperations as part of “Other income (expense)”. Foreign currency gain or loss in 2010, 2009 and 2008 were not material.The functional currency of WTI is the New Taiwan Dollar. Assets and liabilities of WTI are translated into US dollars at period-end exchange rates.Income, expense, and cash flow items are translated at average exchange rates prevailing during the period. The resulting currency translation adjustment isrecorded as a component of accumulated other comprehensive income within stockholders’ equity.Business CombinationsThe Company accounts for acquisitions of businesses using the purchase method of accounting where the cost is allocated to the underlying net tangibleand intangible assets acquired, based on their respective estimated fair values. The excess of the purchase price over the estimated fair values of the net assetsacquired is recorded as goodwill. Determining the fair value of certain acquired assets and liabilities is subjective in nature and often involves the use ofsignificant estimates and assumptions, including, but not limited to, the selection of appropriate valuation methodology, projected revenues, expenses and cashflows, weighted average cost of capital, discount rates, evaluation of in-process research and development (“IPR&D”), estimates of customer turnover ratesand estimates of terminal values. Acquisitions are included in the Company’s consolidated financial statements as of the date of acquisition.Cash and Cash EquivalentsThe Company considers all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase to be cashequivalents. The Company maintains its cash and cash equivalents with major financial institutions and, at times, such balances with any one financialinstitution may exceed Federal Deposit Insurance Corporation insurance limits. Cash equivalents primarily consist of money market funds.Fair Market Value of Financial InstrumentsThe carrying amount reflected in the balance sheet for cash and cash equivalents, accounts receivable, prepaid and other current assets, accountspayable, accrued expenses and other current liabilities, approximate fair value due to the short-term nature of these financial instruments.InventoriesInventories include materials, labor and overhead and are stated at the lower of cost or market. Cost is computed using standard cost, whichapproximates actual cost, on a first-in, first-out basis. Inventories are reduced for write downs based on periodic reviews for evidence of slow-moving orobsolete parts. The write-down is based on comparison between inventory on hand and estimated future sales for each specific product. Once written down,inventory write downs are not reversed until the inventory is sold or scrapped. Inventory write downs are also established when conditions indicate that the netrealizable value is less than cost due to physical deterioration, obsolescence, changes in price level or other causes. Inventory valuation reserves were $1,372and $916, as of December 31, 2010 and 2009, respectively. 50 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) Property and EquipmentProperty and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization is provided on property andequipment over the estimated useful lives on a straight-line basis. Leasehold improvements are amortized on a straight-line basis over the shorter of theirestimated useful lives or lease terms. Repairs and maintenance are charged to expense as incurred. Useful lives by asset category are as follows: Asset Category YearsOffice equipment 3 yearsSoftware 3 yearsLeasehold improvements Shorter of lease term or estimated useful lifeProduction equipment 2 yearsComputer equipment 5 yearsLab equipment 5 yearsFurniture and fixtures 7 yearsEquipment Under Capital LeasesThe Company leases certain of its equipment under capital lease agreements. The assets and liabilities under capital leases are initially recorded at thefair value of the assets under lease. There were no material capital lease obligations outstanding at December 31, 2010 or 2009.Intangible AssetsIntangible assets represent rights acquired for developed technology, customer relationships and IPR&D in connection with the acquisition of WTI.Intangible assets with finite useful lives are amortized over periods ranging from four to five years using a method that reflects the pattern in which theeconomic benefits of the intangible asset are consumed, or if that pattern cannot be reliably determined, using a straight-line amortization method. AcquiredIPR&D is capitalized and amortization commences upon completion of the underlying projects. If any of the projects are abandoned, the Company would berequired to impair the related IPR&D asset.Impairment of Long-lived Assets and GoodwillLong-lived AssetsThe Company assesses the impairment of long-lived assets, which consist primarily of property and equipment and intangible assets, whenever eventsor changes in circumstances indicate that such assets might be impaired and the carrying value may not be recoverable. Events or changes in circumstancesthat may indicate that an asset is impaired include significant decreases in the market value of an asset, significant underperformance relative to expectedhistorical or projected future results of operations, a change in the extent or manner in which an asset is utilized, significant declines in the estimated fair valueof the overall Company for a sustained period, shifts in technology, loss of key management or personnel, changes in the Company’s operating model orstrategy and competitive forces.If events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable and the expected undiscounted future cashflows attributable to the asset are less than the carrying amount of the asset, an impairment loss equal to the excess of the asset’s carrying value over its fairvalue is recorded. Fair value is determined based on the present value of estimated expected future cash flows using a discount rate commensurate with the riskinvolved, quoted market prices or appraised values, depending on the nature of the assets.GoodwillGoodwill represents the excess of the cost of an acquired entity over the fair value of the acquired net assets. The Company tests goodwill for impairmentannually during the fourth quarter of its fiscal year or when events or circumstances change that would 51 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) indicate that goodwill might be permanently impaired. Events or circumstances which could trigger an impairment review include, but are not limited to asignificant adverse change in legal factors or in the business climate, an adverse action or assessment by a regulator, unanticipated competition, a loss of keypersonnel, significant changes in the manner of the Company’s use of the acquired assets or the strategy for the Company’s overall business, significantnegative industry or economic trends or significant underperformance relative to expected historical or projected future results of operations.The testing for a potential impairment of goodwill involves a two-step process. The first step involves comparing the estimated fair values of theCompany’s reporting units with their respective book values, including goodwill. If the estimated fair value exceeds book value, goodwill is considered not tobe impaired and no additional steps are necessary. If, however, the fair value of the reporting unit is less than book value, then the carrying amount of thegoodwill is compared with its implied fair value. The estimate of implied fair value of goodwill may require valuations of certain internally generated andunrecognized intangible assets such as the Company’s technology, customer relationships, patents and trademarks. If the carrying amount of goodwill exceedsthe implied fair value of that goodwill, an impairment loss is recognized in an amount equal to the excess.Internal Use Software CostsCertain external and internal computer software costs acquired for internal use are capitalized. Training costs and maintenance are expensed as incurred,while upgrades and enhancements are capitalized if it is probable that such expenditures will result in additional functionality. Capitalized costs are includedwithin property and equipment.Revenue RecognitionThe Company’s products are fully functional at the time of shipment and do not require additional production, modification, or customization. TheCompany recognizes revenue when there is persuasive evidence of an arrangement, delivery has occurred, the fee is fixed or determinable, and collection isreasonably assured. The Company’s sales arrangements do not include multiple elements.Product revenue is recognized upon shipment of product to customers, net of accruals for estimated sales returns and allowances, which to date, havenot been significant. However, some of the Company’s sales are made through distributors under arrangements that allow for price protection or rights ofreturn on product unsold by the distributors. Product revenue on sales made through distributors with rights of return or price protection is deferred until thedistributors sell the product to end customers. Sales to distributors are included in deferred revenue and the Company includes the related costs in inventoryuntil sale to the end customers occurs. Price protection rights allow distributors the right to a credit in the event of declines in the price of the Company’sproduct that they hold prior to the sale to an end customer. In the event that the Company reduces the selling price of products held by distributors, deferredrevenue related to distributors with price protection rights is reduced upon notification to the customer of the price change. There were no material productreturns or price declines in 2010, 2009 and 2008. The Company’s sales to direct customers are made primarily pursuant to standard purchase orders fordelivery of products. The Company generally allows customers to cancel or change purchase orders within limited notice periods prior to the scheduledshipment.Cost of RevenueCost of revenue includes cost of materials, such as wafers processed by third-party foundries, cost associated with packaging and assembly, test andshipping, cost of personnel, including stock-based compensation, and equipment associated with manufacturing support, logistics and quality assurance,warranty cost, write down of inventories, amortization of production mask costs, overhead and an allocated portion of occupancy costs.WarrantyThe Company’s products are under warranty against defects in material and workmanship generally for a period of one or two years. The Companyaccrues for estimated warranty cost at the time of sale based on anticipated warranty claims and actual historical warranty claims experience includingknowledge of specific product failures that are outside of the Company’s typical experience. The warranty obligation is determined based on product failurerates, cost of replacement and failure analysis cost. If actual warranty costs differ significantly from these estimates, adjustments may be required in thefuture. As of December 31, 2010 and 2009, the warranty liability was $602 and $450, respectively. 52 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) The following table sets forth changes in warranty accrual included in other accrued expenses in the Company’s consolidated balance sheets: Year EndedDecember 31,2010 Year EndedDecember 31,2009 Beginning balance $450 $— Accruals for warranties 165 450 Settlements (13) — Ending balance $602 $450 In September 2010, the Company was informed of a claim related to repair and replacement costs in connection with shipments of over 4,000 integratedcircuits made by the Company during the summer and fall of 2009. Of these shipments, approximately 4% were later confirmed or suspected to have randommanufacturing process anomalies in the wafer die in the product. These anomalies made the circuitry of a small number of random die per foundry wafersusceptible to failure under certain customer specific system operating conditions. At the time of shipment in 2009 and early 2010, the Company establishedan initial warranty reserve and added to that accrual as the problem was identified and reliable information became available. The foundry who produced thewafers has informed the Company that the random anomalies are normal in a Gallium Arsenide (“GaAs”) manufacturing process.In March 2010, the Company developed additional tests to screen out the wafer die that might be susceptible to this type of failure and resumedshipments to the customer with no subsequent additional reported incidents. Based on its standard warranty provisions, the Company has providedreplacement parts to the customer for the known and suspected failures that had occurred.In addition and without informing the Company, in the fall of 2009 the customer instituted its own larger scale replacement program that covered thereplacement of entire subassemblies in which the Company’s product was only one component. In September 2010, the customer made an initial claim forapproximately $18 million against the Company for the costs incurred relative to that program. Management believes the amount of the claim is without meritas its warranty liability is contractually limited to the repair or replacement of the Company’s affected products, which to the extent the customer has requestedreplacement, has already been completed. A formal claim has yet to be made and discussions with the customer are ongoing. At this time, the Companybelieves its current warranty reserves are adequate to address the matter and that the Company’s obligations under its standard warranty provisions have beenfulfilled. However, claims of this nature are subject to various risks and uncertainties and there can be no assurance that this matter will be resolved withoutfurther significant costs to the Company, including the potential for arbitration or litigation. If and when the amount of any additional loss, if any, becomesboth probable and determinable, the Company may be required to record an incremental reserve. The Company currently expects to continue to do businesswith this customer for both current and future products.Research and Development ExpenseResearch and development expense consists of costs incurred in performing research and development activities including salaries, stock-basedcompensation, employee benefits, occupancy costs, overhead costs and prototype wafer, packaging and test costs. Research and development costs areexpensed as incurred.Sales and Marketing ExpenseSales and marketing expense consists of salaries, stock-based compensation, employee benefits, travel and trade show costs. The Company expensessales and marketing costs as incurred. Advertising expenses for the years ended December 31, 2010, 2009 and 2008 were not material.General and Administrative ExpenseGeneral and administrative expense consists of salaries, stock-based compensation, employee benefits and expenses for executive management, legal,finance and human resources personnel. In addition, general and administrative expense includes fees for professional services and occupancy costs. Thesecosts are expensed as incurred. 53 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) Income TaxesDeferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities, and aremeasured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must also make judgments inevaluating whether deferred tax assets will be recovered from future taxable income. To the extent that it believes that recovery is not likely, the Company mustestablish a valuation allowance. The carrying value of the Company’s net deferred tax asset is based on whether it is more likely than not that the Companywill generate sufficient future taxable income to realize these deferred tax assets. A valuation allowance is established for deferred tax assets which the Companydoes not believe meet the “more likely than not” criteria. The Company’s judgments regarding future taxable income may change over time due to changes inmarket conditions, changes in tax laws, tax planning strategies or other factors. If the Company’s assumptions and consequently its estimates change in thefuture, the valuation allowance the Company has established may be increased or decreased, resulting in a material respective increase or decrease in incometax expense (benefit) and related impact on the Company’s reported net income (loss).In accordance with FASBs guidance on Accounting for Uncertainty in Income Taxes, the Company performs a comprehensive review of uncertain taxpositions regularly. In this regard, an uncertain tax position represents an expected treatment of a tax position taken in a filed tax return, or planned to be takenin a future tax return or claim, which has not been reflected in measuring income tax expense for financial reporting purposes. Until these positions aresustained by the taxing authorities, the Company does not recognize the tax benefits resulting from such positions and reports the tax effects as a liability foruncertain tax positions in our consolidated financial statements. The Company recognizes potential interest and penalties on uncertain tax positions in incometaxes on the consolidated statement of operations.Stock-Based CompensationStock-based compensation for stock option and restricted stock awards issued to the Company’s employees is measured at the grant date based on thefair value of the award and is recognized as expense over the requisite service period, which is the vesting period, on a straight-line basis. The Company usesthe Black-Scholes option-pricing model for valuing stock option awards granted to employees and directors at the grant date. Determining the fair value ofstock option awards at the grant date requires the input of various assumptions, including fair value of the underlying common stock, expected future shareprice volatility, expected term, risk-free interest rate and dividend rate. Changes in these assumptions can materially affect the fair value of the options. TheCompany based its estimate of expected volatility on the estimated volatility of similar entities whose share prices are publicly available. The risk-free interestrate is based on the U.S. Treasury yields in effect at the time of grant for periods corresponding to the expected life of the options. The weighted averageexpected life of options was calculated using the simplified method as prescribed by guidance provided by the Securities and Exchange Commission. Thisdecision was based on the lack of relevant historical data due to the Company’s limited experience and the lack of an active market for the Company’scommon stock. The expected dividend yield is zero because the Company has not historically paid dividends and has no present intention to pay dividends.The Company establishes the estimated forfeiture rates based on historical experience. The value of the portion of the award that is ultimately expected to vestis recognized as expense over the requisite service period which is equal to vesting period.The Company has elected to treat share-based payment awards with graded vesting schedules and time-based service conditions as single awards andrecognizes stock-based compensation expense on a straight-line basis (net of estimated forfeitures) over the requisite service period.The Company recognizes non-employee stock-based compensation expenses based on the estimated fair value of the equity instrument determined usingthe Black-Scholes option-pricing model. Management believes that the fair value of the stock options is more reliably measured than the fair value of theservices received. The fair value of each non-employee variable stock award is re-measured each period until a commitment date is reached, which is generallythe vesting date.Earnings per ShareThe Company applies the two-class method for calculating earnings per share. Under the two–class method, net income (loss) is allocated betweencommon stock and other participating securities based on their participation rights. Basic earnings per share is calculated by dividing income (loss) allocableto common stockholders (after the reduction for any preferred stock dividends assuming current income for the period had been distributed) by the weightedaverage number of shares of common stock outstanding, net of shares subject to repurchase by the Company, during the period. Diluted earnings per share iscalculated by dividing the net income (loss) allocable to common stockholders by the weighted average number of common shares outstanding, adjusted forthe 54 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) effects of potentially dilutive common stock, which are comprised of stock options, warrants to purchase common stock and convertible preferred stock.Segment InformationThe Company’s operations are located primarily in the United States, and materially all tangible assets are located in Westlake Village, California. TheCompany operates in one segment related to the design, development and sale of high speed analog connectivity components that operate to maintain, amplifyand improve signal integrity at high speeds in a wide variety of applications. The Company’s chief operating decision-maker is its Chief Executive Officer,who reviews operating results on an aggregate basis and manages the Company’s operations as a single operating segment.Recent Accounting PronouncementsIn October 2009, the FASB reached final consensus on a new revenue recognition guidance regarding revenue arrangements with multiple deliverables.The new accounting guidance addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting,and how the arrangement consideration should be allocated among the separate units of accounting. The new accounting guidance is effective for fiscal yearsbeginning after June 15, 2010 and may be applied retrospectively or prospectively for new or materially modified arrangements. Early adoption is permitted.The Company does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations or disclosures.In January 2010, FASB issued an amendment regarding improving disclosures about fair value measurements. This new guidance requires additionalnew disclosures and clarifies some existing disclosure requirements about fair value measurement. The new disclosures and clarifications of existingdisclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales,issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning afterDecember 15, 2010 and for interim periods within those fiscal years. The adoption of this guidance did not have an impact on the Company’s disclosures forthe year ended December 31, 2010. The Company does not expect that the adoption of the guidance relating to Level 3 fair value measurements will have amaterial impact on its financial position, results of operations or disclosures.In April 2010, FASB issued an accounting guidance concerning application of milestone method of recognizing revenue for research and developmentwhich include payment provisions under which all or a portion of the considerations to be received is contingent upon the achievement of certain events. Amilestone event must carry a substantive uncertainty when the arrangement is entered as to whether the event will be achieved. A milestone is deemedsubstantive when the milestone consideration is: a) proportionate with the vendor’s performance to achieve the milestone or the delivered items enhanced valueresulting for the specific outcome of the vendor’s performance to achieve the milestone; b) related solely to the vendor’s past performance; and c) reasonablerelative to all deliverables and payment terms in the arrangement. This guidance requires disclosures of accounting policy for the recognition of milestoneconsideration and description of the arrangement. This guidance is effective for fiscal years and interim periods beginning on or after June 15, 2010. Earlyadoption is allowed. The Company adopted this guidance in the year ended December 31, 2010. Revenue recognized under the milestone method was notmaterial in 2010. There was no effect on prior years’ financial statements since there were no arrangements in prior periods.In December 2010, FASB issued an amendment to the goodwill impairment test. The amendment modifies Step 1 of the goodwill impairment test forreporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it ismore likely than not that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity shouldconsider whether there are any adverse qualitative factors indicating that impairment may exist. The qualitative factors are consistent with the existing guidanceand examples, which require that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change thatwould more likely than not reduce the fair value of a reporting unit below its carrying amount. The amendments are effective for fiscal years, and interimperiods within those years, beginning after December 15, 2010. Early adoption is not permitted. The Company does not expect that the adoption of thisguidance will have a material impact on its financial position, results of operations or disclosures since the Company does not have any reporting units withzero or negative carrying amounts.In December 2010, FASB issued an amendment to the disclosure of supplementary pro forma information for business combinations. The amendmentsspecify that if a public entity presents comparative financial statements, the entity should disclose revenue and earnings of the combined entity as though thebusiness combination that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. Theamendments also expand the supplemental pro forma disclosures to include a description of the nature and amount of material, nonrecurring pro formaadjustments directly attributable to 55 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) the business combination included in the reported pro forma revenue and earnings. The amendments are effective prospectively for business combinations forwhich the acquisition date is on or after the beginning of the first annual reporting period beginning on or after December 15, 2010. Early adoption ispermitted. The Company does not expect that the adoption of this guidance will have a material impact on its financial position, results of operations ordisclosures.2. AcquisitionOn June 30, 2010, the Company acquired all of the outstanding shares of WTI in exchange for $3.3 million in cash and 313,713 shares of Series Epreferred stock. WTI is primarily engaged in the research, design, development, manufacture and sale of Nand Flash Controller System-On-Chip, securedigital/multi-media card controller, and card reader products. As a result of the acquisition, the Company is expected to expand its technology and engineeringresources.The fair value of consideration transferred is shown in the table below: Cash $3,344 Series E preferred stock 4,538 $7,882 The Company issued 313,713 shares of Series E preferred stock that has a total fair value of $4.5 million based on the valuation performed as ofJune 30, 2010, the acquisition date. The acquisition of WTI includes a contingent consideration arrangement that requires additional consideration to be paidby the Company based on achievement of certain revenue and gross margin targets of WTI over the three fiscal quarters starting July 1, 2010. The amount ofcontingent consideration, if any, is payable on or before May 15, 2011. The amount of consideration the Company could pay under the agreement rangesfrom $0 to $2 million. The fair value of the contingent consideration on the acquisition date and at December 31, 2010 was determined to be insignificant asthe probability of WTI achieving the revenue and gross margin requirement is deemed to be remote.The acquisition has been accounted for using the acquisition method of accounting which requires, among other things, that assets acquired andliabilities assumed be recognized at their fair values as of the acquisition date.The following table summarizes the purchase price allocation as of the acquisition date: Cash $808 Receivables 174 Inventories 493 Other current assets 100 Property and equipment 68 Identifiable intangible assets 1,530 In-process research and development 110 Other noncurrent assets 34 Accounts payable and accrued expenses (539) Deferred tax liabilities, net (177) Total identifiable net assets 2,601 Goodwill 5,281 Net assets acquired $7,882 56 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) As of the acquisition date, the fair value of receivables, inventories, property and equipment, accounts payable and accrued expenses approximated thebook value acquired.Identifiable intangible assets consist of developed technology of $800 and customer relationships of $730. The Company used a relief-from-royaltymethod to value developed technology. The relief-from-royalty method estimates the cost savings that accrue to the owner of an intangible asset that wouldotherwise be payable as royalties or license fees on revenue earned through the use of the asset. The royalty rate used is based on an analysis of licensingagreements related to similar technologies. Revenue is projected over the expected remaining useful life of the developed technology. The market-derived royaltyrate is then applied to estimate the royalty savings. Customer relationships represent future projected revenue that will be derived from sales of products toexisting customers. Developed technology and customer relationships will be amortized on a straight-line method, which approximates the pattern of economicconsumption over their estimated useful lives as follows: Developed technology 4 yearsCustomer relationships 5 yearsThe Company capitalized $110 of IPR&D costs related to the WTI acquisition. Upon completion of the projects, the related IPR&D assets will beamortized over their estimated useful lives. If any of the projects are abandoned, the Company will be required to impair the related IPR&D asset. The fairvalue of the IPR&D was determined using the relief-from-royalty method similar to the process as discussed above. The significant assumptions underlyingthe valuation of IPR&D are: Estimated percent complete 7% Estimated time to complete 6 months Estimated cost to complete $92 Discount rate 32.5% As of December 31, 2010, the projects are expected to be completed in February 2011 and will commence commercial production in the second quarter of2011.The accumulated amortization of developed technology and customer relationships as of December 31, 2010 was $111 and $81, respectively. Estimatedamortization expense of identifiable intangible assets for the next five years is as follows: $401 in 2011, $408 in 2012, $408 in 2013, $297 in 2014 and $110in 2015.Goodwill is calculated as the excess of the consideration transferred over the net assets recognized and is attributable to the workforce of the acquiredbusiness and the synergies expected to arise after the Company’s acquisition of WTI. Goodwill is not amortized and is not deductible for tax purposes. Thechange in goodwill from acquisition date to December 31, 2010 was due to foreign currency translation.The Company incurred acquisition costs of $0.3 million which are included in general and administrative expense in the consolidated statement ofincome for the year ended December 31, 2010.WTI contributed revenue of $1,359 and pre-tax loss of $869 to the Company for the period from June 30 to December 31, 2010.Pro Forma InformationThe following unaudited pro forma financial information presents a summary of the Company’s consolidated results of operations for the year endedDecember 31, 2010 and the year ended December 31, 2009, assuming the WTI acquisition had been completed as of January 1, 2010 and January 1, 2009,respectively: 57 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) Pro FormaYear EndedDecember 31,2010 Pro FormaYear EndedDecember 31,2009 (unaudited) (unaudited) Revenue $84,316 $60,427 Net income $25,738 $5,838 Net income allocable to common stockholders $5,186 $— Net income per share – basic $1.02 $— Net income per share – diluted $0.61 $— The unaudited pro forma consolidated results were prepared using the acquisition method of accounting and are based on the historical financialinformation of the Company and WTI, reflecting the results of operations for the year ended December 31, 2010 and 2009. The unaudited pro formaconsolidated results are not necessarily indicative of what our consolidated results of operations actually would have been had we completed the acquisition asof the beginning of each period presented. In addition, the unaudited pro forma consolidated results do not purport to project the future results of operations ofthe combined company nor do they reflect the expected realization of any cost savings associated with the acquisition.3. ConcentrationsFinancial instruments that subject the Company to concentrations of credit risk consist primarily of cash, cash equivalents and trade accountsreceivable. The Company extends differing levels of credit to customers and does not require collateral deposits. As of December 31, 2010 and 2009, theCompany maintained an allowance for doubtful accounts of $68.The following table summarizes the significant customers’ and distributors’ revenue and accounts receivable as a percentage of total revenue and totalaccounts receivable, respectively: Year Ended December 31, 2010 2009 2008 Revenue Customer A 34% 36% 24% Customer B * * 12 Customer C * * 11 Customer D * * * Customer E * * * December 31, 2010 2009 Accounts Receivable Customer A 33% 42% Customer B * * Customer C 11 * Customer D * 11 Customer E * 12 58 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) *Less than 10% of total revenue and accounts receivableCustomers D and E are distributors that sell the Company’s products exclusively to an end customer. In the aggregate, revenue to such end customer,including revenue made through distributors as a percentage of total revenue was 11%, 17% and 11% for the years ended December 31, 2010, 2009 and 2008.4. InventoriesInventories consist of the following: December 31, 2010 2009 Raw materials $1,028 $1,002 Work in process 2,033 1,375 Finished goods 2,034 1,565 $5,095 $3,942 Finished goods held by distributors were $482 and $442 as of December 31, 2010 and 2009, respectively.5. Property and Equipment, netProperty and equipment consist of the following: December 31, 2010 2009 Laboratory and production equipment $11,882 $10,556 Office, software and computer equipment 3,655 2,575 Furniture and fixtures 729 166 Leasehold improvements 2,652 48 18,918 13,345 Less accumulated depreciation (11,712) (10,231) $7,206 $3,114 Depreciation and amortization expense for the years ended December 31, 2010, 2009 and 2008 was $1,640, $1,291 and $1,430 respectively.As of December 31, 2010 and 2009, laboratory and production equipment includes $397 in assets that have been capitalized under capital leases.Accumulated amortization of equipment under capital leases was $388 and $342 as of December 31, 2010 and 2009, respectively. Amortization expense inconnection with equipment purchased under capital leases was $45, $70 and $73 for the years ended December 31, 2010, 2009 and 2008, respectively.As of December 31, 2010 and 2009, computer software costs included in property and equipment were $1,471 and $1,251, respectively. Amortizationexpense of capitalized computer software costs was $184, $134 and $125 for the years ended December 31, 2010, 2009 and 2008, respectively.6. Lines of CreditIn June 2007, the Company entered into a Loan and Security Agreement with an unrelated financial institution, which provided for borrowing up to anaggregate of $10 million. Amounts borrowed under the Loan and Security Agreement were collateralized by 59 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) substantially all of the assets of the Company and carried an interest rate of prime per annum. The average effective interest rate during 2008 was 6.25%. TheCompany repaid the entire outstanding balance of $3,650 in February 2008, and the $10 million facility was terminated on June 8, 2009.In connection with the Loan and Security Agreement, the Company issued a warrant to purchase 12,857 shares of common stock (see Note 10).7. Income TaxesIncome (loss) before income taxes consists of the following: Year Ended December 31, 2010 2009 2008 United States $12,765 $8,158 $(3,428) Foreign (876) — — Total $ 11,889 $ 8,158 $(3,428) Income tax expense (benefit) consisted of the following: Year Ended December 31, 2010 2009 2008 Current: U.S. Federal $(6,158) $253 $— U.S. State (1,015) 576 — Foreign 29 — — (7,144) 829 — Deferred: U.S. Federal (4,523) — — U.S. State (2,427) — — Foreign (148) — — (7,098) — — Total $(14,242) $829 $— Income tax expense (benefit) differed from the amounts computed by applying the U.S. federal income tax rate of 35% to pretax income (loss) as a resultof the following: Year Ended December 31, 2010 2009 2008 Provision (benefit) at statutory rate $4,161 $2,855 $(1,200) State income taxes 1,653 375 16 Research and development credits (2,063) (713) (528) Change in valuation allowance (24,022) (1,964) 1,544 Foreign earnings, taxed at different rates 4,912 — — Unrecognized tax benefits 791 — — Stock-based compensation 391 — — Other (65) 276 168 $(14,242) $829 $— Significant components of the Company’s net deferred taxes consist of the following: 60 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) December 31, 2010 2009 Deferred tax assets Net operating loss carry forwards $8,051 $15,424 Research and development credits 3,788 4,602 Stock-based compensation 1,150 721 Other temporary differences 1,666 3,731 Total deferred tax assets 14,655 24,478 Deferred tax liabilities Subpart F income on foreign subsidiaries earnings (5,635) — Amortization and depreciation (953) (425) Other (249) (31) Total deferred tax liabilities (6,837) (456) Less: valuation allowance — (24,022) Deferred tax assets, net $7,818 $— At December 31, 2010, the Company has recorded a deferred tax charge of $7.3 million, which represents the tax on the intercompany transfer ofintangible assets in connection with the Company’s international reorganization during 2010 in accordance with ASC 740-10-25-3. The deferred tax charge isbeing amortized over the estimated useful life of 8 years to income tax expense.Valuation AllowanceThe Company recorded a full valuation allowance against its net deferred tax assets at December 31, 2008 and 2009. In determining the need for avaluation allowance, management reviewed all available evidence pursuant to the requirements of ASC 740. The determination of recording or releasing taxvaluation allowances is made, in part, pursuant to an assessment performed by management regarding the likelihood that the Company will generate sufficientfuture taxable income against which benefits of the deferred tax assets may or may not be realized. This assessment requires management to exercise significantjudgment and make estimates with respect to the Company’s ability to generate revenue, gross profits, operating income and taxable income in future periods.Amongst other factors, management must make assumptions regarding overall current and projected business and semiconductor industry conditions,operating efficiencies, the Company’s ability to timely develop, introduce and consistently manufacture new products to customers’ specifications, acceptanceof new products, customer concentrations, technological change and the competitive environment which may impact the Company’s ability to generate taxableincome and, in turn, realize the value of the deferred tax assets. Significant cumulative operating losses in 2008 and prior years, uncertainty with respect to theacceptance of the Company’s products by end customers and significant economic uncertainties in the market made the Company’s ability to project futuretaxable income highly uncertain and volatile at December 31, 2009. Although 2009 was the Company’s first profitable year, only the last three quarters of theyear were profitable and the vast majority of the Company’s pre-tax income was generated in the last two quarters of the year. Based upon management’sassessment of all available evidence, including a relatively short period of recent profitability, coupled with significant uncertainties associated with theCompany’s 2010 business outlook, the Company concluded as of December 31, 2009, that it was not more likely than not that its net deferred tax assetswould be realized.In March 2010, the Company received its first substantial quantity of production orders for a new low voltage product, which was a new low voltageversion of the Company’s integrated PLL and register buffer. This new low voltage product was widely expected in the market to be significant and is expectedto begin shipping in high volumes for both the Company and its competitors with a new Intel platform in the second half of 2010. This new low voltageproduct is currently in commercial production and is shipping in volume. The arrival of these production orders from one of the Company’s largest customersreduced concerns and increased confidence in the strength of the Company’s business outlook for the balance of 2010. In addition, certain other new productintroductions began to gain traction with customers, providing additional confidence in the Company’s longer term outlook. The Company also achievedfurther clarity around certain contingencies related to ongoing litigation and certain other product acceptance concerns that existed at December 31, 2009.Furthermore, during the first quarter of 2010 the Company unexpectedly received additional orders for an older product that allowed the Company to exceed itsoverall plan for the quarter and continue the recent trend of profitability into the first quarter of 2010. At its April 30, 2010 meeting, based on a review of thepositive developments that materialized in the first quarter of 2010, the Company’s Board of Directors decided to authorize management to retain investmentbankers and proceed with plans to pursue a potential initial public offering. Based on these positive developments and an additional quarter of profitableoperation, management reassessed the need for a valuation allowance at March 31, 2010 and concluded that a 61 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) change in circumstances had occurred. Management determined that, based on the Company’s prospects and business outlook, it was reasonable to concludethat it is more likely than not that the Company’s deferred tax assets will be realized. Accordingly, the Company released the full valuation allowance recordedagainst its deferred tax assets based on the weight of positive evidence that existed at March 31, 2010. Significant judgment is required to determine the timingand extent of a valuation allowance release and the Company’s ability to utilize deferred tax assets will continue to be dependent on the ability to generatesufficient taxable income in future periods.In the year ended December 31, 2010, the Company was profitable and utilized a substantial amount of its federal net operating loss carryforward.Based on the current trend of operating results and Company forecasts, the Company believes that it is more likely than not that it will recognize the fullbenefit of the deferred tax assets and no valuation allowance is required as of December 31, 2010.The decrease in the valuation allowance for the years ended December 31, 2010, 2009 and 2008 was $24,022, $2,280 and $3,950, respectively.General Income Tax DisclosuresThe Company has net operating loss (“NOL”) carryforwards for federal and state income tax purposes of approximately $12.9 million and $41.5million, respectively at December 31, 2010 that will begin to expire in 2022 and 2016 for federal income tax purposes and state income tax purposes,respectively. In addition, the Company has NOL carryforwards for foreign income tax purposes of $18.3 million at December 31, 2010, which do not expire.At December 31, 2010, the Company also has federal and state research and development (“R&D”) tax credit carryforwards of $3.6 million and $2.3million, respectively. The federal tax credits will begin to expire in 2024, unless previously utilized. The state tax credits do not expire.Pursuant to Internal Revenue Code sections 382 and 383, use of the Company’s NOL and R&D credits generated prior to June 2004 are subject to anannual limitation due to a cumulative ownership percentage change that occurred in that period. The Company has had two changes in ownership, one inDecember 2000 and the second in June 2004, resulting in an annual limitation on NOL and R&D credit utilization.As of December 31, 2010, the Company had approximately $3.0 million of unrecognized tax benefits, $2.4 million of which, if recognized, would affectthe effective income tax rate. The Company does not expect any significant increases or decreases to its unrecognized tax benefits within the next 12 months.The following table summarizes the changes in unrecognized tax benefits: Year Ended December 31, 2010 2009 2008 Balance as of January 1 $1,283 $1,057 $891 Additions based on tax positions related to the current year 1,438 226 166 Additions based on tax positions of prior year 264 — — Balance as of December 31 $2,985 $1,283 $1,057 The Company recognizes interest and penalties related to unrecognized tax benefits as a component of income tax expense. The Company recognized nointerest or penalties during the years ended December 31, 2010, 2009 and 2008 as the prior year’s unrecognized tax benefits reduce tax attributes that have notyet been utilized on the Company’s tax return.The Company files income tax returns in the U.S. federal jurisdiction, state of California and certain foreign jurisdictions. The Company is no longersubject to U.S. federal income tax examinations for tax years ended on or before December 31, 2006 or to California state income tax examinations for tax yearsended on or before December 31, 2005. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where netoperating losses or tax credits were generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carryforward. 62 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) On December 31, 2009, the federal R&D credit statute expired and was retroactively reinstated into law on December 17, 2010. Accordingly, theCompany recorded a tax benefit for federal research credits for the year ended December 31, 2010.The Company does not provide for U.S. income taxes on undistributed earnings of its controlled foreign corporations that are intended to be investedindefinitely outside the United States. At December 31, 2010, the Company had $0.1 million of undistributed earnings.8. Earnings Per ShareThe following shows the computation of basic and diluted earnings per share: Year Ended December 31, 2010 2009 2008 Numerator Net income (loss) $26,131 $7,329 $(3,428) Less amount allocable to preferred stockholders (20,805) (7,193) — Less amount allocable to unvested early exercised options andunvested restricted stock award (86) (6) — Net income (loss) allocable to common stockholders—basic anddiluted $5,240 $130 $(3,428) Denominator Weighted average common stock 5,137,029 1,671,565 1,289,431 Less weighted average unvested common stock subject torepurchase and unvested restricted stock award (50,860) (2,689) — Weighted average common stock—basic 5,086,169 1,668,876 1,289,431 Effect of potentially dilutive securities: Add options to purchase common stock 3,425,528 1,103,828 — Add warrants to purchase common stock 34,840 12,573 — Weighted-average common stock—diluted 8,546,537 2,785,277 1,289,431 Earnings per share Basic $1.03 $0.08 $(2.66) Diluted $0.61 $0.05 $(2.66) Net income has been allocated to the common stock, convertible participating preferred stock before conversion to common stock, unvested earlyexercised options and unvested restricted stock award based on their respective rights to share in dividends.The following securities were not included in the computation of diluted earnings per share as inclusion would have been anti-dilutive: 63 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) Year Ended December 31, 2010 2009 2008 Convertible preferred stock 12,776,077 14,481,699 14,367,283 Common stock options 938,691 2,145,688 5,639,483 Warrant to purchase common stock — — 38,571 Warrant to purchase redeemable convertible preferred stock — 17,187 17,187 Unvested early exercised options 32,872 2,689 — Unvested restricted stock award 17,987 — — 13,765,627 16,647,263 20,062,524 64 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) 9. Convertible Preferred StockConvertible preferred stock as of December 31, 2009 consists of the following: Par ValuePer Share Shares LiquidationValue Authorized Outstanding Series A $0.001 528,858 518,555 $12,100 Series B $0.001 2,926,670 2,905,783 24,985 Series C $0.001 6,503,902 6,503,882 18,690 Series D $0.001 3,512,880 3,509,749 11,989 Series E $0.001 1,045,714 1,043,731 10,000 14,518,024 14,481,700 $77,764 The Company’s Board of Directors is authorized to determine the rights of each offering of convertible preferred stock including, among other terms,dividend rights, voting rights, conversion rights, redemption prices and liquidation preferences, if any, subject to the limitations of applicable laws,regulations and its charter. In October 2010, the majority of preferred stockholders consented to the automatic conversion of preferred stock to common stockon a one-for-one basis immediately prior to the completion of the initial public offering. In November 2010, the Company completed its IPO and all shares ofthe Company’s then outstanding convertible preferred stock automatically converted into 14,795,413 shares of common stock. Accordingly, no convertiblepreferred stock was outstanding at December 31, 2010.The following summarizes the terms of each series of the Company’s previously convertible preferred stock:Conversion RightsEach share of Series E and Series D was convertible, at the holder’s option, into such number of fully paid and nonassessable shares of common stockas determined by dividing $9.5809 and $3.4160 by the applicable conversion price, respectively. At December 31, 2009, the conversion price of the Series Eand Series D was $9.5809 and $3.4160, respectively, such that each share of Series E and Series D was convertible into one share of common stock.Each share of Series C, Series B and Series A was convertible, at the holder’s option, into such number of fully paid and nonassessable shares ofcommon stock as determined by dividing $2.8738 by the applicable conversion price, as defined. At December 31, 2009 the conversion price of the Series C,Series B and Series A was $2.8738 such that each share of Series C, Series B or Series A was convertible into one share of common stock.In the event of the issuance of additional shares of common stock, subject to certain exclusions, at a price per share less than the conversion price forany series of convertible preferred stock in effect on the date of such issuance, the conversion price for that series will be adjusted based on a weighted averageanti-dilution formula. The conversion price was also subject to adjustment based on certain other anti-dilution provisions. Each share of convertible preferredstock automatically converted into shares of common stock at its then effective conversion rate either immediately upon the closing of a qualified initial publicoffering a defined, or upon the consent of a majority of the preferred stockholders.Redemption ProvisionsThe holders of Series E, Series D, Series C and Series B were entitled to redeem their shares in three equal installments at any time between July 30,2012 and July 30, 2013, upon the written election of the holders of then outstanding shares. The redemption provisions required at least 50% of Series E andSeries D and 66/3% of the Series C and Series B, voting on an as converted to common stock basis. The redemption price for each share of preferred stockwas the sum equal to the Original Issue Price for each share of preferred stock, plus all declared but unpaid dividends on such shares at the time of payment.The Series A was not redeemable. 65 2 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) Liquidation PreferenceIn the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary, the holders of Series E were entitled toreceive, prior and in preference to any distribution of any assets or surplus funds to the holders of the Series D, Series C, Series B, Series A or commonstock, $9.5809 per share for Series E plus any dividends declared but unpaid on such shares. If the funds to be distributed were insufficient to permit fullpayment of the preferential amounts, then the assets will be distributed to the Series E holders ratably in proportion to the full amount due to the Series Eholders. After the payment of the Series E liquidation preference, any excess assets and funds of the Company will be distributed to the holders of theSeries D, prior and in preference to any distribution of any assets or surplus funds to the holders of the Series C, Series B, Series A or common stock, at$3.4160 per share for Series D plus any dividends declared but unpaid on such shares. If the funds to be distributed were insufficient to permit full paymentof the preferential amounts, then the assets will be distributed to the Series D holders ratably in proportion to the full amount due to the Series D holders. Afterthe payment of the Series D liquidation preference, any excess assets and funds of the Company will be distributed to the holders of the Series C and Series B,prior and in preference to any distribution of any assets or surplus funds to the holders of the Series A or common stock, at $2.8738 per share for Series Cand $8.5984 per share of Series B, plus any dividends declared but unpaid on such shares. If the funds to be distributed were insufficient to permit fullpayment of the preferential amounts, then the assets will be distributed to the Series C and Series B holders on a pari passu basis ratably in proportion to thefull amount due to the Series C and Series B holders. After the payment of the Series C and Series B liquidation preference, any excess assets and funds of theCompany will be distributed to the holders of the Series A, prior and in preference to any distribution of any assets or surplus funds to the holders of thecommon stock, at $23.34 per share for Series A plus any dividends declared but unpaid on such shares. If the funds to be distributed were insufficient topermit full payment of the preferential amounts, then the assets will be distributed to the Series A holders ratably in proportion to the full amount due to theSeries A holders.After the payment of the convertible preferred stock liquidation preferences, any excess assets and funds of the Company will be distributed ratablyamong the holders of the common stock and convertible preferred stockholders in proportion to the number of common shares held by them or issuable uponthe conversion of the convertible preferred stock.Liquidation was deemed to include the Company’s sale of all or substantially all of its assets or the acquisition of the Company by another person orentity by means of merger or consolidation resulting from the transfer of 50% or more of the Company’s voting power. Convertible preferred stockholders canwaive this “deemed” liquidation preference by a vote of at least 67% of the convertible preferred stock, voting as a single class on an as-converted to commonstock basis.Voting RightsThe convertible preferred stockholders were entitled to one vote for each share of common stock into which such convertible preferred stock can beconverted.DividendsThe holders of each series of convertible preferred stock were entitled to receive noncumulative dividends per annum when and if declared by the Boardof Directors. The Series E, Series D, Series C, Series B and Series A were entitled to dividends of $0.7665, $0.2733, $0.2299, $0.6879, and $1.8667, pershare, respectively. After the foregoing dividend payments, if any have been made in full for in a given calendar year, the holders of the preferred stock wereentitled to receive dividends with the holders of common stock on an as-converted common stock basis if declared by the Board of Directors. No dividendshave been declared or paid to date.10. WarrantsIn connection with various financing agreements, the Company issued warrants to purchase common stock and preferred stock. At December 31, 2009,the following warrants were outstanding: NumberofShares ExercisePriceper Share Series B Preferred Stock Warrants 15,045 $8.60 Series D Preferred Stock Warrants 2,142 3.42 Common Stock Warrants 38,571 1.54 66 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) The warrants to purchase Series B expire upon the earlier to occur of 1) a Qualifying Acquisition as defined or 2) December 31, 2010. The warrant topurchase Series D expires on the longer to occur of 1) the seventh anniversary after the issuance date or 2) 3 years after the Company’s initial public offering.The warrant to purchase 12,857 shares of common stock expires on June 8, 2014. The warrant to purchase 25,714 of common stock expires on the earliest tooccur of 1) June 22, 2012, 2) a Qualified Initial Public Offering, or 3) a Qualifying Acquisition as defined.In June 2005, the FASB issued authoritative guidance on the classification of freestanding warrants and other similar instruments on shares that areredeemable (either puttable or mandatorily redeemable). The guidance requires liability classification for warrants issued that are exercisable into convertiblepreferred stock. Liability classification requires the warrants to be remeasured to their fair value each reporting period. At December 31, 2009, the fair value ofthe warrants of $55, was included in accrued liabilities and the changes in fair value has been recorded in other income (expense).In November 2010, upon completion of the initial public offering, all preferred stock warrants were converted to common stock warrants. In addition,15,045 warrants were exercised. As of December 31, 2010, there were 2,142 and 38,571 outstanding common stock warrants with exercise price of $3.42 and$1.54 per share, respectively.11. Stock Option PlanIn 2000, the Company adopted the 2000 Stock Option/Stock Issuance Plan (the Plan). Under provisions of the Plan, employees, outside directors,consultants and other independent advisors who provide services to the Company may be issued incentive and non-qualified stock options to purchasecommon stock or may be issued shares of common stock directly. The Board of Directors is authorized to administer the Plan and establish the stock optionterms, including the exercise price and vesting period. Options granted under the plan may have varying vesting schedules; however, options generally vest25% upon completion of one year of service and thereafter in 36 equal monthly installments. Options granted are immediately exercisable and the sharesissued upon exercise of the option are subject to a repurchase right held by the Company. The repurchase price under the repurchase right is the originalexercise price and the right lapses in accordance with the option-vesting schedule. There were 32,875 and 89,232 unvested shares subject to the Company’srepurchase right as of December 31, 2010 and 2009, respectively. The proceeds received from the unvested early exercise of options are presented in thebalance sheet as liabilities and subsequently classified to equity based on the vesting schedule. The vesting of certain options granted or shares issued underthe Plan is subject to acceleration of vesting upon the occurrence of certain events as defined in the Plan.Under the Plan, the exercise price, in the case of an incentive stock option, can not be less than 100%, and in the case of a nonqualified stock option,not less than 85%, of the fair market value of such shares on the date of grant. The term of the option is determined by the Board but in no case can exceed 10years. At December 31, 2009, 7,901,158 shares of common stock have been reserved for issuance under the Plan.In June 2010, the Board of Directors approved the Company’s 2010 Stock Incentive Plan, which became effective in November 2010. Upon completionof the Company’s initial public offering, shares originally reserved for issuance under the 2000 Plan but which were not issued or subject to outstandinggrants on the effective date of the 2010 Stock Incentive Plan, and share subject to outstanding options or forfeiture restriction under the 2000 Plan on theeffective date of the 2010 Stock Incentive Plan that are subsequently forfeited or terminated before being exercised, become available for awards under the 2010Stock Incentive plan, up to 428,571 shares. At December 31, 2010, 2,032,192 shares of common stock have been reserved for issuance under the 2010Stock Incentive Plan. There were no equity awards granted under this plan in 2010.The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted averageassumptions: Year Ended December 31, 2010 2009 2008 Risk-free interest rate 2.99% 2.67% 4.13% Expected life (in years) 6.42 6.25 6.25 Dividend yield — — — Expected volatility 60.00% 68.00% 55.00% 67 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) The following table summarizes information regarding options outstanding: Number ofShares WeightedAverageExercisePrice WeightedAverageRemainingContractualLife AggregateIntrinsicValue Outstanding at December 31, 2009 5,362,506 1.61 6.84 $15,175 Granted 1,839,738 9.75 Exercised (396,753) 1.22 Canceled (133,242) 2.88 Outstanding at December 31, 2010 6,672,249 $3.85 6.88 $108,369 Exercisable at December 31, 2010 6,672,249 $3.85 6.88 $108,369 Vested at December 31, 2010 3,874,307 $1.61 5.48 $71,608 Vested and expected to vest at December 31, 2010 6,658,466 $3.84 6.87 $108,205 The intrinsic value of options outstanding, exercisable and vested and expected to vest is calculated based on the difference between the exercise price andthe fair value of the Company’s common stock as of the respective balance sheet date.Stock-based compensation expense is included in the Company’s results of operations as follows: Year Ended December 31, 2010 2009 2008 Operating expenses Cost of goods sold $107 $31 $119 Research and development 1,381 475 358 Sales and marketing 526 238 101 General and administrative 691 421 417 $2,705 $1,165 $995 Total unrecognized compensation cost related to unvested stock options at December 31, 2010, prior to the consideration of expected forfeitures, isapproximately $10,219 and is expected to be recognized over a weighted-average period of 3.52 years.The total fair value of employee options vested during the years ended December 31, 2010, 2009 and 2008 was $887, $963 and $1,007, respectively.The weighted average grant date fair value per share of stock options granted to employees during the years ended December 31, 2010, 2009 and 2008was $5.79, $1.34 and $1.10, respectively.The total intrinsic value of options exercised during the years ended December 31, 2010, 2009 and 2008 was $3,247, $890 and $294, respectively. Theintrinsic value of exercised options is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of theexercise date. Cash received from the exercise of stock options was $485, $733 and $644, respectively, for the years ended December 31, 2010, 2009 and2008. 68 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) On April 30, 2010, the Board of Directors granted 17,142 restricted stock awards to a Board member with a fair value of $9.29. The award vests 25%after one year of service and thereafter in 36 equal monthly installments.On August 17, 2010, the Board of Directors granted 17,142 restricted stock awards to a Board member with a fair value of $12.02. The award vests25% after one year of service and thereafter in 36 equal monthly installments.12. Employee Benefit PlanThe Company has established a 401(k) tax-deferred savings plan (the “Plan”) which permits participants to make contributions by salary deductionpursuant to Section 401(k) of the Internal Revenue Code of 1986, as amended. The Company may, at its discretion, make matching contributions to the Plan.Furthermore, the Company is responsible for administrative costs of the Plan. The Company has not made contributions to the Plan since its inception.13. Fair Value MeasurementsThe guidance on fair value measurements requires fair value measurements to be classified and disclosed in one of the following three categories:Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;Level 2: Quoted prices in markets that are not active, or inputs which are observable, either directly or indirectly, for substantially the full term of theasset or liability, orLevel 3: Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (i.e., supported bylittle or no market activity).The following table presents information about assets and liabilities required to be carried at fair value on a recurring basis: December 31, 2010 Level 2 Level 3 Total Cash equivalents $80,017 $— $80,017 December 31, 2009 Level 1 Level 3 Total Cash equivalents $15,212 $— $15,212 Warrants — (55) (55) $15,212 $(55) $15,157 As of December 31, 2010, cash equivalents consist mainly of money market funds which are valued using the amortized cost method, in accordancewith Rule 2a-7 under the 1940 Act which approximates fair value. Cash equivalents as of December 31, 2010 are categorized as Level 2.As of December 31, 2009, cash equivalents consist mainly of money market funds which are traded in active exchange markets. The cash equivalentsare categorized as Level 1.The Company utilized a Black-Scholes option pricing model in order to determine the fair value of the preferred stock warrants, including theconsideration of a risk-free interest rate, expected term and expected volatility. Certain inputs used in the model are unobservable. The fair values of preferredstock warrants can change significantly based on market conditions and changes in the underlying value of the convertible preferred stock. Preferred stockwarrants were categorized as Level 3. As of December 31, 2010, the preferred stock warrants were converted to common stock warrant as a result of the IPO. 69 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) The following table summarizes the change in value of the preferred stock warrants for the years ended December 31, 2010 and 2009: 2010 2009 Balance at beginning of year $55 $72 Change in fair value included in other (income) expense 75 (17) Transfer to additional paid-in capital (130) — Balance at end of year $— $55 14. Segment InformationThe Company operates in one reportable segment. The Company’s Chief Executive Officer, who is considered to be the chief operating decision maker,manages the Company’s operations as a whole and reviews consolidated financial information for purposes of evaluating financial performance and allocatingresources. Revenue by region is classified based on the locations to which the product is transported, which may differ from the customer’s principal offices.The following table sets forth the Company’s revenue by geographic region: Year Ended December 31, 2010 2009 2008 United States $13,528 $10,727 $12,265 Korea 14,319 18,307 15,147 Japan 6,557 5,688 5,903 China 29,238 9,924 2,258 Taiwan 6,838 5,687 1,544 Other 12,713 8,519 5,837 $83,193 $58,852 $42,954 As of December 31, 2009, substantially all of the Company’s long-lived tangible assets were located in the United States. As of December 31, 2010,$1,280 of long-lived tangible assets are located outside the United States of which $864 are located in Taiwan.15. Commitments and ContingenciesLeasesThe Company leases its facility and certain equipment under noncancelable lease agreements expiring in various years through 2016. The Companyalso licenses certain software used in its research and development activities under a term license subscription and maintenance arrangement.Future minimum lease payments under noncancelable operating leases having initial terms in excess of one year are as follows: 70 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) December 31, 2010 2011 $3,726 2012 2,965 2013 1,180 2014 1,188 2015 1,006 2016 736 $10,801 For the years ended December 31, 2010, 2009 and 2008, lease operating expense was $3,272, $2,811 and $2,649, respectively.Noncancelable Purchase ObligationsThe Company’s noncancelable purchase obligations consisted primarily of license and consulting fees the Company committed to pay under severalagreements. As of December 31, 2010, the Company’s future noncancelable purchase obligations are as follows: December 31, 2010 2011 $745 2012 175 $920 Legal ProceedingsNetlist, Inc. v. Inphi Corporation, Case No. 09-cv-6900 (C.D. Cal.)On September 22, 2009, Netlist filed suit in the United States District Court, Central District of California, or the Court, asserting that the Companyinfringes U.S. Patent No. 7,532,537. Netlist filed an amended complaint on December 22, 2009, further asserting that the Company infringes U.S. PatentNos. 7,619,912 and 7,636,274, collectively with U.S. Patent No. 7,532,537, the patents-in-suit, and seeking both unspecified monetary damages to bedetermined and an injunction to prevent further infringement. These infringement claims allege that the Company’s iMB™ and certain other memory modulecomponents infringe the patents-in-suit. The Company answered the amended complaint on February 11, 2010 and asserted that the Company does notinfringe the patents-in-suit and that the patents-in-suit are invalid. The Company has since filed inter partes requests for reexamination with the United StatesPatent and Trademark Office (the “USPTO”), asserting that the patents-in-suit are invalid.On August 27, 2010, the USPTO granted the Request for Inter Partes Reexamination for U.S. Patent No. 7,636,274 and found a substantial newquestion of patentability based upon each of the different issues that the Company raised as the reexamination requestor. The USPTO has not, however,accompanied its Reexamination Order of U.S. Patent No. 7,636,274 with its own evaluation of the validity of this patent, indicating that such evaluation willbe forthcoming at a later time. With respect to the granted reexamination request for U.S. Patent No. 7,636,274, the USPTO will evaluate the validity of thispatent in reexamination proceedings.On September 8, 2010, the USPTO ordered the Inter Partes Request for Reexamination for U.S. Patent No. 7,532,537 and found a substantial newquestion of patentability based upon different issues that the Company raised as the reexamination requestor. The USPTO accompanied this ReexaminationOrder of U.S. Patent No. 7,532,537 with its own evaluation of the validity of this patent, and rejected some but not all of claims. In a response datedOctober 8, 2010, Netlist responded to the USPTO determination by amending 71 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) some but not all of the claims, adding new claims and making arguments why the claims were not invalid in view of the cited references. The Companyprovided rebuttal comments to the USPTO on January 27, 2011, which the USPTO will consider, and the proceeding will continue in accordance withestablished inter partes reexamination procedures.On September 8, 2010, the USPTO ordered the Inter Partes Request for Reexamination for U.S. Patent No. 7,619,912 and found a substantial newquestion of patentability based upon different issues that we raised as the reexamination requestor. The USPTO accompanied this Reexamination Order ofU.S. Patent No. 7,619,912 with its own evaluation of the validity of this patent, and determined that all of the claims were patentable based upon theCompany’s reexamination. Netlist has not commented upon this Reexamination Order. The USPTO on February 28, 2011 also merged the Proceedings of ourReexamination of U.S. Patent No. 7,619,912, bearing Control No. 90/001,339 with Inter Partes Reexamination Proceeding 95/000,578 filed October 20, 2010on behalf of SMART Modular Technologies, Inc. and Inter Partes Reexamination Proceeding 95/000,579 filed October 21, 2010 on behalf of Google, Inc. Ineach of these other Reexamination Proceedings, the USPTO had indicated that there existed a substantial new question of patentability with respect to certainclaims of U.S. Patent No. 7,619,912, but had not accompanied the Reexamination Orders related thereto with its own evaluation of the validity of this patent,indicating that such evaluation would be forthcoming at a later time. The merged Reexamination Proceeding will be conducted in accordance with establishedprocedures for merged Reexamination Proceedings. As part of the merged Reexamination Proceeding, once the USPTO issues a Right of Notice of Appeal, theCompany will have the opportunity to appeal the USPTO determination of its Reexamination Request in accordance with these established procedures formerged Reexamination Proceedings.The reexamination proceedings could result in a determination that the patents-in-suit, in whole or in part, are valid or invalid, as well as modificationsof the scope of the patents-in-suit.A third party, Sanmina-SCI Corporation, or SSC, has also requested interference proceedings with the USPTO with respect to each of the patents-in-suit. In its April 21, 2010 Request for Continued Examination of U.S. Application No. 11/142,989 (“SSC ‘989 patent application”), SSC asserted that ithas priority to the inventions claimed by the patents-in-suit and should be granted rights to those inventions. The Company has entered into an agreement withSSC for a non-exclusive license to those rights, if any, that SSC may obtain to the inventions claimed by the patents-in-suit if the USPTO agrees to commenceinterference proceedings and if SSC prevails in those proceedings.The USPTO, in a communication dated July 7, 2010, acknowledged that claims were submitted in a filing made in the SSC ‘989 patent application toinvoke an Interference with each of the patents-in-suit, but has declined to declare an Interference at this time. The July 7, 2010 USPTO communicationrejected the claims submitted to invoke the Interference based upon 35 USC 112, with the rejection asserting that these claims contain “subject matter whichwas not described in the specification in such a way as to reasonably convey to one skilled in the relevant art that the inventor(s), at the time the applicationwas filed, had possession of the claimed invention.” SSC responded to this USPTO communication on December 24, 2010, and a further communicationfrom the USPTO is anticipated.In connection with the reexamination requests and the interference proceedings, the Company also filed a motion to stay proceedings with the Court,which was granted on May 18, 2010, whereby the Court stayed the proceedings until at least February 14, 2011, requested that Netlist notify the Court withinone week of any action taken by the USPTO in connection with the reexamination or interference proceedings, and requested that the parties file papers byJanuary 31, 2011 stating their position on whether the stay should be extended. The Company filed its paper on January 31, 2011 stating the reasons itbelieved the stay should be maintained and Netlist, having been given leave to file its paper later, filed its paper on February 21, 2011. the Court ordered acontinued stay of the proceedings until February 24, 2012, that the parties file papers by January 30, 2012 stating their position on whether the stay should beextended, and that Netlist notify the Court within one week of any action taken by the USPTO in the reexamination or interference proceedings. While theCourt granted the stay until February 24, 2012, the Court could lift the stay before then. For example, if the USPTO confirms that all claims of the patents-in-suit are patentable, the Court may decide to lift the stay. While the Company intends to defend the lawsuit vigorously, litigation, whether or not determined inthe Company’s favor or settled, could be costly and time-consuming and could divert management’s attention and resources, which could adversely affect theCompany’s business.If this litigation results in an adverse outcome, we may be required to cease the manufacture, use or sale of any product held to infringe Netlist’s patents,including our iMB product, unless and until we or our customers obtain a license from Netlist. A license from Netlist may or may not be available oncommercially reasonable terms. An adverse outcome could also result in our having to pay damages for infringement and the expenditure of significantresources to redesign any infringing product, including our iMB product, in a non-infringing manner, which may or may not be successful. To date, we haveonly sampled our iMB product and, as a result, we have generated very little revenue. Our ability to generate future revenue from our iMB product, could beadversely affected, though it is currently difficult to estimate the level at which this may affect our revenue. 72 Table of ContentsInphi CorporationNotes to Consolidated Financial Statements—(Continued)(Dollars in thousands except share and per share amounts) Inphi Corporation v. Netlist, Inc, Case No. 09-cv-8749 (C.D. Cal.).On November, 30, 2009, the Company filed suit in the United States District Court, Central District of California asserting that Netlist infringes U.S.Patent Nos. 7,307,863 and 7,479,799, collectively the patents-in-suit, and are seeking both unspecified monetary damages and an injunction to preventfurther infringement. Netlist answered the complaint on January 15, 2010 and filed an amended answer on April 22, 2010, asserting that it does not infringethe patents-in-suit, that the patents-in-suit are invalid and that U.S. Patent No. 7,479,799 is unenforceable due to inequitable conduct before the USPTO.Discovery is currently proceeding, and the Court has set a trial date of October 11, 2011.The Company is unable to assess the possible outcome of these matters. However, because of the nature and inherent uncertainties of litigation, shouldthe outcome of these actions be unfavorable, the Company’s business, financial condition, results of operations or cash flows could be materially andadversely affected.IndemnificationsIn the ordinary course of business, the Company may provide indemnifications of varying scope and terms to customers, vendors, lessors, investors,directors, officers, employees and other parties with respect to certain matters, including, but not limited to, losses arising out of the Company’s breach ofsuch agreements, services to be provided by the Company, or from intellectual property infringement claims made by third-parties. These indemnificationsmay survive termination of the underlying agreement and the maximum potential amount of future payments the Company could be required to make underthese indemnification provisions may not be subject to maximum loss clauses. The Company has not incurred material costs to defend lawsuits or settleclaims related to these indemnifications. As a result, the Company believes the estimated fair value of these agreements is immaterial. Accordingly, theCompany has no liabilities recorded for these agreements as of December 31, 2010 and 2009.16. Related Party TransactionsThe Company recognized $27,940, $21,235 and $10,227 in revenue during the December 31, 2010, 2009 and 2008, respectively, from an investor.The receivable balance from the investor as of December 31, 2010 and 2009 was $3,386, and $3,411, respectively.In 2007, the Company entered into software subscription and maintenance agreement with Cadence Design Systems, Inc. (“Cadence”), a related partycompany. A member of the Company’s Board of Directors is also the Chief Executive Officer, President and a director of Cadence. The Company committedto pay $7 million payable in 16 quarterly payments through May 2011. The Company paid $2.1 million, $1.8 million and $1.4 million in the years endedDecember 31, 2010, 2009 and 2008, respectively. Operating lease expense related to this agreement included in research and development expense was $1.8million for the years ended December 31, 2010, 2009 and 2008. In December 2010, the software subscription and maintenance agreement was renewedeffective June 30, 2011. Under the new agreement, the Company committed to pay $5.25 million payable in 10 quarterly payments through November 2013.17. Subsequent EventsOn January 20, 2011, the Board of Directors granted a 8,879 restricted stock unit award to a Board member and options to purchase an aggregate of26,450 shares to new employees and a consultant. 73 Table of ContentsSupplementary Financial Information (Unaudited)Quarterly Results of Operations Year Ended December 31, 2010 Mar. 31,2010 Jun. 30,2010 Sept. 30,2010 Dec. 31,2010 (in thousands, except per share amounts) Total revenue $19,086 $21,099 $21,862 $21,146 Gross profit 11,899 13,755 14,307 13,794 Net income 11,999 7,578 3,579 2,975 Basic earnings per share 0.65 0.37 0.11 0.20 Diluted earnings per share 0.26 0.14 0.05 0.11 Year Ended December 31, 2009 Mar. 31,2009 Jun. 30,2009 Sept. 30,2009 Dec. 31,2009 (in thousands, except per share amounts) Total revenue $10,336 $12,986 $18,370 $17,160 Gross profit 6,633 8,334 11,997 10,619 Net income (loss) (461) 1,223 3,846 2,721 Basic earnings per share (0.29) — 0.15 0.08 Diluted earnings per share (0.29) — 0.08 0.03 (1)Net income for the quarters ended March 31, 2010, June 30, 2010, September 30, 2010 and December 31, 2010, included the releases and reversals ofvaluation allowance of $10.1 million, $6.9 million, $4.4 million and $2.6 million, respectively. 74(1) Table of ContentsITEM 9 — CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A — CONTROLS AND PROCEDURES(a) Evaluation of disclosure controls and procedures. We maintain “disclosure controls and procedures,” as such term is defined in Rule 13a-15(e) under the Securities Exchange Act 1934, or the Exchange Act, that are designed to ensure that information required to be disclosed by us in reports we fileor submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and ExchangeCommission’s rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer andChief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls andprocedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute,assurance that the objectives of the disclosure controls and procedures met. Our disclosure controls and procedures have been designed to meet reasonableassurance standards. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment inevaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures also is based inpart upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goalsunder all potential future conditions.Based on their evaluation as of the end of the period covered by this Annual Report on Form 10-K, our Chief Executive Officer and Chief FinancialOfficer have concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.(b) Management’s Annual Report on Internal Control over Financial Reporting. This annual report does not include a report of management’sassessment regarding internal control over financial reporting or an attestation report of our registered public accounting firm due to a transition periodestablished by rules of the SEC for newly public companies.(c) Changes in Internal Control over Financial Reporting. There has been no change in our internal control over financial reporting during our mostrecent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.ITEM 9B — OTHER INFORMATIONNone.PART IIIITEM 10 —DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEExecutive Officers and DirectorsThe following table shows information about our executive officers and directors as of February 28, 2011: Name Age PositionYoung K. Sohn 54 President, Chief Executive Officer and DirectorJohn Edmunds 53 Chief Financial Officer and Chief Accounting OfficerRon Torten 43 Vice President of Worldwide SalesDiosdado P. Banatao 64 Chairman of the BoardChenming C. Hu 63 DirectorDavid J. Ladd 64 DirectorTimothy D. Semones 51 DirectorPeter J. Simone 63 DirectorSam S. Srinivasan 66 Lead DirectorLip-Bu Tan 51 Director (1)Member of our audit committee 75(2)(1)(2)(3)(1)(2)(3)(1)(2)(3) Table of Contents(2)Member of our compensation committee(3)Member of our nominating and corporate governance committeeYoung K. Sohn has served as our President and Chief Executive Officer since August 2007 and as a director since July 2007. Prior to joining us,Mr. Sohn served as an Advisor at Panorama Capital, a venture capital firm, from June 2006 to June 2007. From August 2003 until his retirement in March2005, Mr. Sohn served as President of Agilent Technologies, Inc.’s Semiconductor Group, now known as Avago Technologies, and as Chairman and ChiefExecutive Officer of Oak Technology, Inc., a semiconductor company, from 1999 until it was acquired by Zoran Corporation in August 2003. In addition,Mr. Sohn was an advisor to the Massachusetts Institute of Technology Media Lab’s OLPC (One Laptop Per Child) program from 2005 to 2007 and was thepast President and Chairman of the Asia America MultiTechnology Association (AAMA) from 2001 to 2003. He currently serves on the board of directors forARM Holdings PLC and Cymer, Inc. Mr. Sohn holds a B.S. degree in electrical engineering from the University of Pennsylvania and an M.S. degree from theMIT Sloan School of Management.John Edmunds has served as our Chief Financial Officer and Chief Accounting Officer since January 2008. He previously served as Chief FinancialOfficer of Trident Microsystems, a semiconductor company, from June 2004 to January 2008. Mr. Edmunds also served as Senior Vice President and ChiefFinancial Officer for Oak Technology, Inc. from January 2000 until it was acquired by Zoran Corporation in August 2003. He continued to serve as VicePresident of Finance for Zoran until June 2004. Mr. Edmunds started his career as a C.P.A. with Coopers & Lybrand in San Francisco and San Jose. He holdsa B.S. degree in finance and accounting from the University of California, Berkeley.Ron Torten has served as our Vice President of Worldwide Sales since December 2007. Mr. Torten previously served as Chief Executive Officer ofNemeriX, a semiconductor company, from January 2006 to December 2007. From January 2004 to December 2005, he served as Vice President, WorldwideMaterials, at Agilent Technologies, Inc., a semiconductor company. Mr. Torten served as Vice President and General Manager for the NetworkingEntertainment Division at Agere Systems, Inc., a semiconductor company, from April 2000 to January 2004. He holds a B.S. degree in chemical engineeringfrom the Technion—Israel Institute of Technology and an M.B.A. from the University of California, Davis.Diosdado P. Banatao has served on our board of directors and as chairman of our board of directors since December 2000 and served as our InterimPresident and Chief Executive Officer from October 2006 to August 2007. Mr. Banatao has been a Managing Partner of Tallwood Venture Capital, a venturecapital firm, since July 2000 and served as Interim President and Chief Executive Officer at Ikanos Communications, Inc. from April 2010 to August 2010.From April 2008 to June 2009, he also served as Interim Chief Executive Officer of SiRF Technology Holdings, Inc., which was acquired by CSR plc in June2009. Prior to forming Tallwood, Mr. Banatao was a venture partner at Mayfield Fund from January 1998 to May 2000. Mr. Banatao co-founded threetechnology startups: S3 Incorporated, Chips & Technologies and Mostron. He also held positions in engineering and general management at NationalSemiconductor Corporation, Seeq Technologies and Intersil Corporation. Mr. Banatao currently serves on the board of directors of Ikanos Communications,Inc. He previously served as Chairman and led investments in SiRF Technology, acquired by CSR plc (CSR); CSR plc (CSR); Marvell Technology Group(MRVL); Acclaim Communications, acquired by Level One (INTC); Newport Communications, acquired by Broadcom (BRCM); Cyras Systems, acquiredby Ciena (CIEN); and Stream Machine, acquired by Cirrus Logic (CRUS). He has also served on the board of directors of various privately held companiesin the semiconductor industry. Mr. Banatao holds a B.S. degree in electrical engineering, cum laude, from the Mapua Institute of Technology in the Philippinesand an M.S. degree in electrical engineering from Stanford University.Mr. Banatao’s background as a technologist, as well as a senior manager of, board member of, and investor in numerous semiconductor companiesprovides a diversity of experience for his service on our board of directors. The companies with which he has been involved range from start-up companies tovery large public corporations.Dr. Chenming C. Hu has served on our board of directors since August 2010. Since 2004, Dr. Hu has served as the TSMC Distinguished ChairProfessor of Microelectronics in Electrical Engineering and Computer Sciences at University of California, Berkeley, where he has been a professor since1976. From 2001 until 2004, Dr. Hu was the Chief Technology Officer at Taiwan Semiconductor Manufacturing Company. Dr. Hu also serves on the boardsof SanDisk Corp. and Formfactor, Inc. and was the founding board chairman of Celestry Design Solutions. Dr. Hu is a member of the U.S. NationalAcademy of Engineering, the Chinese Academy of Sciences and Academia Sinica. Dr. Hu received his B.S. degree from National Taiwan University and M.S.and Ph.D. degrees from University of California, Berkeley, all in electrical engineering.Dr. Hu’s background as an academic in electrical engineering and computer science provides a diversity of experience for his service on our board ofdirectors and valuable insight into our industry. Dr. Hu has also served on the board of directors of several other technology companies. 76 Table of ContentsDavid J. Ladd has served on our board of directors since June 2007. In 1997, Mr. Ladd joined Mayfield Fund, a forty-one year old venture capitalfirm, where he has served in various capacities as a member of Mayfield Fund’s investment team until his retirement in December 2010. Prior to joiningMayfield Fund, he served as Chief Technology Officer of Octel Communications Corporation from 1994 until it was acquired by Lucent Technologies in1997. In 1981 he co-founded Opcom/VMX, a voice messaging company, which was acquired by Octel in 1994. Mr. Ladd holds aB.S. degree in electrical engineering from the University of California, Berkeley and an M.S. degree in Computer Science from Stevens Institute ofTechnology.Mr. Ladd’s experience as a technologist and as a technology-focused investor, which gives him in-depth knowledge of, and exposure to, currenttechnology and industry trends and developments, provides us with valuable insight into our industry and target markets.Timothy D. Semones is one of our founders and has served as a director since 2001. Mr. Semones also served as our Chief Financial Officer fromNovember 2000 to January 2008 and as our Chief Operating Officer from October 2006 to June 2007. Mr. Semones previously served as the Director ofMarketing at MindSpring Enterprises, an Internet service provider, and the Director of Broadband Technology at Earthlink Network, an Internet serviceprovider. He has also held general management and engineering positions with Measurement Systems, Inc. and Hewlett-Packard Company. Mr. Semones alsosits on the board of directors of Semi Dice, Inc. He holds a B.S. degree in electrical engineering from Georgia Institute of Technology and an M.B.A. from theAnderson School of Management at the University of California, Los Angeles.As one of our founders and a technologist, Mr. Semones has comprehensive expertise and knowledge regarding our semiconductor solutions andtechnology, as well as insight into our anticipated future technological needs and industry needs.Peter J. Simone has served on our board of directors since April 2010. Mr. Simone has served as an investment consultant and as a consultant tonumerous private companies since February 2001. He also served as Executive Chairman of SpeedFam-IPEC, Inc., a semiconductor equipmentmanufacturing company, which was acquired by Novellus Systems, Inc., from June 2001 to December 2002. From February 2000 to February 2001,Mr. Simone served as a director and President of Active Controls Experts, Inc., a manufacturer and distributor of solid-state actuators, and served asPresident, Chief Executive Officer and director of Xionics Document Technologies, Inc., a software company, from April 1997 until Xionics’ acquisition byOak Technology, Inc. in January 2000. Mr. Simone currently serves on the board of directors of Monotype Imaging Holdings Inc., Newport Corporation,Veeco Instruments, Inc. and Cymer, Inc. He previously served on the board of directors of Sanmina-SCI Corporation from 2003 to 2008. Mr. Simone is also amember of the board of directors of the Massachusetts High Technology Council and is vice president of the board of Walker Home and School for Children.Mr. Simone holds a B.S. degree in accounting from Bentley University and an M.B.A. from Babson College.Mr. Simone possesses particular knowledge and operational experience across several industries as well as broad experience in financial markets, whichprovides a diversity of experience.Sam S. Srinivasan has served on our board of directors since June 2007 and as lead director since February 2011. Mr. Srinivasan served as ChiefExecutive Officer and Chairman of Health Language, Inc., a software company, from May 2000 to March 2002 and currently serves as Chairman Emeritus.He also served as Senior Vice President, Finance, Chief Financial Officer of Cirrus Logic, Inc., a semiconductor company, from November 1988 to March1996, and as Director, Internal Audits and subsequently as Corporate Controller of Intel Corporation, a semiconductor company, from May 1984 toNovember 1988. Currently, Mr. Srinivasan serves on the board of directors of TranSwitch Corporation, as well as its nominating and corporate governancecommittee and is the chairman of its audit committee. Mr. Srinivasan previously served on the board of directors of SiRF Technology Holdings, Inc. from2004 to 2009, Centillium Communications, Inc. from 2006 to 2008, and Leadis Technology, Inc. from 2008 to 2009. He holds a B.A. in commerce fromMadras University, India and an M.B.A. from Case Western Reserve University. Mr. Srinivasan is a member of the American Institute of Certified PublicAccountants.Mr. Srinivasan has considerable financial experience with publicly-traded companies and is a certified public accountant. He has also served as adirector for a number of technology companies and as member of various board of director committees.Lip-Bu Tan has served on our board of directors since May 2002. Mr. Tan has served as Chairman of Walden International, an international venturecapital firm, since he founded the firm in 1987. He has also served as President and Chief Executive Officer of Cadence Design Systems, Inc., an electronicdesign automation software and engineering services company, since January 2009 and as a director since 2004. Mr. Tan currently serves on the board ofdirectors of Flextronics International Ltd., Semiconductor 77 Table of ContentsManufacturing International Corporation and SINA Corporation. He previously served on the board of directors of Centillium Communications, Inc. from1997 to 2007, Creative Technology, Ltd. from 1990 to 2009, Integrated Silicon Solution, Inc. from 1990 to 2007, Leadis Technology, Inc. from 2002 to 2006and MindTree Ltd. from 2006 to 2009. He holds a B.S. degree in physics from Nanyang University in Singapore, an M.S. degree in nuclear engineering fromMassachusetts Institute of Technology and an M.B.A. from the University of San Francisco.As Chief Executive Officer of Cadence and a Chairman of an international venture capital firm, as well as a director of a number of technologycompanies, Mr. Tan has extensive experience in the electronic design and semiconductor industries, as well as international operations and corporategovernance expertise.Board CommitteesWe have established an audit committee, a compensation committee and a nominating and corporate governance committee. We believe that thecomposition of these committees meet the criteria for independence under, and the functioning of these committees complies with the applicable requirementsof, the Sarbanes-Oxley Act of 2002, the current rules of the NYSE and SEC rules and regulations. We intend to comply with future requirements as theybecome applicable to us. Our board of directors has determined that Messrs. Simone and Srinivasan are each an audit committee financial expert, as definedby the rules promulgated by the SEC. Each committee has the composition and responsibilities described below:Audit Committee. Messrs. Ladd, Simone and Srinivasan serve on our audit committee. Mr. Srinivasan is chairperson of this committee. Our auditcommittee assists our board of directors in fulfilling its legal and fiduciary obligations in matters involving our accounting, auditing, financial reporting,internal control and legal compliance functions, and is directly responsible for the approval of the services performed by our independent accountants andreviewing of their reports regarding our accounting practices and systems of internal accounting controls. Our audit committee also oversees the audit efforts ofour independent accountants and takes actions as it deems necessary to satisfy itself that the accountants are independent of management. Our audit committeeis also responsible for monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to financialstatements or accounting matters.In addition, our board of directors considered Mr. Simone’s services on the audit committee of four other corporate boards of directors. Mr. Simoneserves as a member of our audit committee. He also serves as the chairman of the audit committee of Monotype, Newport, Veeco and Cymer, all publicly-traded companies. Pursuant to the terms of the audit committee charter and the regulations of the NYSE, our board of directors has determined thatMr. Simone’s simultaneous service on multiple audit committees would not impair his ability to effectively serve on our audit committee.Compensation Committee. Dr. Hu and Messrs. Ladd, Simone and Srinivasan serve on our compensation committee. Mr. Simone is chairperson of thiscommittee. Our compensation committee assists our board of directors in meeting its responsibilities with regard to oversight and determination of executivecompensation and assesses whether our compensation structure establishes appropriate incentives for officers and employees. Our compensation committeereviews and makes recommendations to our board of directors with respect to our major compensation plans, policies and programs. In addition, ourcompensation committee reviews and makes recommendations for approval by the independent members of our board of directors regarding the compensationfor our executive officers, establishes, modifies the terms and conditions of employment of our executive officers and administers our stock option plans.Nominating and Corporate Governance Committee. Messrs. Ladd, Simone and Srinivasan serve on our nominating and corporate governancecommittee. Mr. Ladd is chairperson of this committee. Our nominating and corporate governance committee is responsible for making recommendations to ourboard of directors regarding candidates for directorships and the size and composition of the board. In addition, our nominating and corporate governancecommittee is responsible for overseeing our corporate governance guidelines, and reporting and making recommendations to the board concerning corporategovernance matters.Compensation Committee Interlocks and Insider ParticipationDr. Hu and Messrs. Ladd, Simone and Srinivasan served as members of our compensation committee during 2010. None of the members of ourcompensation committee is or has in the past served as an officer or employee of our company. None of our executive officers currently serves, or in the pastyear has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board ofdirectors or compensation committee. 78 Table of ContentsSection 16(a) Beneficial Ownership Reporting ComplianceSection 16(a) of the Securities Exchange Act of 1934, requires our executive officers and directors, and persons who own more than 10% of a registeredclass of our equity securities, to file reports of ownership on Forms 3, 4 and 5 with the SEC. Officers, directors and greater than 10% stockholders arerequired to furnish us with copies of all Forms 3, 4 and 5 they file.Based solely on our review of the copies of such forms we have received and written representations from certain reporting persons that they filed allrequired reports, we believe that all of our officers, directors and greater than 10% stockholders complied with all Section 16(a) filing requirements applicableto them with respect to transactions during fiscal year ended December 31, 2010.Code of EthicsOur written Code of Business Conduct and Ethics applies to all of its directors and employees, including its executive officers. The Code of BusinessConduct and Ethics is available on our website at http://www.inphi.com. Changes to or waivers of the Code of Business Conduct and Ethics will be disclosedon the same website.ITEM 11 — EXECUTIVE COMPENSATIONEXECUTIVE COMPENSATIONCompensation Discussion and AnalysisExecutive SummaryThis Compensation Discussion and Analysis discusses the compensation programs and policies for our principal executive officer, principal financialofficer and our two other mostly highly compensated executive officers as determined by the rules of the SEC. In February 2011, Dr. Raghavan resigned fromhis position as Chief Technology Officer. Our named executive officers and their positions in 2010 were: Young K. Sohn President and Chief Executive OfficerJohn Edmunds Chief Financial Officer and Chief Accounting OfficerGopal Raghavan Former Chief Technology OfficerRon Torten Vice President of Worldwide SalesRecommendations for executive compensation are made by our Compensation Committee and approved our board of directors, except that compensationrecommendations for our Chief Executive Officer are approved by the non-employee members of our board of directors. The primary components ofcompensation for our named executive officers were base salary, cash incentive compensation and equity-based compensation. The following informationshould be read together with the compensation tables and related disclosures set forth below.Objectives of the Executive Compensation ProgramOur executive compensation program is shaped by the competitive market for executives in the semiconductor industry. We have designed an executivecompensation program with the following primary objectives: • to attract, retain and motivate talented and experienced executives; • to provide fair, equitable and reasonable compensation to each executive officer; • to reward job performance, and • to further align the interest of our executive officers with that of our stockholders.Since we were founded in 2000, our executive compensation program has focused primarily on attracting executive talent to manage and operate ourbusiness, retaining individuals whose employment is key to our success and growth, and rewarding individuals who help us achieve our business objectives.We aim to achieve these objectives while preserving our cash resources, largely through equity-based compensation. By focusing our executive compensationprogram primarily on equity-based compensation, we have sought to align the interest of our executive officers and stockholders by motivating executiveofficers to increase the value of our stock over time.Our Compensation Committee expects to: • refine and modify our compensation programs to further reflect the competitive market for executive talent and our changing business needs as apublic company; • use individual and corporate performance goals to tie the compensation of our executive officers to our financial performance and creation ofstockholder value; • use equity-based award programs to continue the long-term connection with stockholder value and executive compensation; and 79 Table of Contents • structure our executive compensation program as to not incentivize unnecessary risk-taking.Role of Compensation CommitteeOur compensation committee is currently comprised of four independent, non-employee directors, Mr. Simone (Chairman), Dr. Hu, Mr. Ladd andMr. Srinivasan. Our compensation committee determines and recommends to our board of directors the compensation for our executive officers. With respectto our named executive officers, other than our Chief Executive Officer, our compensation committee meets with our Chief Executive Officer as needed toprovide evaluations of our executive officers and other relevant information to our compensation committee and makes recommendations regarding appropriatecompensation for each executive, including merit increases, changes to incentive compensation and grant of equity awards. Historically, our compensationcommittee has established the executive compensation by considering the competitive market for corresponding positions at companies of similar size and stageof development operating in the semiconductor industry. Specifically, our compensation committee used research and industry standards based on theirpersonal knowledge of the competitive market. In 2010, to complement its review of executive compensation for our named executive officers, ourcompensation committee consulted the 2009 High Technology Executive Compensation Survey, a publicly available compensation survey prepared byRadford, a compensation consulting firm, to benchmark our executive compensation against companies with similar revenues, market capitalization and otherfinancial measures within our industry. We expect that our compensation committee will continue to engage an independent consultant in setting our executivecompensation program.2010 Competitive Market ReviewOur compensation committee has the sole authority to retain compensation consultants to assist in its evaluation of our executive compensation program,including authority to approve the consultant’s fees and other terms of its engagement. Our compensation committee engaged Radford in January 2010 toperform the following services: • assess and provide recommendations with respect to updating the list of peer companies against which we benchmark our executivecompensation; • brief our compensation committee on current compensation market trends; • assess our performance against our peer groups and evaluate our current executive compensation program with a view to supporting andreinforcing our long-term strategic goals; and • assist our compensation committee in developing a competitive executive compensation program to reinforce our long-term strategic goals.To understand our position relative to market, it has been our historical practice to consider the market for comparable positions on an annual basis toensure executive compensation remains competitive. Going forward, our compensation committee intends to evaluate the practice of setting our executivecompensation program at the median of our peer group as established by our compensation committee. In 2010, Radford selected the following 16 companiesto create a benchmark for assistance in determining competitive compensation packages. Advanced Analogic TechnologiesApplied Micro CircuitsCavium NetworksCirrus Logic Hittite MicrowaveIntegrated Device TechnologyLattice SemiconductorMicrel MicrosemiMonolithic Power SystemsNetlogic MicrosystemsPower Integrations SemtechSilicon LabsStandard MicrosystemsVolterra SemiconductorElements of Executive CompensationOverviewOur executive compensation program consists of three principal components: • base salary; • cash incentive compensation; and • equity-based compensation.We also provide our executive officers with other benefits, including commuting allowance, severance, change-of-control benefits and the ability toparticipate in employee benefit plans on the same terms as all other eligible employees. While we do not have an exact formula for allocating between cash andnon-cash compensation, we try to balance long-term equity versus short-term cash compensation and variable compensation versus fixed compensation.Base SalaryOur base salaries are intended to provide financial stability, predictability and security of compensation for our executive officers for fulfilling their corejob responsibilities. Our compensation committee considered several factors in determining base salaries, 80 Table of Contentsincluding each executive officer’s position, functional role, scope of responsibilities and seniority, individual performance, our financial performance and therelative ease or difficulty of replacing such executive officer with a person with comparable experience.The effective base salary for each of our named executive officers for 2009 and 2010 was as follows: Annual Base Salary Named Executive Officer 2009 2010 Young K. Sohn $250,000 $300,000 John Edmunds $250,000 $260,000 Gopal Raghavan $200,000 $225,000 Ron Torten $200,000 $225,000 (1)Reflects the highest annualized base salary established for the named executive officer during each year.From our time of incorporation until 2009, we did not make substantial increases in our base salary structure for our executive officers. As we did notrealize net profits and positive cash flows from operations until second quarter of 2009, our base salaries reflected our status as a start-up company focusedprincipally on technology and product development and efficient use of limited cash resources. However, in 2009, our revenue began to increase and wegenerated positive cash flows. Accordingly, our compensation committee approved the increase in base salaries of our executive officers in light of theiradditional responsibilities as we focused on increased customer and revenue growth. The increase was consistent with the Radford survey of base salariesfrom our peer group and brought our executive officers’ base salaries to approximately the 25th percentile of base salaries of our peer group.Cash Incentive CompensationOur cash incentive compensation is intended to incentivize our executive officers in the achievement of our pre-determined financial objectives andindividual performance objectives. We believe it is important to provide our executive officers with the opportunity to earn annual cash incentive payments toreward performance and the achievement of various pre-determined objectives. In 2010, we established an annual cash incentive plan for our executive officersin 2010 and we anticipate that we will establish similar cash incentive plans in the future. Under the annual cash compensation plan, an executive officer’sannual cash incentive award will generally depend on two performance factors, one related to our financial performance and one related to the executiveofficer’s individual performance as measured against specific management-by-objective goals, or MBO.Year 2010In 2010, our compensation committee approved a financial performance-based cash incentive plan for our executive officers. The performance target isbased on our revenue growth, and the MBO goals for each of our named executive officers, which include, but are not limited to, achieving our financialperformance goals, maintaining leadership in the market, building strong engagements with customers, introducing new products and preparing for our initialpublic offering. Under this cash incentive plan, if our revenue for the year ended December 31, 2010 equaled or exceeded $72 million, then our bonus poolwould be equal to 6% of our targeted earnings before income tax, stock-based compensation expense, and depreciation and amortization. Our bonus pool couldincrease up to a maximum of 12% of our targeted earnings before income tax, stock-based compensation expense, and depreciation and amortization if weexceed our revenue target by 15% or more. The target amounts that could be paid out of the available bonus pool to our named executive officers are as follows: Named Executive Officer Target CashIncentive ($) Percentage ofBase Salary(%) Maximum CashIncentive ($) Percentage ofBase Salary(%) Young K. Sohn 150,000 50 300,000 100 John Edmunds 78,000 30 156,000 60 Gopal Raghavan 67,500 30 135,000 60 Ron Torten 67,500 30 135,000 60 Mr. Sohn’s MBO goals in 2010 were centered around us achieving a corporate revenue goal of $72 million, as well as achieving product developmentand market penetration goals, exploring potential growth through establishing relationships with third parties and preparing for a possible initial publicoffering. Mr. Edmunds’s MBO goals in 2010 were centered around us achieving a corporate revenue goal of $72 million, completing our initial public offeringand leading certain functional areas within the company. Mr. Raghavan’s MBO goals in 2010 were aligned with developing and maintaining technologyleadership and exploring the technology aspects of certain potential strategic relationship opportunities. Mr. Torten’s MBO goals for 2010 were based upon usachieving our corporate revenue objective of $72 million and upon achieving his individual MBO goals to increase sales in order for us to achieve ourcorporate revenue target of $72 million, to increase design wins and to maintain our leadership position in the markets in which we compete. For 2010, ourrevenue was $83.2 million, exceeding our corporate revenue goal of $72 million. As a result, our named executive officers were eligible to receive a cashincentive payment from the bonus pool. As discussed above, bonuses for each of our named executive officers were determined based on their overallperformance and contribution to our 81(1) Table of Contentscompany, taking into account their MBO goals. In assessing each individual’s performance, our compensation committee did not apply a quantitativeanalysis but instead made a qualitative assessment of the relative importance of the overall objectives achieved by each of our named executive officers. Thebonus paid to each of our named executive officers is set forth in the 2010 Summary Compensation Table under Non-Equity Incentive Plan Compensation.Year 2011In 2011, our compensation committee approved a financial performance-based cash incentive plan for our named executive officers similar to what wasin place for 2010. For 2011, the performance target is based on our operating income growth and the MBO goals for each of our named executive officers,which include, but are not limited, achieving our financial performance goals, maintaining leadership in the market, building strong engagements withcustomers, introducing new products and operating in good form as a public company. In 2011, if we exceed our operating income targets, 33% of such excesswill fund the bonus pool for all employees up to a total of $2 million. We believe that the 2011 goals are reasonably challenging to incentivize our namedexecutive officers to achieve returns for our stockholders, considered in light of general economic conditions, our company and industry, and competitiveconditions. In our judgment, the threshold targets are set at levels exceeding the prior year and are intended to incentivize our executive officers to increasestockholder return.Equity-Based CompensationOur equity-based compensation is intended to incentivize and retain executive officers through the use of time-based vesting while tying our long-termfinancial performance and stockholder value creation to the executive officer’s financial gain. Historically, equity-based compensation has been our primarylong-term incentive compensation component. We believe that equity-based compensation has been and will continue to be a significant part of our executiveofficers’ total compensation packages. We believe both time-based vesting and shares financial success are long-term incentives that motivate executive officersto grow revenue and earnings, enhance stockholder value and align the interests of our stockholders and executives over the long-term. We believe that long-term performance is achieved through an ownership culture that encourages a high level of continuously improving performance by our executive officersthrough grants of equity awards. The vesting feature of our equity grants contributes to executive officer retention as this feature provides an incentive to ourexecutive officers to remain in our employ during the vesting period. To date, stock options have been the only type of equity award granted to our executiveofficers.The equity-based awards granted to our executive officers have been in the form of stock options granted at fair market value with time-based vestingunder our 2000 Stock Plan. All of our executive officers receive equity-based awards when they are hired and these awards typically vest over a four-yearperiod, with 1/4th of the shares vesting one year from the vesting commencement date and the remaining shares vesting in equal monthly installments over thefollowing 36 months. The level of equity-based compensation is reviewed periodically and additional option grants are made from time to time. In the future,we expect our compensation committee to review equity-based compensation levels, along with our base salary and annual cash incentives, on an annual basis.In 2010, our named executive officers were awarded the following stock options under our 2000 Stock Plan: Named Executive Officer Date of Award Number of Shares Young K. Sohn 4/30/2010 128,571 John Edmunds 4/30/2010 42,856 Gopal Raghavan 4/30/2010 107,142 Ron Torten 4/30/2010 21,428 7/14/2010 428 (1)The awards will begin vesting on April 30, 2011 and will vest as to 1/48th of the shares monthly thereafter over the 48 succeeding months.(2)This award vested immediately in full.Our compensation committee granted the above awards in recognition of our named executive officers’ efforts during the previous year after consideringthe extraordinary growth and development of our business. In determining the amount of the awards above, our compensation committee considered theexecutive officer’s position, the existing equity awards held by the executive officer and the total number of equity awards outstanding. The equity-basedawards are meant to provide long-term incentives to motivate the executive officers to stay and contribute to our continuous growth.Other Compensatory BenefitsWe believe it is appropriate and necessary for recruitment and retention to provide our executive officers with other forms of compensatory benefits,including the following:Severance and Change of Control Benefits. Certain of our named executive officers are entitled to severance and change of control benefits pursuant totheir offer letters. We believe these severance and change of control benefits are an essential element of our executive compensation package that enables us torecruit and retain talented executives, the terms of which are described below under “—Employment, Severance and Change in Control Arrangements.” 82(1)(1)(1)(1)(2) Table of ContentsBenefits. We maintain broad-based benefits that are provided to all eligible employees, including our 401(k), flexible spending accounts, medical, dentaland vision care plans, our life and accidental death and dismemberment insurance policies and long-term and short-term disability plans. Executive officersare eligible to participate in each of these programs on the same terms as non-executive employees. We do not provide any retirement benefits separate from the401(k).Other Compensation. We pay Mr. Sohn a commuting allowance to reimburse him for expenses incurred traveling between our Westlake Village officeand his place of residence. Under his offer letter, Mr. Sohn is entitled to a commuting allowance of $50,000 per year. The value of this benefit is included inthe “2010 Summary Compensation Table” under “All Other Compensation.”Accounting and Tax ConsiderationsSection 162(m). Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended, or the Code, which will become applicable to us upon theclosing of this offering, generally disallows a tax deduction for compensation in excess of $1.0 million paid to any and each of our Chief Executive Officer andother highest paid officers in office at year end. Qualifying performance-based compensation is not subject to the deduction limitation if specified requirementsare met. We periodically review the potential consequences of Section 162(m) and we generally intend to structure the performance-based portion of ourexecutive compensation, where feasible, to comply with exemptions in Section 162(m) so that the compensation remains tax deductible to us. However, ourcompensation committee may, in its judgment, authorize compensation payments that do not comply with the exemptions in Section 162(m) when it believesthat such payments are appropriate to attract and retain executive talent.Share-based compensation cost is measured at grant date, based on the fair value of the awards, and is recognized as an expense over the requisiteemployee service period. Our compensation committee has determined to retain for the foreseeable future our stock option program as the sole component of itslong-term compensation program and to record this expense on an ongoing basis.Compensation Policies and Practices as They Relate to Risk ManagementWe believe that our compensation policies and practices for all employees, including our executive officers, do not create risks that are reasonably likelyto have a material adverse effect on our company. In making this determination, we assessed our executive and broad-based compensation and benefitsprograms to determine if the programs’ provisions and operations create undesired or unintentional risk of a material nature. This risk assessment processincluded a review of our compensation policies and practices and an analysis of our executive compensation program. Although we reviewed all compensationprograms, we focused on the programs with variability of payout, with the ability of a participant to directly affect payout and the controls on participantaction and payout. Based on the foregoing, we believe that our compensation policies and practices do not create inappropriate or unintended significant risk tous as a whole. We also believe that our incentive compensation arrangements provide incentives that do not encourage risk-taking beyond the organization’sability to effectively identify and manage significant risks, are compatible with effective internal controls and our risk management practices, and aresupported by the oversight and administration of our compensation committee with regard to our executive compensation program.Several features in our compensation programs and policies mitigate or reduce the likelihood of excessive risk-taking by employees, including thefollowing: • The core principles outlined above and compensation program elements discussed below are designed to align goals with stockholder interests. • Pay typically consists of a mix of fixed and variable compensation, with the variable compensation designed to reward both short-and long-termcorporate performance. • A significant portion of our executive officers’ total direct compensation is in the form of equity awards that usually vest over multiple years.Internal controls, the number of people involved and discipline over financial records, financial reporting, disclosure and externalcommunications tend to dilute the ability of any one individual to single handedly have a material influence on our financial reporting in a waythat would materially increase the potential value of an individual’s equity award. • The funded pool of our annual bonus program is dependent upon company revenue performance relative to the annual plan and capped in total byour board of directors when the annual business plan is approved in the beginning of the year. All individual awards for executives from the poolare reviewed by our compensation committee in relation to the individual performance against specific preset objectives. All other awards toindividual contributors are also reviewed by the committee for reasonableness and equity among the employees. • Our compensation committee has the ability to use, and has used, negative discretion to reduce payouts under the annual bonuses as appropriateto the circumstances. • Our determination that our compensation policies and practices do not create risks that are reasonably likely to have a material adverse effect onour company was based upon the considerations identified above. 83 Table of Contents2010 Summary Compensation TableThe following table sets forth compensation for services rendered in all capacities to us for the years ended December 31, 2010 and 2009 for ourPresident and Chief Executive Officer, our Chief Financial Officer and our two other most highly compensated executive officers as of December 31, 2010,whom we refer to as the named executive officers. Name & Principal Position Year Salary($) OptionAwards($) Non-EquityIncentive PlanCompensation($) All OtherCompensation($) Total ($) Young K. Sohn 2010 289,583 730,290 175,000 50,000 1,244,873 President and Chief Executive Officer 2009 250,000 — 100,000 50,000 400,000 John Edmunds 2010 260,000 243,430 63,000 — 566,430 Chief Financial Officer and Chief Accounting Officer 2009 250,000 12,195 40,000 — 302,195 Gopal Raghavan 2010 220,833 608,575 65,000 — 894,408 Chief Technology Officer 2009 200,000 41,349 53,200 — 294,549 Ron Torten 2010 212,500 124,433 75,757 — 412,690 Vice President of Worldwide Sales 2009 200,000 15,118 109,161 — 324,279 (1)The amount reflects the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718, rather than the amounts paidto or realized by the named individual. We provide information regarding the assumptions used to calculate the value of all stock option awards made toexecutive officers in note 11 to the notes to our consolidated financial statements. There can be no assurance that awards will vest or will be exercised (inwhich case no value will be realized by the individual), or that the value upon exercise will approximate the aggregate grant date fair value. None of ourexecutive officers forfeited any option awards in 2010.(2)Reflects the amount approved by our compensation committee as cash incentive to executive officers for 2010 based upon satisfaction of the criteriaunder our 2010 bonus program. See “Compensation Discussion and Analysis—Cash Incentive Compensation” for a discussion on our bonus plan in2010.(3)Represents commuting allowance.(4)Dr. Raghavan resigned as our Chief Technology Officer effective February 18, 2011.Grants of Plan-Based Awards in 2010The following table sets forth information on grants of plan-based awards in 2010 to our named executive Estimated Future Payouts UnderNon-Equity Incentive PlanAwards All Other OptionAwards: Number ofSecurities UnderlyingOptions (#) Exercise or BasePrice of OptionAwards ($/Sh) Grant Date FairValue of Stockand OptionAwards($) Name GrantDate Threshold($) Target($) Maximum($) Young K. Sohn 4/30/10 128,571 9.29 730,290 — 150,000 300,000 — — — John Edmunds 4/30/10 42,856 9.29 243,430 — 78,000 156,000 — — — Gopal Raghavan 4/30/10 707,142 9.29 608,575 — 67,500 135,000 — — — Ron Torten 4/30/10 21,428 9.29 121,715 7/14/10 428 12.02 2,718 — 67,000 135,000 — — — (1)The target incentive amounts shown in this column reflect our annual bonus awards originally provided under our cash incentive plan and representspre-established target awards as a percentage of base salary for fiscal year ended December 31, 2010, with the potential for actual awards under the planto either exceed or be less than such funding target depending upon corporate performance. Actual award amounts are not guaranteed and are determinedat the discretion of the Compensation Committee, which may consider an individual’s performance during the period. For additional information, pleaserefer to the Compensation Discussion and Analysis section. Actual cash incentive plan payouts are reflected in the Non-Equity Incentive PlanCompensation column of the 2010 Summary Compensation Table.(2)The threshold illustrates the smallest payout that can be made if all of the pre-established performance objectives are achieved at the minimumachievement level. Actual awards may be more or less than these amounts and are at the discretion of the Compensation Committee. The target is thepayout that can be made if the pre-established performance objectives have been achieved at the target achievement level. The maximum is the greatestpayout that can be made if the pre-established maximum performance objectives are achieved or exceeded at the outperform achievement levels.(3)The amount reflects the aggregate grant date fair value of the awards computed in accordance with FASB ASC Topic 718, rather than the amounts paidto or realized by the named individual. We provide information regarding the assumptions used to calculate the value of all awards of stock optionsmade to executive officers in note 11 to the notes to our consolidated financial statements. There can be no assurance 84(1)(2)(3)(4)(1) (2)(3) Table of Contents that awards will vest or will be exercised (in which case no value will be realized by the individual), or that the value upon exercise will approximate theaggregate grant date fair value. None of our executive officers forfeited any option awards in 2010.Narrative to 2010 Summary Compensation Table and Grants Plan-Based Awards in 2010 TablePlease see “—Compensation Discussion and Analysis” above for a complete description of compensation plans pursuant to which the amounts listedunder the 2010 Summary Compensation Table and Grants of Plan-Based Awards in 2010 Table were paid or awarded and the criteria for such payment,including targets for payment of annual incentives, as well as performance criteria on which such payments were based. The Compensation Discussion andAnalysis also describes the options grants.Outstanding Equity Awards at December 31, 2010The following table presents certain information concerning equity awards held by our named executive officers at December 31, 2010. Option AwardsName Number of SecuritiesUnderlyingUnexercised Options(#) Exercisable Number of SecuritiesUnderlyingUnexercised Options(#) Unexercisable Option ExercisePrice ($) OptionExpiration DateYoung K. Sohn 866,704 — 1.78 8/15/2017 128,571 — 9.29 4/30/2020John Edmunds 183,221 — 1.96 3/12/2018 12,857 — 1.47 2/25/2019 42,856 — 9.29 4/30/2020Gopal Raghavan 143,666 — 2.34 6/7/2012 268,761 — 0.70 5/19/2014 200,571 — 1.05 5/5/2016 42,857 — 1.47 2/25/2019 428 — 2.62 8/27/2019 107,142 — 9.29 4/30/2020Ron Torten 193,165 — 1.96 3/12/2018 8,571 — 1.47 2/25/2019 4,285 — 2.62 8/27/2019 21,428 — 9.29 4/30/2020 428 — 12.02 7/14/2020 (1)Except as otherwise noted, all option awards listed in the table vest as to 1/4th of the total number of shares subject to the option 12 months after thevesting commencement date, and the remaining shares vest at a rate of 1/48th of the total number of shares subject to the option each month thereafter.Unless otherwise noted, all option awards are subject to early exercise, subject to our right of repurchase during the vesting period.(2)This stock option vests in full after three years of service from the grant date.(3)This stock option is fully vested.(4)This stock option vests in a series of 48 successive equal monthly installments upon completion of each additional month of service over the 48-monthperiod measured from the first anniversary of such optionee’s vesting commencement date.Option Exercises and Stock Vested in 2010The following table sets forth the number of shares acquired upon exercise of options by each named executive officer during 2010. Option Awards Name Number of SharesAcquired on Exercise (#) Value Realized OnExercise ($)(1) Young K. Sohn — — John Edmunds — — Gopal Raghavan 67,285 755,521 Ron Torten 10,285 103,261 (1)Value realized is based on the fair market value of our common stock on the date of exercise minus the exercise price. As there was no public market forour common stock on the dates the options were exercised, we have assumed the fair market value on the date of exercise was $12.00, the initial publicoffering price per share. 85(1)(4)(2)(4)(3)(3)(2)(3)(4)(2)(3)(4)(3) Table of ContentsEmployment, Severance and Change in Control ArrangementsIn July 2007, we entered into an offer letter agreement with Young K. Sohn, our Chief Executive Officer. This offer letter agreement set Mr. Sohn’s basesalary at an annual rate of $250,000. Pursuant to the offer letter agreement, Mr. Sohn is entitled to a commuting allowance of $50,000 annually, or $4,167 permonth. In addition, Mr. Sohn was granted options to purchase 1,220,703 shares of our common stock under the 2000 Stock Plan. Mr. Sohn is also entitled toparticipate in all employee benefit plans, including group health care plans and all fringe benefit plans. Mr. Sohn’s offer letter agreement provides that he is anat-will employee and his employment may be terminated at any time by us. On June 8, 2010, we entered into an amendment to Mr. Sohn’s offer letter toconform his offer letter to the requirements of Section 409A of the Code.Pursuant to Mr. Sohn’s offer letter agreement, if Mr. Sohn’s employment terminates after a “corporate transaction” as defined below, he will receive oneyear of benefits and salary. If he is involuntarily terminated within 18 months of a “corporate transaction,” then his options granted under the offer letteragreement will become fully vested. If Mr. Sohn’s employment is involuntarily terminated and his termination is not subsequent to a “corporate transaction”,as defined below, Mr. Sohn will receive one year of benefits. However, these provisions were superseded pursuant to a change of control severance agreementwe entered into with Mr. Sohn on June 8, 2010. Under this change of control severance agreement, if Mr. Sohn is terminated by us without “cause,” as definedbelow, or if he resigns for “good reason,” as defined below, within 12 months of an Inphi “change of control,” as defined below, Mr. Sohn will be entitled toreceive a lump sum equal to 200% of the sum of his annual base salary, plus his annual target bonus as in effect on his termination date. In addition, ifMr. Sohn elects and pays to continue health insurance under the Consolidated Omnibus Budget Reconciliation Act of 1985, or COBRA, we will reimburseMr. Sohn on a monthly basis an amount equal to the monthly amount we were paying as the employer-portion of premium contributions for health coveragefor Mr. Sohn and his eligible dependents, until the earlier of (a) the end of the 24–month period following his termination date or (b) the date Mr. Sohn or hiseligible dependents lose eligibility for COBRA continued coverage. We also agreed to accelerate the vesting of 100% of his unvested outstanding equity awards.In December 2007, we entered into an offer letter agreement with John Edmunds, our Chief Financial Officer. This offer letter agreement setMr. Edmunds’ base salary at an annual rate of $250,000. Pursuant to the offer letter agreement, Mr. Edmunds was entitled to a commuting allowance of$2,000 per month and a relocation allowance of up to $25,000 in the event he relocates to Westlake Village. However, it was agreed that instead of receivingthis commuting allowance, we would reimburse Mr. Edmunds for travel expenses incurred for traveling between our headquarters in Sunnyvale, Californiaand Westlake Village, California. In addition, Mr. Edmunds was granted options to purchase 183,221 shares of common stock, determined by our board ofdirectors under the 2000 Stock Plan. Mr. Edmunds is also entitled to participate in all employee benefit plans, including group health care plans and all fringebenefit plans. Mr. Edmunds’ offer letter agreement provides that he is an at-will employee and his employment may be terminated at any time by us.The offer letter agreement further provided that if Mr. Edmunds’ employment terminates within 18 months after a “corporate transaction”, as definedbelow, his option granted under his offer letter agreement will accelerate as to 50% of the unvested shares. However, pursuant to his stock option agreement, thevesting of the option will accelerate and the option will become fully vested. These provisions were superseded pursuant to a change of control severanceagreement we entered into with Mr. Edmunds on June 8, 2010. Under this change of control severance agreement, if Mr. Edmunds is terminated by us without“cause,” as defined below, or if he resigns for “good reason,” as defined below, within 12 months of an Inphi “change of control,” as defined below,Mr. Edmunds will be entitled to receive a lump sum equal to 150% of the sum of his annual base salary, plus his annual target bonus as in effect on histermination date. In addition, if Mr. Edmunds elects and pays to continue health insurance under COBRA, we will reimburse Mr. Edmunds on a monthlybasis an amount equal to the monthly amount we were paying as the employer-portion of premium contributions for health coverage for Mr. Edmunds and hiseligible dependents, until the earlier of (a) the end of the 18-month period following his termination date or (b) the date Mr. Edmunds or his eligible dependentslose eligibility for COBRA continued coverage. We also agreed to accelerate the vesting of 100% of his unvested outstanding equity awards.For purposes of the offer letter agreements above, “corporate transaction” is defined as: (a) a merger or consolidation in which securities possessing morethan 50% of the total combined voting power of our outstanding securities are transferred to a person or persons different from the persons holding thosesecurities immediately prior to such transaction or (b) the sale, transfer or other disposition of all or substantially all of our assets in complete liquidation ordissolution of our company.For purposes of the change of control agreements above, “good reason” is defined as (a) a reduction in compensation by greater than 10%, unless part ofa general reduction in compensation applicable to our senior executives, (b) relocation of job site by more than 50 miles, or (c) a material reduction in jobresponsibilities, change in title or change in reporting structure.The term “cause” is defined as (a) commission of a felony, an act involving moral turpitude, or an act constituting common law fraud, and which has amaterial adverse effect on our the business or affairs or that of our affiliates or stockholders, (b) intentional or willful misconduct or refusal to follow thelawful instructions of our board of directors, or (c) intentional breach of our confidential information obligations which has an adverse effect on us or ouraffiliates or stockholders.The term “change of control” is defined as the occurrence of any one of the following events: 86 Table of Contents • the approval by our stockholders of our liquidation or dissolution or the sale or disposition of all or substantially all of our assets; • a merger or consolidation where we are not the surviving entity; • any person or persons becoming the beneficial owner, directly or indirectly, of 50% or more of the total voting power of our then outstandingvoting securities; or • a change in the composition of our board of directors, as a result of which fewer than a majority of the directors who are currently on our board ofdirectors or who are elected, or nominated for election, to our board of directors with the affirmative votes of at least a majority of those directorswhose election or nomination was not in connection with any transactions described in subsections (a), (b) or (c), or in connection with an actualor threatened proxy contest relating to our election of directors.Potential Payments Upon Termination and Change of ControlThe following table shows the potential payments that would have been paid to our named executive officers if they had been involuntarily terminated onDecember 31, 2010. InvoluntaryTermination without aChange of Control Involuntary Termination Following a Change of Control Name Health Care Benefits($) SeverancePaymentsAttributable toSalary ($) Value of AcceleratedEquity Awards ($) Health Care Benefits($) Young K. Sohn 21,760 750,000 4,648,113 36,298 John Edmunds — 468,000 1,601,907 17,837 Gopal Raghavan — — — — Ron Torten — — — — (1)The amount represents the fair market value per share of our common stock as of December 31, 2010, less the option exercise price ($1.78 and $9.29)multiplied by the unvested options as of December 31, 2010 (306,591 options). The closing price of our common stock on December 31, 2010 was$20.09.(2)The amount represents the fair market value per share of our common stock as of December 31, 2010, less the option exercise price ($1.47, $1.96 and$9.29) multiplied by unvested options as of December 31, 2010 (105,336 options). The closing price of our common stock on December 31, 2010 was$20.09.Each executive will not receive a gross-up payment if the executive officer is required to pay excise tax under Section 4999 of the Code.In addition to the benefits described above, our 2000 Stock Plan provides for the acceleration of vesting of awards in certain circumstances in connectionwith a change of control of our company. See “Employee Benefit Plans” below.COMPENSATION OF DIRECTORSPrior to our initial public offering, our independent directors received an annual retainer of $32,000 and the chairman of our audit committee received anadditional annual retainer of $10,000. In addition, for a description of our compensation arrangements with Young K. Sohn, see “Executive Compensation.”Following completion of our initial public offering in November 2010, our non-employee directors, other than our Chairman of the Board and the leaddirector, receive an annual retainer of $32,000, prorated for partial service in any year. Our Chairman of the Board and lead director receive an annual retainerof $50,000 and $40,000, respectively, so long as such director is not an employee of Inphi. Members of our audit committee, compensation committee andnominating and corporate governance committee, other than the chairpersons of those committees, receive an additional annual retainer of $7,500, $5,000 and$4,000, respectively. The chairpersons of our audit committee, compensation committee and nominating and corporate governance committee each receive anadditional annual retainer of $15,000, $10,000 and $7,500, respectively.In addition, non-employee directors receive nondiscretionary, automatic grants of restricted stock units our 2010 Stock Incentive Plan. A non-employeedirector, other than those currently serving on our board of directors, will be automatically granted an initial restricted stock unit for shares of our commonstock that have a value of $160,000, calculated using the fair market value of our common stock on the date of grant, upon becoming a member of our boardof directors. The initial option will vest over four years in equal annual installments. On the first business day following each of our regularly scheduledannual meetings of stockholders, each 87(1)(2) Table of Contentsnon-employee director will be automatically granted a restricted stock unit for shares of our common stock that have a value of $80,000, calculated using thefair market value of our common stock on the date of grant, provided the director has served on our board of directors for at least six months. These restrictedstock units will vest on the first anniversary of the date of grant or immediately prior to our next annual meeting of stockholders, if earlier. The restricted stockunits granted to non-employee directors will have a per share fair value equal to the closing price of the underlying shares on the date of grant as reported on theNew York Stock Exchange and will become fully vested if a change in control occurs.We also reimbursed our non-employee directors for their reasonable out-of-pocket costs and travel expenses in connection with their attendance at boardand committee meetings.2010 Director CompensationThe following table sets forth the compensation paid or accrued by us to our non-employee directors in 2010. The table excludes Young K. Sohn, whodid not receive any additional compensation from us for his role as a director because he is our Chief Executive Officer. Name Fees Earned or Paidin Cash ($) StockAwards($) All OtherCompensation Total($) Diosdado Banatao 6,250 — — 6,250 Chenming C. Hu 12,625 206,047 — 218,672 Timothy D. Semones 4,000 — 86,4000 90,400 Peter J. Simone 29,188 159,249 — 188,437 Sam S. Srinivasan 43,750 — — 43,750 (1)Amounts listed in this column represent the fair value of the awards computed in accordance with FASB ASC Topic 718 as of the grant date multipliedby the number of shares. See note 11 of the notes to our consolidated financial statements for a discussion of assumptions made in determining the grantdate fair value.(2)Please see the outstanding equity awards table below for the details of the stock awards granted.(3)Represents fees earned for consulting services.The following table lists all outstanding equity awards held by non-employee directors as of the end of December 31, 2010: Option Awards Stock Awards Name OptionGrantDate Number ofSecuritiesUnderlyingUnexercisedOptionsExercisable Number ofSecuritiesUnderlyingUnexercisedOptionsUnexercisable OptionExercisePrice OptionExpirationDate StockAwardGrantDate Number ofShares orUnits ThatHave NotVested (#) MarketValue ofShares orUnits ThatHave NotVested ($) Sam S. Srinivasan 8/15/07 25,714 — $1.78 8/15/2017 8/27/09 19,285 — $2.62 8/27/2019 Timothy D. Semones 6/7/02 6,866 — $2.34 6/7/2012 5/5/06 4,285 — $1.05 5/5/2016 2/16/07 56,888 — $1.22 2/16/2017 8/15/07 28,444 — $1.78 8/15/2017 10/17/07 51,428 — $1.94 10/17/2017 Chenming C. Hu 8/17/10 17,142 344,383 Peter J. Simone 4/30/10 17,142 344,383 (1)The grant date fair value of the common stock underlying these option awards was equal to the option exercise price on the date the stock options weregranted.(2)The amount represents the fair market value of our common stock as of December 31, 2010 multiplied by unvested shares as of December 31, 2010.The closing price of our common stock on December 31, 2010 was $20.09.COMPENSATION COMMITTEE REPORTThe following report of the compensation committee does not constitute soliciting material and shall not be deemed filed or incorporated byreference into any other filing by Inphi Corporation under the Securities Act of 1933 or the Securities Exchange Act of 1934.The compensation committee has reviewed and discussed the Compensation Discussion and Analysis with Inphi Corporation’s management. Based onthis review and these discussions, the compensation committee recommended to the Board of Directors of 88(1)(2)(3)(1)(2) Table of ContentsInphi Corporation that the Compensation Discussion and Analysis be included in Inphi Corporation’s annual report on Form 10-K for the fiscal year endedDecember 31, 2010.Respectfully submitted on March , 2011, by the members of the compensation committee of the Board of Directors: Mr. Peter J. Simone, ChairmanDr. Chenming C. HuMr. David J. LaddMr. Sam S. SrinivasanInformation regarding compensation committee interlocks can be found under Item 10 of this Annual Report on Form 10-K.ITEM 12 — SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED SHAREHOLDERMATTERSPrincipal StockholdersThe following table sets forth information as of February 23, 2011 regarding the number of shares of common stock beneficially owned and thepercentage of common stock beneficially owned by: • each person or group of persons known to us to be the beneficial owner of more than 5% of our common stock; • each of our named executive officers; • each of our directors; and • all of our directors and executive officers as a group.Unless otherwise noted below, the address of each beneficial owner listed in the table is c/o Inphi Corporation, 3945 Freedom Circle, Suite 1100, SantaClara, California 95054. We have determined beneficial ownership in accordance with the rules of the SEC. Except as indicated by the footnotes below, webelieve, based on the information furnished to us, that the persons and entities named in the table below have sole voting and investment power with respect toall shares of common stock that they beneficially own, subject to applicable community property laws.Applicable percentage ownership is based on 25,388,810 shares of common stock outstanding on February 23, 2011. In computing the number ofshares of common stock beneficially owned by a person and the percentage ownership of that person, we deemed outstanding shares of common stock subjectto options and warrants held by that person that are currently exercisable or exercisable within 60 days of February 23, 2011. We did not deem these sharesoutstanding, however, for the purpose of computing the percentage ownership of any other person. Beneficial Ownership ofShares Before Offering Name and Address of Beneficial Owner Number Percent 5% Stockholders: Entities affiliated with Walden International 3,507,458 13.8% Tallwood I, L.P 3,458,091 13.6 Entities affiliated with Mayfield Fund 3,134,420 12.3 Named Executive Officers and Directors: Young K. Sohn 1,349,274 5.1 John Edmunds 238,934 * Gopal Raghavan 756,901 2.9 Ron Torten 238,162 * Diosdado P. Banatao 3,458,091 13.6 Chenming Hu 17,142 * David J. Ladd 8,879 * Timothy D. Semones 229,101 * Sam S. Srinivasan 102,025 * Peter J. Simone 17,142 * 89(1).(2)(3)(4)(5)(6)(7)(2)(8)(9)(10)(11)(12) Table of Contents Beneficial Ownership ofShares Before Offering Name and Address of Beneficial Owner Number Percent Lip-Bu Tan 3,507,458 13.8 All executive officers and directors as a group (11 persons) 9,923,109 39.1 *Represents beneficial ownership of less than 1%.(1)Based on the Forms 4 filed on November 16, 2010, represents 59,210 shares held by Asian Venture Capital Investment Corporation, or AVCIC,59,210 shares held by International Venture Capital Investment Corporation, or IVCIC, 59,210 shares held by International Venture Capital InvestmentIII Corp., or IVCIC III, 52,423 shares held by Pacven Walden Ventures Parallel V-A C.V., 52,423 shares held by Pacven Walden Ventures Parallel V-B.C.V., 62,642 shares held by Pacven Walden Ventures Parallel VI, L.P., 5,576 shares held by Pacven Walden Ventures V Associates Fund, L.P.,2,274,888 shares held by Pacven Walden Ventures V, L.P., 804,499 shares held by Pacven Walden Ventures VI, L.P., 36,672 shares held by PacvenWalden Ventures V-QP Associates Fund, L.P. and 40,705 shares held by Seed Ventures III Ptd Ltd. Lip-Bu Tan, one of our directors, is the sole directorof Pacven Walden Management V Co. Ltd,. which is the general partner of Pacven Walden Ventures V, L.P., Pacven Walden Ventures Parallel V-A C.V.,Pacven Walden Ventures Parallel V-B C.V., Pacven Walden Ventures V Associates Fund, L.P. and Pacven Walden Ventures V-QP Associates Fund,L.P., or Pacven V and affiliated funds. He is also the sole director of Pacven Walden management VI Co. Ltd., which is the general partners of PacvenWalden Ventures VI, L.P. and Pacven Walden Ventures Parallel VI, L.P., or Pacven VI and Parallel Funds. Mr. Tan is also the President of each ofAVCIC, IVCIC and IVCIC III. The voting and investment power over the shares held by AVCIC is determined by a majority of its six directors, You-LinLu, Allen Kao, Allen Hsu, Wee Ee Cheong, George Lee and Mr. Tan, all of whom disclaim beneficial ownership of shares held by AVCIC except to theextent of any pecuniary interest therein. The voting and investment power over the shares held by IVCIC is determined by a majority of its 13 directors,You-Lin Lu, Allen Hsu, C. C. Kuo, Allen Kao, Yaw Nan Lu, James Tseng, Wen-Ching Tseng, Yu-Hwei Huang, F. C. Sun, Hock Voon Loo, Wee EeCheong, Lorin Young and Mr. Tan, all of whom disclaim beneficial ownership of shares held by IVCIC except to the extent of any pecuniary interesttherein. The voting and investment power over the shares held by IVCIC III is determined by a majority of its four directors, James Tseng, Yaw NanLu, Julian Yu and Mr. Tan, all of whom disclaim beneficial ownership of shares held by IVCIC III except to the extent of any pecuniary interest therein.Mr. Tan, Mary Coleman, Brian Chiang, Hock Voon Loo and Andrew Kau hold shared voting and investment power with respect to the shares held byPacven V and affiliated funds and Pacven VI and Parallel Funds, all of whom disclaim beneficial ownership of these shares except to the extent of anypecuniary interest therein. The address for Walden International is One California Street, Suite 2800, San Francisco, CA 94111.(2)Based on the Form 4 filed by Tallwood I, L.P. on November 16, 2010, consists of 3,458,090 shares held by Tallwood I, L.P. Diosdado Banatao, one ofour directors, is the managing member of Tallwood Management Co. LLC, which is the general partner of Tallwood I, L.P. The Banatao Living Trustdirectly or indirectly holds 100% of the membership interests in Tallwood Management Co. LLC. Mr. and Mrs. Banatao, as trustees of the BanataoLiving Trust, hold shared voting and dispositive power over the securities held by this fund. Mr. and Mrs. Banatao disclaim beneficial ownership ofthe reported securities except to the extent of any pecuniary interest therein. The principal business address of Tallwood I, L.P. and TallwoodManagement Co. LLC is 400 Hamilton Avenue, Suite 230, Palo Alto, CA 94301.(3)Based on the Schedule 13G filed Mayfield XI Management, LLC on February 9, 2011, represents 56,418 shares held by Mayfield Associates FundVI, a Delaware limited partnership, or MF AF VI, 194,333 shares held by Mayfield Principals Fund II, a Delaware limited liability company, or MF PFII, 169,257 shares held by Mayfield XI, a Delaware limited partnership, or MF XI, and 2,714,412 shares held by Mayfield XI Qualified, a Delawarelimited partnership, or MF XI Q. Yogen K. Dalal, Janice M. Roberts and Robert T. Vasan are managing directors of Mayfield XI Management, L.L.C.,which is the general partner of MF XI Q, MF XI and MF AF VI and the sole Managing Director of MF PF II. The individuals listed herein may bedeemed to have voting and dispositive power over the shares which are, or may be, deemed to be beneficially owned by MF XI Q, MF PF II, MF XI andMF AF VI, but disclaim such beneficial ownership except to the extent of his or her pecuniary interest therein. The address of the entities affiliated withMayfield Fund is 2800 Sand Hill Road, Suite 250, Menlo Park, CA 94025.(4)Includes 995,275 shares subject to options that are immediately exercisable, of which 190,776 shares are subject to our right of repurchase as ofApril 24, 2011, and 14,090 restricted shares are subject to our right of repurchase as of April 24, 2011. Also includes 42,857 shares held by each ofMr. Sohn’s three children.(5)Includes 238,934 shares subject to options that are immediately exercisable, of which 90,068 shares are subject to our right of repurchase as ofApril 24, 2011.(6)Includes 412,855 shares subject to options that are immediately exercisable, none of which are subject to our right of repurchase as of April 24, 2011.(7)Includes 196,592 shares subject to options that are immediately exercisable, of which 63,908 shares are subject to our right of repurchase as ofApril 24, 2011.(8)Consists of 17,142 restricted shares that are subject to forfeiture as of April 24, 2011.(9)Consists of 8,879 shares subject to restricted stock units, all of which are unvested as of April 24, 2011.(10)Includes 152,911 shares subject to options that are immediately exercisable, of which 5,000 shares are subject to our right of repurchase as of April 24,2011. 90(1)(13) Table of Contents(11)Includes 44,999 shares subject to options that are immediately exercisable, of which 7,501 shares are subject to our right of repurchase as of April 24,2011.(12)Consists of 17,142 restricted shares that are subject to forfeiture as of April 24, 2011.(13)Includes 2,041,566 shares subject to options that are immediately exercisable, of which 357,253 shares are subject to our right of repurchase as ofApril 24, 2011, and 43,163 outstanding restricted shares and units that are subject to our right of repurchase as of April 24, 2011 and 34,284outstanding restricted shares that are subject to forfeiture as of April 24, 2011.Equity Compensation Plan Information Plan Category Number of securities to beissued upon exercise ofoutstanding options,warrants and rights Weighted averageexercise price ofoutstanding options,warrants and rights Number of securitiesremaining available forfuture issuance underequity compensation plans(excluding securitiesreflected in column (a)) (a) (b) (c) Equity compensation plans approved by security holders 6,672,249 $3.85 2,428,572 (1) Equity compensation plans not approved by security holders None None None Total 6,672,249 3.85 2,428,572 (1) (1)Includes 2,032,192 shares reserved for issuance under the 2010 Stock Incentive Plan. The 2010 Stock Incentive Plan provides for the grant of optionsto purchase shares of common stock, restricted stock, stock appreciation rights and stock units. The number of shares reserved for issuance under the2010 Stock Incentive Plan is automatically increased on January 1st of each year by the lesser of (i) 3,000,000 shares, (ii) five percent (5%) of thenumber of shares of our common stock outstanding on the last day of the immediately preceding fiscal year or (iii) the number of shares determined bythe board of directors. In addition, the number of shares reserved for issuance under the 2010 Stock Incentive Plan is increased from time to time in anamount equal to the number of shares subject to outstanding options under the 2000 Stock Plan that are subsequently forfeited or terminate for any otherreason before being exercised and unvested shares that are forfeited pursuant to the 2000 Stock Plan.ITEM 13 — CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCERelated Party TransactionsIn addition to the compensation arrangements with directors and executive officers described elsewhere in this prospectus, the following is a descriptionof each transaction since January 1, 2008 and each currently proposed transaction in which: • we have been or are to be a participant; • the amount involved exceeds or will exceed $120,000; and • any of our directors, executive officers or beneficial holders of more than 5% of our capital stock, or any immediate family member of or personsharing the household with any of these individuals (other than tenants or employees), had or will have a direct or indirect material interest.Registration RightsThe holders of 14,851,170 shares of common stock, including shares to be issued upon the exercise of warrants to purchase shares of our capitalstock, are entitled to contractual rights by which they may require us to register those shares under the Securities Act. All of these shares are subject to a 180-day lock-up period, which expires on May 9, 2011. If we propose to register any of our securities under the Securities Act for our own account, holders ofthose shares are entitled to include their shares in our registration, provided they accept the terms of the underwriting as agreed upon between us and theunderwriters selected by us, and among other conditions, that the underwriters of any such offering have the right to limit the number of shares included in theregistration. Subject 91 Table of Contentsto limitations and conditions specified in the amended and restated investor rights agreement with the holders, six months after our initial public offering,holders of at least 30% of the shares of common stock that were issued upon conversion of our former preferred stock upon completion of our initial publicoffering and shares of common stock issued as a result of the exercise of certain warrants may require us to prepare and file a registration statement under theSecurities Act at our expense covering those shares, provided that the shares to be included in the registration shall include at least 20% of such shares ofcommon stock and shares issued as a result of the exercise of certain warrants, or a lesser percentage if the anticipated aggregate public offering price wouldexceed $10,000,000. We are not obligated to effect more than two of these demand registrations.Sale of Preferred StockMessrs. Banatao and Tan, two of our directors, are affiliated with Tallwood I, L.P. and entities affiliated with Walden International, respectively. FromJanuary 30, 2008 through April 21, 2008, Tallwood I, L.P., entities affiliated with Walden International, an entity associated with Samsung, andMr. Srinivasan, one of our directors, purchased 178,729, 267,056, 160,595 and 31,312 shares of our Series E preferred stock, respectively, for anaggregate purchase price of approximately $1,712,387, $2,558,651, $1,538,646 and $300,000, respectively, or $9.5809 per share. In connection withthese purchases of our Series E preferred stock, Tallwood I, L.P., entities affiliated with Walden International, an entity associated with Samsung andMr. Srinivasan entered into the same agreements as the other investors, and we believe that the significant terms of these purchases of preferred stock wouldnot differ in any material way from the terms we could have negotiated with unaffiliated third parties.As Messrs. Banatao and Tan are affiliated with Tallwood I, L.P. and Walden International, respectively, beneficial ownership of the shares purchasedby Tallwood I, L.P. and by entities affiliated with Walden International are attributable to Messrs. Banatao and Tan, respectively.Indemnification AgreementsWe intend to enter into indemnification agreements with each of our current directors and executive officers. These agreements require us to indemnifythese individuals to the fullest extent permitted under Delaware law against liabilities that may arise by reason of their service to us, and to advance expensesincurred as a result of any proceeding against them as to which they could be indemnified. We also intend to enter into indemnification agreements with ourfuture directors and executive officers.Other TransactionsWe have a business relationship with Samsung, which holds approximately 4.6%, directly, and an additional 4.1%, indirectly, of our outstandingshares of common stock. For the years ended December 31, 2010 and 2009, Samsung purchased high-speed PLLs and register solution for approximately$27.9 million and $21.2 million, respectively, constituting 34% and 36% of our total revenue, respectively. While Samsung is a significant stockholder, webelieve that the terms of our purchase orders, including pricing, would not differ in any material way from the terms we could have negotiated withunaffiliated third parties.As of December 31, 2010, we have a software subscription and maintenance agreement with Cadence Design Systems, Inc., which agreement wasentered into in the ordinary course of business. In connection with this agreement, we committed to pay approximately $7.0 million, payable in 16 quarterlypayments through May 2011. We paid $1.4 million, $1.8 million and $2.1 million in the years ended December 31, 2008, 2009 and 2010, respectively. InDecember 2010, we committed to pay an additional $250,000, payable in four quarterly payments through November 2011. Mr. Tan, one of our directors, iscurrently the Chief Executive Officer of Cadence. Mr. Tan does not have a direct or indirect material interest in the transaction. The agreement with Cadencewas entered into in June 2007, prior to Mr. Tan’s employment with Cadence. Mr. Tan was appointed the President and Chief Executive Officer of Cadence inJanuary 2009, although he has served as a member of the Cadence board of directors since 2004. Mr. Tan did not participate in the negotiation of, and did notderive any direct or indirect compensation or other benefit, monetary or otherwise, as a result of this agreement. In addition, Mr. Tan is not a party to theagreement. Further, the amounts paid and to be paid to Cadence under this agreement do not, and are not expected to, constitute a material percentage of therevenue of Cadence. Specifically, the amounts paid to Cadence in the years ended December 31, 2008, 2009 and 2010 accounted for 0.13%, 0.21% and 0.22%of Cadence’s revenue for the years ended January 3, 2009, January 2, 2010 and January 1, 2011, respectively. We believe that the significant terms of thesepurchases, including pricing, would not differ in any material way from the terms we could have negotiated with unaffiliated third parties.Procedures for Approval of Related Party TransactionsPursuant to our Related Person Transactions Policy, the audit committee of our board of directors must approve transactions with our company valuedat or above $120,000 in which any director, officer, 5% or greater stockholder or certain related persons or entities has a direct or indirect material interest.Director IndependenceIn June 2010, our board of directors undertook a review of the independence of our directors and considered whether any director has a materialrelationship with us that could compromise his ability to exercise independent judgment in carrying out his 92 Table of Contentsresponsibilities. As a result of this review, our board of directors determined that Messrs. Banatao, Ladd, Simone and Srinivasan and Dr. Hu, representing amajority of our directors, are “independent directors” as defined under the rules of the NYSE. Mr. Banatao served as our Interim Chief Executive Officer andbeneficially owns approximately 13.8% of our common stock, which represents shares held by Tallwood I, L.P., a venture fund affiliated with TallwoodVenture Capital, of which Mr. Banatao is a Managing Partner. Our board of directors considered Mr. Banatao’s prior role with us and his beneficial stockownership in its determination that Mr. Banatao qualifies as an independent director as defined under the rules of the NYSE.In determining that Messrs. Banatao, Ladd, Simone and Srinivasan and Dr. Hu qualify as “independent directors,” our board of directors determinedthat none of these individuals had any of the relationships enumerated in Rule 303A.02(b) of the New York Stock Exchange Manual, or Rule 303A.02(b), thatwould preclude them from serving as independent directors. Our board of directors also made an affirmative determination that none of these directors,including Mr. Banatao and Mr. Ladd, had any other material relationship with us, other than in his capacity as a director and stockholder. Our board ofdirectors specifically considered the beneficial ownership of common stock deemed held by Messrs. Banatao and Ladd and determined that such ownershipwould not impact their ability to exercise independent judgment as a director, notwithstanding such beneficial ownership. Upon concluding that neitherMr. Banatao nor Mr. Ladd had any of the relationships specifically enumerated in Rule 303A.02(b) or any other material relationship with us, and that theirrespective beneficial ownership of our common stock would not impact their ability to exercise independent judgment as a director or their overall independencefrom management, our board of directors determined that both Messrs. Banatao and Ladd qualify as independent directors.ITEM 14 — PRINCIPAL ACCOUNTANT FEES AND SERVICESPrincipal Accountant Fees and ServicesAggregate fees for professional services rendered for us by PricewaterhouseCoopers LLP for the years ended December 31, 2010 and 2009, were asfollows: Services Provided 2010 2009 Audit Fees $1,257,189 $250,859 Audit-Related Fees 45,184 — Tax Fees 433,666 77,621 All Other Fees 1,500 — Total Fees $1,737,539 $328,480 Audit Fees. The aggregate fees billed for the years ended December 31, 2010 and 2009 were for professional services rendered for the audits of ourconsolidated financial statements, statutory audits of our subsidiaries, reviews of our interim consolidated financial statements, services rendered inconnection with our Form S-1 and Form S-8 related to our initial public offering, comfort letter consents and other matters related to the SEC.Audit-Related Fees. The aggregate fees billed for the year ended December 31, 2010 were for professional services related to the 2009 audit of WinyatekTechnology Inc. acquired in June 2010. For the year ended December 31, 2009, there were no fees billed by PricewaterhouseCoopers LLP for professionalservices rendered under “Audit-Related Fees” above.Tax Fees. The aggregate fees billed for the years ended December 31, 2010 and 2009 were for tax advisory and tax compliance services related to taxresearch and tax planning services in foreign countries in which we do business, the review of research and development credits and net operating losscarryover, and services related to our federal and state tax returns.All Other Fees. For the year ended December 31, 2010, the aggregate fees billed were for professional services related to our Sarbanes-Oxley preparation.For the year ended December 31, 2009, there were no fees billed by PricewaterhouseCoopers LLP for professional services rendered under “All Other Fees”above.Audit Committee Pre-Approval Policies and ProceduresThe audit committee has implemented pre-approval policies and procedures related to the provision of audit and non-audit services. Under theseprocedures, the audit committee pre-approves both the type of services to be provided by PricewaterhouseCoopers LLP and the estimated fees related to theseservices.During the approval process, the audit committee considers the impact of the types of services and the related fees on the independence of the registeredpublic accountant. The services and fees must be deemed compatible with the maintenance of such accountants’ independence, including compliance withSEC rules and regulations.Throughout the year, the audit committee will review any revisions to the estimates of audit and non-audit fees initially approved. 93 Table of ContentsPART IVITEM 15 — EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 1.Financial Statements. See “Index to Consolidated Financial Statements” under Item 8 of report. (a)Documents filed as part of this report:(1) Financial StatementsReference is made to the Index to Consolidated Financial Statements of Inphi Corporation under Item 8 of Part II hereof.(2) Financial Statement SchedulesAll financial statement schedules have been omitted because they are not applicable or not required or because the information isincluded elsewhere in the Consolidated Financial Statements or the Notes thereto.(3) ExhibitsSee Item 15(b) below. Each management contract or compensatory plan or arrangement required to be filed has been identified. (b)ExhibitsThe exhibits listed in the Exhibit Index below are filed or incorporated by reference as part of this report.(c) Financial Statements and SchedulesReference is made to Item 15(a)(2) above. 94 Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. INPHI CORPORATIONBy: /s/ Young K. Sohn Young K. Sohn Chief Executive Officer(Principal Executive Officer)Date: March 4, 2011POWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Young K. Sohn and JohnEdmunds, and each of them, his true and lawful attorneys-in-fact, each with full power of substitution, for him or her in any and all capacities, to sign anyamendments to this report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities andExchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact or their substitute or substitutes may do or cause to be done byvirtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated. Name Title Date/s/ Young K. SohnYoung K. Sohn Chief Executive Officer(Principal Executive Officer), President and Director March 4, 2011/s/ John EdmundsJohn Edmunds Chief Financial Officer and Chief Accounting Officer(Principal Financial and Accounting Officer) March 4, 2011/s/ Diosdado P. BanataoDiosdado P. Banatao Chairman of the Board March 4, 2011/s/ Chenming C. HuChenming C. Hu Director March 4, 2011/s/ David J. LaddDavid J. Ladd Director March 4, 2011/s/ Timothy D. SemonesTimothy D. Semones Director March 4, 2011/s/ Peter J. SimonePeter J. Simone Director March 4, 2011/s/ Sam S. SrinivasanSam S. Srinivasan Lead Director March 4, 2011/s/ Lip-Bu TanLip-Bu Tan Director March 4, 2011 95 Table of ContentsEXHIBIT INDEX ExhibitNumber Description 2.1 Share Purchase Agreement dated as of May 25, 2010, by and among the Registrant, Winyatek Technology Inc. and the shareholder signatoriesthereto, as amended (excluding certain schedules and exhibits referred to in the agreement, which the Registrant agrees to furnish to the Securitiesand Exchange Commission upon request) (incorporated by reference to the exhibit of the same number filed with Registration Statement on FormS-1 (File No. 333-167564), as amended). 3(i) Restated Certificate of Incorporation of the Registrant. 3(ii) Amended and Restated Bylaws of the Registrant (incorporated by reference to the exhibit 3(ii).2 filed with Registration Statement on Form S-1(File No. 333-167564), as amended). 4.1 Specimen Common Stock Certificate (incorporated by reference to the exhibit of the same number filed with Registration Statement on Form S-1(File No. 333-167564), as amended). 4.2 Amended and Restated Investors’ Rights Agreement dated as of January 30, 2008.10.1+ Inphi Corporation 2000 Stock Option/Stock Issuance Plan (as amended on June 2, 2010) and related form stock option plan agreements(incorporated by reference to the exhibit of the same number filed with Registration Statement on Form S-1 (File No. 333-167564), as amended).10.2+ Inphi Corporation 2010 Stock Incentive Plan and related form agreements.10.3+ Form of Indemnification Agreement between the Registrant and its officers and directors (incorporated by reference to the exhibit of the samenumber filed with Registration Statement on Form S-1 (File No. 333-167564), as amended).10.4+ Offer letter dated July 14, 2007 between Young K. Sohn and the Registrant, as amended (incorporated by reference to the exhibit of the samenumber filed with Registration Statement on Form S-1 (File No. 333-167564), as amended).10.5+ Change of Control and Severance Agreement dated June 8, 2010, by and between Young K. Sohn and the Registrant (incorporated by referenceto the exhibit of the same number filed with Registration Statement on Form S-1 (File No. 333-167564), as amended).10.6 Offer letter dated December 10, 2007 between John Edmunds and the Registrant, as amended (incorporated by reference to Exhibit 10.6 to filedwith Registration Statement on Form S-1 (File No. 333-167564), as amended).10.7+ Change of Control and Severance Agreement dated June 8, 2010, by and between John Edmunds and the Registrant (incorporated by referenceto the exhibit of the same number filed with Registration Statement on Form S-1 (File No. 333-167564), as amended).10.8+ Offer letter dated October 3, 2007 between Ron Torten and the Registrant, as amended (incorporated by reference to the exhibit of the samenumber filed with Registration Statement on Form S-1 (File No. 333-167564), as amended).10.9 Lease Agreement between the Registrant and H&G Selvin Properties dated as of June 30, 2006, including amendments thereto (incorporated byreference to the exhibit of the same number filed with Registration Statement on Form S-1 (File No. 333-167564), as amended).10.10 Sublease Agreement between the Registrant and Scintera Networks, Inc. dated as of December 1, 2009, including amendments thereto(incorporated by reference to the exhibit of the same number filed with Registration Statement on Form S-1 (File No. 333-167564), as amended).10.11 Lease Agreement between the Registrant and Santa Clara Towers, L.P. dated as of April 27, 2010 (incorporated by reference to the exhibit of thesame number filed with Registration Statement on Form S-1 (File No. 333-167564), as amended).10.12 Lease Agreement between the Registrant and LBA Realty Fund III—Company VII, LLC dated as of June 4, 2010 (incorporated by reference tothe exhibit of the same number filed with Registration Statement on Form S-1 (File No. 333-167564), as amended).10.13 Workshop Lease Contract between Winyatek Technology Inc. and Integrated Circuit Solutions Inc. dated as of March 29, 2010 (incorporatedby reference to the exhibit of the same number filed with Registration Statement on Form S-1 (File No. 333-167564), as amended). 96 Table of Contents10.14** Software License and Maintenance Agreement dated as of June 29, 2007, by and between the Registrant and Cadence Design Systems, Inc.21.1 List of Subsidiaries (incorporated by reference to the exhibit of the same number filed with Registration Statement on Form S-1 (File No. 333-167564), as amended).23.1 Consent of PricewaterhouseCoopers LLP, independent registered public accounting firm.24.1 Power of Attorney (see page 97 of this report).31.1 Certificate of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).31.2 Certificate of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).32.1(1) Certificate of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350).32.2(1) Certificate of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (18 U.S.C. Section 1350). **Confidential treatment requested.+Indicates management contract or compensatory plan.(1)The material contained in Exhibit 32.1 and Exhibit 32.2 is not deemed “filed” with the SEC and is not to be incorporated by reference into any filing ofthe Company under the Securities Act of 1933 or the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective ofany general incorporation language contained in such filing, except to the extent that the registrant specifically incorporates it by reference. 97 Exhibit 3(i)RESTATED CERTIFICATE OF INCORPORATION OFINPHI CORPORATIONInphi Corporation, a corporation organized and existing under the laws of the State of Delaware, hereby certifies as follows:FIRST: The name of the corporation is Inphi Corporation.SECOND: The original Certificate of Incorporation of the corporation was filed with the Secretary of State of the State of Delaware on November 13,2000 and the original name of the corporation was TCom Communications, Inc., and a Restated Certificate of Incorporation was filed on December 4, 2000. ACertificate of Amendment of the Restated Certificate of Incorporation, whereby the corporation changed its name, was filed with the Secretary of State onFebruary 27, 2001.THIRD: Pursuant to Sections 242 and 245 of the General Corporation Law of the State of Delaware, this Restated Certificate of Incorporation restates,integrates and further amends the provisions of the Certificate of Incorporation of the corporation.FOURTH: The Certificate of Incorporation of the corporation shall be amended and restated to read in full as follows:ARTICLE IThe name of the Corporation is Inphi Corporation (the “Corporation”).ARTICLE IIThe address of the registered office of the corporation in the State of Delaware is 2711 Centerville Road, Suite 400, in the City of Wilmington,County of New Castle. The name of its registered agent at such address is Corporation Service Company.ARTICLE IIIThe purpose of the Corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware GeneralCorporation Law (the “DGCL”).ARTICLE IVA. Classes of Stock. The total number of shares of all classes of capital stock that the Corporation shall have authority to issue is 510,000,000,of which 500,000,000 shares shall be Common Stock, $0.001 par value per share (the “Common Stock”), and of which 10,000,000 shares shall be PreferredStock, $0.001 par value per share (the “Preferred Stock”). The number of authorized shares of Common Stock or Preferred Stock may be increased ordecreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority of the then outstanding shares ofCommon Stock, without a vote of the holders of the Preferred Stock, or of any series thereof, unless a vote of any such Preferred Stock holders is required pursuant to the provisions establishedby the Board of Directors of the Corporation (the “Board of Directors”) in the resolution or resolutions providing for the issue of such Preferred Stock, and ifsuch holders of such Preferred Stock are so entitled to vote thereon, then, except as may otherwise be set forth in the certificate of incorporation of thecorporation, the only stockholder approval required shall be the affirmative vote of a majority of the voting power of the Common Stock and the PreferredStock so entitled to vote, voting together as a single class.B. Preferred Stock. The Preferred Stock may be issued from time to time in one or more series, as determined by the Board of Directors. TheBoard of Directors is expressly authorized to provide for the issue, in one or more series, of all or any of the remaining shares of Preferred Stock and, in theresolution or resolutions providing for such issue, to establish for each such series the number of its shares, the voting powers, full or limited, of the shares ofsuch series, or that such shares shall have no voting powers, and the designations, preferences and relative, participating, optional or other special rights ofthe shares of such series, and the qualifications, limitations or restrictions thereof. The Board of Directors is also expressly authorized (unless forbidden in theresolution or resolutions providing for such issue) to increase or decrease (but not below the number of shares of such series then outstanding) the number ofshares of any series subsequent to the issuance of shares of that series. In case the number of shares of any such series shall be so decreased, the sharesconstituting such decrease shall resume the status that they had prior to the adoption of the resolution originally fixing the number of shares of such series.C. Common Stock.1. Relative Rights of Preferred Stock and Common Stock. All preferences, voting powers, relative, participating, optional or other special rightsand privileges, and qualifications, limitations, or restrictions of the Common Stock are expressly made subject and subordinate to those that may be fixedwith respect to any shares of the Preferred Stock.2. Voting Rights. Except as otherwise required by law or the certificate of incorporation of the Corporation, each holder of Common Stock shallhave one vote in respect of each share of stock held by such holder of record on the books of the Corporation for the election of directors and on all matterssubmitted to a vote of stockholders of the Corporation.3. Dividends. Subject to the preferential rights of the Preferred Stock, the holders of shares of Common Stock shall be entitled to receive, whenand if declared by the Board of Directors, out of the assets of the Corporation which are by law available therefor, dividends payable either in cash, inproperty or in shares of capital stock.4. Dissolution, Liquidation or Winding Up. In the event of any dissolution, liquidation or winding up of the affairs of the Corporation, afterdistribution in full of the preferential amounts, if any, to be distributed to the holders of shares of the Preferred Stock, holders of Common Stock shall beentitled, unless otherwise provided by law or the certificate of incorporation of the Corporation, to receive all of the remaining assets of the Corporation of 2 whatever kind available for distribution to stockholders ratably in proportion to the number of shares of Common Stock held by them respectively.ARTICLE VIn furtherance and not in limitation of the powers conferred by the laws of the State of Delaware:A. The Board of Directors is expressly authorized to adopt, amend or repeal the bylaws of the Corporation, without any action on the part of thestockholders, by the vote of at least a majority of the directors of the Corporation then in office. In addition to any vote of the holders of any class or series ofstock of the Corporation required by law or the certificate of incorporation of the Corporation, the bylaws may also be adopted, amended or repealed by theaffirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the shares of the capital stock of the Corporationentitled to vote in the election of directors, voting as one class; provided, however, that the affirmative vote of the holders representing only a majority of thevoting power of the shares of the capital stock of the Corporation entitled to vote in the election of directors, voting as one class, shall be required if suchadoption, amendment or repeal of the bylaws has been previously approved by the affirmative vote of at least two-thirds (2/3) of the directors of theCorporation then in office.B. Elections of directors need not be by written ballot unless the bylaws of the Corporation shall so provide.C. The books of the Corporation may be kept at such place within or without the State of Delaware as the bylaws of the Corporation may provideor as may be designated from time to time by the Board of Directors.ARTICLE VIA. The business and affairs of the Corporation shall be managed by a Board of Directors. Other than those directors elected by the holders of anyseries of Preferred Stock as provided for or fixed pursuant to the provisions of Article IV hereof, each director shall serve until his successor shall be dulyelected and qualified or until his earlier resignation, removal from office, death or incapacity.B. Subject to the rights of the holders of any series of Preferred Stock then outstanding, newly created directorships resulting from any increase inthe authorized number of directors or any vacancies in the Board of Directors resulting from death, resignation, retirement, disqualification, removal fromoffice or other cause shall be filled solely by a majority vote of the directors then in office, although less than a quorum, or by a sole remaining director. If thereare no directors in office, then an election of directors may be held in the manner provided by statute. Directors chosen pursuant to any of the foregoingprovisions shall hold office until their successors are duly elected and have qualified or until their earlier resignation or removal. No decrease in the number ofdirectors constituting the Board of Directors shall shorten the term of any incumbent director. In the event of a vacancy in the Board of Directors, theremaining directors, except as otherwise provided by law, or by the certificate of incorporation or the bylaws of the corporation, may exercise the powers of thefull board until the vacancy is filled. 3 ARTICLE VIIA. No action required or permitted to be taken at any annual or special meeting of the stockholders may be taken without a meeting and the powerof stockholders to consent in writing, without a meeting, to the taking of any action is specifically denied.B. Special meetings of the stockholders of the Corporation may be called only by the Chairman of the Board or the Chief Executive Officer of theCorporation or by a resolution adopted by the affirmative vote of a majority of the Board of Directors, and any power of stockholders to call a special meetingof stockholders is specifically denied.C. Advance notice of stockholder nominations for the election of directors and of business to be brought by stockholders before any meeting of thestockholders of the Corporation shall be given in the manner and to the extent provided in the bylaws of the Corporation.D. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall be thesole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of afiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any actionasserting a claim arising pursuant to any provision of the DGCL, or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person orentity purchasing or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to theprovisions of this Article VII, Paragraph D.ARTICLE VIIIA. Limitation on Liability. To the fullest extent permitted by the DGCL, as the same exists or as may hereafter be amended (including, but notlimited to Section 102(b)(7) of the DGCL), a director of the Corporation shall not be personally liable to the Corporation or its stockholders for monetarydamages for breach of fiduciary duty as a director. If the DGCL hereafter is amended to further eliminate or limit the liability of directors, then the liability of adirector of the Corporation, in addition to the limitation on personal liability provided herein, shall be limited to the fullest extent permitted by the amendedDGCL. Any repeal or modification of this paragraph by the stockholders of the Corporation shall be prospective only, and shall not adversely affect anylimitation on the personal liability of a director of the Corporation existing at the time of such repeal or modification.B. Indemnification. Each person who is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as adirector, officer, employee or agent of another corporation or of a partnership, joint venture, trust, employee benefit plan or other enterprise (including the heirs,executors, administrators or estate of such person), shall be indemnified and advanced expenses by the Corporation, in accordance with the bylaws of theCorporation, to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but, in the case of any such amendment, only tothe extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the 4 Corporation to provide prior to such amendment) or any other applicable laws as presently or hereinafter in effect. The right to indemnification andadvancement of expenses hereunder shall not be exclusive of any other right that any person may have or hereafter acquire under any statute, provision of thecertificate of incorporation or bylaws of the Corporation, agreement, vote of stockholders or disinterested directors or otherwise.C. Insurance. The Corporation may, to the fullest extent permitted by law, purchase and maintain insurance on behalf of any person who is orwas a director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust, employee benefit plan or other enterpriseagainst any expense, liability or loss incurred by such person in any such capacity or arising out of such person’s status as such, whether or not theCorporation would have the power to indemnify such person against such expense, liability or loss under the DGCL.D. Repeal and Modification. Any repeal or modification of the foregoing provisions of this Article VIII shall not adversely affect any right orprotection existing hereunder immediately prior to such repeal or modification.ARTICLE IXThe affirmative vote of the holders of at least sixty-six and two-thirds percent (66-2/3%) of the voting power of the shares of the capital stock of theCorporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to amend in any respect or repeal this ArticleIX, Paragraph A of Article V, Articles VI, VII and VIII.* * *FIFTH: This Restated Certificate of Incorporation was duly adopted by the Board of Directors of the corporation.SIXTH: This Restated Certificate of Incorporation was duly adopted by the stockholders in accordance with the provisions of Sections 242 and 245 ofthe General Corporation Law of the State of Delaware. Written consent of the stockholders has been given with respect to this Restated Certificate ofIncorporation in accordance with Section 228 of the General Corporation Law of the State of Delaware, and written notice has been given as provided inSection 228.[Remainder of this page intentionally left blank] 5 IN WITNESS WHEREOF, the corporation has caused this certificate to be signed by its Chief Executive Officer and attested by its Secretary this 16day of November, 2010. INPHI CORPORATION By /s/ Young K. Sohn Young K. Sohn, Chief Executive Officer and PresidentAttest: By /s/ John Edmunds John Edmunds, Secretary 6th Exhibit 4.2INPHI CORPORATIONAMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT August 12, 2010 TABLE OF CONTENTS Page 1. Registration Rights 1 1.1 Definitions 1 1.2 Request for Registration 2 1.3 Company Registration 3 1.4 Obligations of the Company 4 1.5 Furnish Information 5 1.6 Expenses of Demand and S-3 Registration 6 1.7 Expenses of Company Registration 6 1.8 Underwriting Requirements; Allocation of Registration Opportunity 6 1.9 Delay of Registration 7 1.10 Indemnification 7 1.11 Reports Under Securities Exchange Act of 1934 9 1.12 Form S-3 Registration 10 1.13 Assignment of Registration Rights 11 1.14 Limitations on Subsequent Registration Rights 11 1.15 Market Stand-Off Agreement 11 1.16 Termination of Registration Rights 12 2. Covenants of the Company 12 2.1 Delivery of Financial Statements 12 2.2 Inspection Covenants 13 2.3 Termination of Information and Inspection Covenants 13 2.4 Right of First Offer 13 2.5 Qualified Small Business 15 2.6 Employee and Other Stock Arrangements 16 2.7 Proprietary Information Agreements 16 2.8 Assignment of Right of First Refusal 16 3. Miscellaneous 17 3.1 Successors and Assigns 17 3.2 Governing Law 17 3.3 Counterparts 17 3.4 Titles and Subtitles 17 3.5 Notices 17 3.6 Expenses 17 3.7 Amendments and Waivers 17 3.8 Severability 18 3.9 Aggregation of Stock 18 3.10 Entire Agreement 18 3.11 Recapitalizations, Etc. 18 3.12 Additional Parties 18 AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENTTHIS AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (“Agreement”) is made as of the 12th day of August, 2010, byand among Inphi Corporation, a Delaware corporation (the “Company”), the investors listed on Schedule A hereto, each of whom is herein referred to as an“Investor,” and the founders listed on Schedule B hereto, each of which is herein referred to as a “Founder.”WHEREAS, the Company and certain of the Investors are parties to that certain Series E Preferred Stock Purchase Agreement dated as ofJanuary 30, 2008 and that Series E Preferred Stock Purchase Agreement dated as of June 30, 2010 (together, the “Series E Agreement”);WHEREAS, the Company previously entered into an Amended and Restated Investors Rights Agreement dated as of January 30, 2008, among theCompany, certain of the Investors and the Founders (the “Prior Agreement”); andWHEREAS, the Investors and the Company hereby agree that this Agreement shall govern the rights of the Investors to cause the Company toregister shares of the Company’s Common Stock (the “Common Stock”) issuable to the Investors and certain other matters as set forth herein and, upon theeffectiveness of this Agreement, the Prior Agreement shall be terminated and have no further force or effect.NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:1. Registration Rights. The Company covenants and agrees as follows:1.1 Definitions. For purposes of this Section 1:(a) The term “Act” means the Securities Act of 1933, as amended.(b) The term “Form S-3” means such form under the Act as in effect on the date hereof or any registration form under the Act subsequentlyadopted by the SEC which permits inclusion or incorporation of substantial information by reference to other documents filed by the Company with the SEC.(c) The term “Holder” means any person owning or having the right to acquire Registrable Securities (subject to the limitations set forth in thedefinition thereof) or any assignee thereof in accordance with Section 1.13 hereof.(d) The term “IPO” shall mean the first sale of the Common Stock of the Company to the public pursuant to an effective registration statementfiled under the Securities Act of 1933, as amended (other than a registration statement relating either to the sale of Common Stock to employees of theCompany pursuant to a stock option, stock purchase or similar plan or an SEC Rule 145 transaction).(e) The term “1934 Act” shall mean the Securities Exchange Act of 1934, as amended. 1 (f) The term “Preferred Stock” shall mean the Company’s Series A Preferred Stock (the “Series A Preferred Stock”), the Company’s Series BPreferred Stock (the “Series B Preferred Stock”), the Company’s Series C Preferred Stock (the “Series C Preferred Stock”), the Company’s Series DPreferred Stock (the “Series D Preferred Stock”) and the Company’s Series E Preferred Stock (the “Series E Preferred Stock”).(g) The term “register,” “registered” and “registration” refer to a registration effected by preparing and filing a registration statement or similardocument in compliance with the Act, and the declaration or ordering of effectiveness by the SEC of such registration statement or document.(h) The term “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Company’s Series A PreferredStock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock or Series E Preferred Stock; (ii) the Common Stock issuable or issuedupon exercise of the warrants as listed on Schedule 1.1(h) hereto (the “Warrants”) and (iii) any Common Stock of the Company issued as (or issuable uponthe conversion or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or inreplacement of the shares referenced in (i) - (ii) above, excluding in all cases, however, any Registrable Securities sold by a person in a transaction in whichhis rights under this Section 1 are not assigned.(i) The number of shares of “Registrable Securities then outstanding” shall be determined by the number of shares of Common Stockoutstanding which are, and the number of shares of Common Stock issuable pursuant to then exercisable or convertible securities which are, RegistrableSecurities.(j) The term “SEC” shall mean the Securities and Exchange Commission.1.2 Request for Registration.(a) If the Company shall receive at any time after the earlier of (i) the Company’s initial public offering, or (ii) January 30, 2011 (but not within 6months of the effective date of a registration), a written request from the Holders of at least thirty percent (30%) of the Registrable Securities then outstandingthat the Company file a registration statement under the Act covering the registration of at least twenty percent (20%) of the Registrable Securities thenoutstanding (or a lesser percentage if the anticipated aggregate offering price would exceed $10,000,000), then the Company shall:(i) within ten (10) days of the receipt thereof, give written notice of such request to all Holders; and(ii) use its best efforts to effect as soon as practicable, the registration under the Act of all Registrable Securities which the Holders requestto be registered, subject to the limitations of subsection 1.2(b).(b) If the Holders initiating the registration request hereunder (“Initiating Holders”) intend to distribute the Registrable Securities covered by theirrequest by means of an underwriting, they shall so advise the Company as a part of their request made pursuant to 2 subsection 1.2(a) and the Company shall include such information in the written notice referred to in subsection 1.2(a). The underwriter will be selected by theCompany and shall be reasonably acceptable to a majority in interest of the Initiating Holders. In such event, the right of any Holder to include his RegistrableSecurities in such registration shall be conditioned upon such Holder’s participation in such underwriting and the inclusion of such Holder’s RegistrableSecurities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent providedherein. All Holders proposing to distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.4(e)) enterinto an underwriting agreement in customary form with the underwriter or underwriters selected for such underwriting. Notwithstanding any other provision ofthis Section 1.2, if the underwriter advises the Initiating Holders in writing that marketing factors require a limitation of the number of shares to beunderwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and thenumber of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the InitiatingHolders, in proportion (as nearly as practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that thenumber of shares of Registrable Securities to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded fromthe underwriting.(c) Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.2, acertificate signed by the Chief Executive Officer of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would beseriously detrimental to the Company and its stockholders for such registration statement to be filed and it is therefore essential to defer the filing of suchregistration statement, the Company shall have the right to defer taking action with respect to such filing for a period of not more than ninety (90) days afterreceipt of the request of the Initiating Holders; provided, however, that the Company may not utilize this right more than once in any twelve-month period.(d) In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.2:(i) After the Company has effected two registrations pursuant to this Section 1.2 and such registrations have been declared or orderedeffective and the securities offered pursuant to such registration have been sold; or(ii) During the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of filing of, and endingon a date one hundred eighty (180) days after the effective date of, a registration subject to Section 1.3 hereof; provided that (A) the Company is activelyemploying in good faith all reasonable efforts to cause such registration statement to become effective and (B) the Company provides prior written notice to theInitiating Holders of any registration request of its intent to file a registration statement.1.3 Company Registration. If (but without any obligation to do so) the Company proposes to register (including for this purpose a registrationeffected by the Company for stockholders other than the Holders) any of its Common Stock under the Act in connection 3 with the public offering of such securities solely for cash (other than a registration relating solely to the sale of Common Stock to participants in a Companystock plan, a registration on any form which does not include substantially the same information as would be required to be included in a registrationstatement covering the sale of the Registrable Securities or a registration in which the only Common Stock being registered is Common Stock issuable uponconversion of debt securities which are also being registered), the Company shall, at such time, promptly give each Holder written notice of such registration.Upon the written request of each Holder given within ten (10) days after mailing of such notice by the Company in accordance with Section 3.5, the Companyshall, subject to the provisions of Section 1.8, cause to be registered under the Act all of the Registrable Securities that each such Holder has requested to beregistered.1.4 Obligations of the Company. Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Companyshall, as expeditiously as reasonably possible:(a) Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause suchregistration statement to become effective, and, upon the request of the Holders of a majority of the Registrable Securities registered thereunder, keep suchregistration statement effective for a period of up to one hundred twenty (120) days or until the distribution contemplated in the Registration Statement has beencompleted; provided, however, that in the case of any registration of Registrable Securities on Form S-3 which are intended to be offered on a continuous ordelayed basis, such 120-day period shall be extended, if necessary, to keep the registration statement effective until all such Registrable Securities are sold,provided that Rule 415, or any successor rule under the Act, permits an offering on a continuous or delayed basis, and provided further that applicable rulesunder the Act governing the obligation to file a post-effective amendment permit, in lieu of filing a post-effective amendment which (i) includes any prospectusrequired by Section 10(a)(3) of the Act or (ii) reflects facts or events representing a material or fundamental change in the information set forth in theregistration statement, the incorporation by reference of information required to be included in (i) and (ii) above to be contained in periodic reports filedpursuant to Section 13 or 15(d) of the 1934 Act in the registration statement.(b) Prepare and file with the SEC and furnish to the Holders such amendments and supplements to such registration statement and the prospectusused in connection with such registration statement as may be necessary to comply with the provisions of the Act with respect to the disposition of allsecurities covered by such registration statement.(c) Furnish to the Holders such numbers of copies of a prospectus, including all amendments thereto, and including a preliminary prospectus, inconformity with the requirements of the Act, and such other documents as they may reasonably request in order to facilitate the disposition of RegistrableSecurities owned by them.(d) Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or “Blue Sky” lawsof such jurisdictions as shall be reasonably requested by the Holders; provided that the Company shall not be required in connection therewith or as acondition thereto to qualify to do business or to file a general consent to service of process in any such states or jurisdictions. 4 (e) In the event of any underwritten public offering, enter into and perform its obligations under an underwriting agreement, in usual andcustomary form, with the managing underwriter of such offering. Each Holder participating in such underwriting shall also enter into and perform itsobligations under such an agreement.(f) Promptly notify each Holder of Registrable Securities covered by such registration statement at any time when a prospectus relating thereto isrequired to be delivered under the Act of the happening of any event as a result of which the prospectus included in such registration statement, as then ineffect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements thereinnot misleading in the light of the circumstances then existing or, if for any other reason it shall be necessary at such time to amend or supplement theregistration statement or the prospectus in order to comply with the Act.(g) Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issuedby the Company are then listed.(h) Provide a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such RegistrableSecurities, in each case not later than the effective date of such registration.(i) Use its reasonable best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to thisSection 1, on the date that such Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Section 1, ifsuch securities are being sold through underwriters, or, if such securities are not being sold through underwriters, on the date that the registration statementwith respect to such securities becomes effective, (a) an opinion, dated such date, of the counsel representing the Company for the purposes of suchregistration, in form and substance as is customarily given to underwriters in an underwritten public offering, addressed to the underwriters, if any, and to theHolders requesting registration of Registrable Securities and (b) a letter dated such date, from the independent certified public accountants of the Company, inform and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to theunderwriters, if any, and to the Holders requesting registration of Registrable Securities (to the extent the then applicable standards of professional conductpermit said letter to be addressed to the Holders).1.5 Furnish Information.(a) It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the RegistrableSecurities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and theintended method of disposition of such securities as shall be required to effect the registration of such Holder’s Registrable Securities.(b) The Company shall have no obligation with respect to any registration requested pursuant to Section 1.2 or Section 1.12 if, due to theoperation of subsection 1.5(a), the 5 number of shares or the anticipated aggregate offering price of the Registrable Securities to be included in the registration does not equal or exceed the number ofshares or the anticipated aggregate offering price required to originally trigger the Company’s obligation to initiate such registration as specified in subsection1.2(a) or subsection 1.12(b)(2), whichever is applicable.1.6 Expenses of Demand and S-3 Registration. All expenses (other than underwriting discounts and commissions applicable to the sale ofRegistrable Securities (the “Selling Expenses”)) incurred in connection with registrations, filings or qualifications pursuant to Section 1.2 and 1.12,including (without limitation) all registration, filing and qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the Company,and the reasonable fees and disbursements of one counsel for the selling Holders selected by Holders selling a majority of the subject Registrable Securities andreasonably acceptable to the Company, shall be borne by the Company (the “Registration Expenses”); provided, however, that the Company shall not berequired to pay for any expenses of any registration proceeding begun pursuant to Section 1.2 or 1.12 if the registration request is subsequently withdrawn atthe request of the Holders of a majority of the Registrable Securities to be registered (in which case all participating holders shall bear such expenses inproportion to the number of shares for which registration was requested), unless the Holders of a majority of the Registrable Securities agree to forfeit their rightto a demand registration pursuant to Section 1.2 in which event such right shall be forfeited by all Holders; provided further, however, that if at the time ofsuch withdrawal, the Holders have learned of a material adverse change in the condition, business, or prospects of the Company not known to the Holders atthe time of their request and have withdrawn the request in good faith as a result of such change with reasonable promptness following disclosure of suchmaterial adverse change, then the Holders shall not be required to pay any of such expenses and shall retain their rights pursuant to Section 1.2. All SellingExpenses relating to the Registrable Securities so registered shall be borne by holders of such securities and, if it participates, the Company, pro rata on thebasis of the number of shares of Registrable Securities so registered on their behalf.1.7 Expenses of Company Registration. All expenses (other than Selling Expenses) incurred in connection with any registrations, filings orqualifications of Registrable Securities pursuant to this Agreement (other than those pursuant to Sections 1.2 or 1.12), including (without limitation) allregistration, filing, and qualification fees, printers’ and accounting fees relating or apportionable thereto and the fees and disbursements of counsel for theCompany, and the reasonable fees and disbursements of one counsel for the selling Holders selected by Holders selling a majority of the subject RegistrableSecurities and reasonably acceptable to the Company, shall be borne by the Company. All Selling Expenses relating to the Registrable Securities so registeredshall be borne by holders of such securities and, if it participates, the Company, pro rata on the basis of the number of shares of Registrable Securities soregistered on their behalf.1.8 Underwriting Requirements; Allocation of Registration Opportunity. In connection with any offering involving an underwriting of shares ofthe Company’s capital stock, the Company shall not be required under Section 1.3 to include any of the Holders’ securities in such underwriting unless theyaccept the terms of the underwriting as agreed upon between the Company and the underwriters selected by it (or by other persons entitled to select theunderwriters) and then only in such quantity as the underwriters determine in their sole 6 discretion will not jeopardize the success of the offering by the Company. If the total amount of securities, including Registrable Securities, requested bystockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters determine in their solediscretion is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities,including Registrable Securities, which the underwriters determine in their sole discretion will not jeopardize the success of the offering (the securities soincluded to be apportioned pro rata among the selling stockholders according to the total amount of securities entitled to be included therein owned by eachselling Holder or in such other proportions as shall mutually be agreed to by such selling stockholders) but in no event shall (i) the amount of securities of theselling Holders included in the offering be reduced below thirty percent (30%) of the total amount of securities included in such offering, unless such offeringis the initial public offering of the Company’s securities, in which case the selling stockholders may be entirely excluded if the underwriters make thedetermination described above and no other stockholder’s securities are included, (ii) the amount of securities of the selling Holders included in the offering bereduced unless all of the securities of the Founders and any other non-Holder stockholder of the Company are first excluded from the offering, or(iii) notwithstanding (i) and (ii) above, any shares being sold by a stockholder exercising a demand registration right similar to that granted in Section 1.2 areexcluded from such offering. For purposes of the preceding parenthetical concerning apportionment, for any selling stockholder which is a holder ofRegistrable Securities and which is a partnership or corporation, the partners, retired partners and stockholders of such holder, or the estates and familymembers of any such partners and retired partners and any trusts for the benefit of any of the foregoing persons shall be deemed to be a single sellingstockholder, and any pro-rata reduction with respect to such selling stockholder shall be based upon the aggregate amount of shares carrying registration rightsowned by all entities and individuals included in such selling stockholder, as defined in this sentence.1.9 Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration asthe result of any controversy that might arise with respect to the interpretation or implementation of this Section 1.1.10 Indemnification. In the event any Registrable Securities are included in a registration statement under this Section 1:(a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Act) for suchHolder and each person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934 Act, and such parties’ counsel against anylosses, claims, damages, or liabilities (joint or several) to which they may become subject under the Act, the 1934 Act or other federal or state law insofar assuch losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions orviolations or alleged statements, omissions or violations (collectively a “Violation”): (i) any untrue statement or alleged untrue statement of a material factcontained in such registration statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplementsthereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein notmisleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act or other federal or state law, or any rule or 7 regulation promulgated under the Act, the 1934 Act or other federal or state law; and the Company will pay to each such Holder, underwriter or controllingperson, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage,liability or action; provided, however, that the indemnity agreement contained in this subsection 1.10(a) shall not apply to amounts paid in settlement of anysuch loss, claim, damage, liability, or action if such settlement is effected without the consent of the Company (which consent shall not be unreasonablywithheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is basedsolely upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with suchregistration by any such Holder, underwriter or controlling person.(b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, its counsel, each of its directors, each ofits officers who has signed the registration statement, each person, if any, who controls the Company within the meaning of the Act, any underwriter, anyother Holder selling securities in such registration statement and any controlling person of any such underwriter or other Holder, against any losses, claims,damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Act or the 1934 Act insofar as such losses,claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) thatsuch Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with suchregistration; and each such Holder will pay any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to thissubsection 1.10(b), in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnityagreement contained in this subsection 1.10(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if suchsettlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld; provided, that, in no event shall any indemnityunder this subsection 1.10(b) exceed the net proceeds from the offering received by such Holder.(c) Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including anygovernmental action), such indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 1.10, deliverto the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent theindemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel mutually satisfactory tothe parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by onecounsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of suchindemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between suchindemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within areasonable time of the commencement of any such action, shall not relieve such indemnifying party of any liability to the indemnified party under thisSection 1.10 to the extent such failure is not prejudicial to its ability to defend such action, and the omission so to deliver 8 written notice to the indemnifying party will not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 1.10. Noindemnifying party, in the defense of any such claim or litigation, shall, except with the consent of each indemnified party, consent to entry of any judgmentor enter into any settlement which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such indemnified party of arelease from all liability with respect to such claim or litigation.(d) If the indemnification provided for in this Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified partywith respect to any loss, liability, claim, damage, or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified partyhereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such loss, liability, claim, damage, or expense in suchproportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on the other in connection withthe statements or omissions that resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations; provided,that in no event shall any contribution by a Holder under this Section 1.10(d) exceed the net proceeds from the offering received by such Holder. The relativefault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untruestatement of a material fact or the omission to state a material fact relates to information supplied by the indemnifying party or by the indemnified party andthe parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or omission.(e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreemententered into in connection with the underwritten public offering are in conflict with the foregoing provisions, the provisions in the underwriting agreement shallcontrol.(f) The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in aregistration statement under this Section 1, and otherwise.1.11 Reports Under Securities Exchange Act of 1934. With a view to making available to the Holders the benefits of Rule 144 promulgated underthe Act and any other rule or regulation of the SEC that may at any time permit a Holder to sell securities of the Company to the public without registration orpursuant to a registration on Form S-3, the Company agrees to:make and keep public information available, as those terms are understood and defined in SECRule 144, at all times after ninety (90) days after the effective date of the first registration statement filed by the Company for the offering of its securities to thegeneral public;(b) take such action, including the voluntary registration of its Common Stock under Section 12 of the 1934 Act, as is necessary to enable theHolders to utilize Form S-3 for the sale of their Registrable Securities, such action to be taken as soon as practicable after the end of the fiscal year in which thefirst registration statement filed by the Company for the offering of its securities to the general public is declared effective; 9 (c) file with the SEC in a timely manner all reports and other documents required of the Company under the Act and the 1934 Act; and(d) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Companythat it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the first registration statementfiled by the Company), the Act and the 1934 Act (at any time after it has become subject to such reporting requirements), or that it qualifies as a registrantwhose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the most recent annual or quarterly report of the Companyand such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested in availing any Holder ofany rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.1.12 Form S-3 Registration. After its IPO, the Company shall use its best efforts to qualify for registration on Form S-3 or any successor form.Thereafter, in case the Company shall receive from any Holder or Holders of Registrable Securities then outstanding a written request or requests that theCompany effect a registration on Form S-3 and any related qualification or compliance with respect to all or a part of the Registrable Securities owned by suchHolder or Holders, the Company will: promptly give written notice of the proposed registration, and any related qualification or compliance, to all otherHolders; and(b) as soon as practicable, effect such registration and all such qualifications and compliances as may be so requested and as would permit orfacilitate the sale and distribution of all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such request, together with all orsuch portion of the Registrable Securities of any other Holder or Holders joining in such request as are specified in a written request given within fifteen(15) days after receipt of such written notice from the Company; provided, however, that the Company shall not be obligated to effect any such registration,qualification or compliance, pursuant to this section 1.12: (1) if Form S-3 is not available for such offering by the Holders; (2) if the Holders, together with theholders off any other securities of the Company entitled to inclusion in such registration, propose to sell Registrable Securities and such other securities (ifany) at an aggregate price to the public of less than $1,000,000; (3) if the Company shall furnish to the Holders a certificate signed by the President of theCompany stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and itsstockholders for such Form S-3 Registration to be effected at such time, in which event the Company shall have the right to defer the filing of the Form S-3registration statement for a period of not more than 60 days after receipt of the request of the Holder or Holders under this Section 1.12; provided, however,that the Company shall not utilize this right more than once in any twelve month period; (4) if the Company has, within the six (6) month period preceding thedate of such request, already effected on registration on Form S-3 for the Holders pursuant to this Section 1.12; or (5) in any particular jurisdiction in whichthe Company would be required to qualify to do business or to execute a general consent to service of process in effecting such registration, qualification orcompliance.(c) Subject to the foregoing, the Company shall file a registration statement covering the Registrable Securities and other securities so requested tobe registered as soon as 10 practicable after receipt of the request or requests of the Holders. Registrations effected pursuant to this Section 1.12 shall not be counted as demands forregistration or registrations effected pursuant to Sections 1.2 or 1.3, respectively.1.13 Assignment of Registration Rights. The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may beassigned (but only with all related obligations) by a Holder to a transferee or assignee of such securities who, after such assignment or transfer, holds at leastone hundred thousand (100,000) shares of the Registrable Securities (as adjusted for stock splits, stock dividends, recapitalizations and the like) held by thetransferor or assignor of such securities immediately prior to such transfer, provided: (a) the Company is, within a reasonable time after such transfer,furnished with written notice of the name and address of such transferee or assignee and the securities with respect to which such registration rights are beingassigned; (b) such transferee or assignee agrees in writing to be bound by and subject to the terms and conditions of this Agreement, including withoutlimitation the provisions of Section 1.15 below; (c) such assignment shall be effective only if immediately following such transfer the further disposition ofsuch securities by the transferee or assignee is restricted under the Act; and (d) such transfer or assignment shall not be effective if it is made to a competitor ofthe Company as determined by the Company in its sole discretion. Notwithstanding the foregoing, (i) transfers to transferees and assignees of a partnership orlimited liability company who are partners or members or retired partners or members of such partnership or limited liability company (including spouses andancestors, lineal descendants and siblings of such partners or members who acquire Registrable Securities by gift, will or intestate succession), (ii) transfersto an affiliated fund, partnership, entity or shareholder of any Investor shall not be subject to the minimum shareholding requirement set forth above, providedthat all such assignees and transferees shall have a single attorney-in-fact for the purpose of exercising any rights, receiving notices or taking any action underthis Section 1.1.14 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior writtenconsent of the Holders of not less than sixty percent (60%) of the outstanding Registrable Securities, enter into any agreement with any holder or prospectiveholder of any securities of the Company which would allow such holder or prospective holder (a) to include such securities in any registration filed underSection 1.2 hereof, unless under the terms of such agreement, such holder or prospective holder may include such securities in any such registration only tothe extent that the inclusion of his securities will not reduce the amount of the Registrable Securities of the Holders which is included or (b) to make a demandregistration which could result in such registration statement being declared effective prior to the earlier of either of the dates set forth in subsection 1.2(a) orwithin one hundred twenty (120) days of the effective date of any registration effected pursuant to Section 1.2.1.15 Market Stand-Off Agreement.(a) Each Investor and each Founder hereby agrees that, during the period of duration specified by the underwriter of Common Stock or othersecurities of the Company, following the effective date of a registration statement of the Company filed under the Act in connection with the Company’s IPO, itshall not, to the extent requested by the Company and such underwriter, directly or indirectly sell, offer to sell, contract to sell (including, without 11 limitation, any short sale), grant any option to purchase or otherwise transfer or dispose of (other than to donees who agree to be similarly bound) anysecurities of the Company held by it at any time during such period except Common Stock included in such registration, provided, however, that suchmarket stand-off period shall not exceed 198 days.(b) In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions with respect to the Registrable Securities ofeach Investor and each Founder (and the shares or securities of every other person subject to the foregoing restriction) until the end of such period.(c) The obligations described in Section 1.15(a) shall apply to the Investors only if all officers and directors of the Company, all one-percent(1%) securityholders, and all other persons with registration rights (whether or not pursuant to this Agreement) enter into similar agreements. If the Companyor the underwriter of any public offering of the Company’s securities waive or terminate any standoff or lockup restrictions imposed on any holder ofsecurities of the Company, then such waiver or termination shall be granted to all Holders subject to standoff or lockup restrictions pro rata based on thenumber of shares of Common Stock beneficially held by such holder and the Holders. From and after the date of this Agreement, the Company shall use itsbest efforts to ensure that all holders of capital stock of the Company agree to be bound by terms substantially similar to those set forth in this Section 1.15.1.16 Termination of Registration Rights. The rights under this Section 1 shall terminate (i) as to each Holder who, immediately following theconsummation of the IPO, holds, or is entitled to hold upon conversion, shares of Registrable Securities which may be immediately sold under Rule 144during any 90-day period and (ii) as to all Holders upon the five-year anniversary of the consummation of the Company’s IPO.2. Covenants of the Company.2.1 Delivery of Financial Statements.(a) So long as any Investor holds at least one hundred thousand (100,000) Registrable Securities (as adjusted for stock splits, stock dividends,recapitalizations and the like), the Company shall deliver to each such Investor (a “Major Investor”):(i) as soon as practicable, but in any event within sixty (60) days after the end of each fiscal year of the Company, an income statementfor such fiscal year, a balance sheet of the Company and statement of stockholder’s equity as of the end of such year, and a statement of cash flows for suchyear, such year-end financial reports to be in reasonable detail, prepared in accordance with generally accepted accounting principles, and audited and certifiedby independent public accountants of nationally recognized standing selected by the Company;(ii) as soon as practicable, but in any event within forty-five (45) days after the end of each of the first three (3) quarters of each fiscalyear of the Company, an unaudited profit or loss statement and a statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the endof such fiscal quarter, in each case, certified by Company’s Chief Financial Officer, with management’s analysis of results and a statement of an executiveofficer comparing monthly and year-to-date information to the Company’s budget for such fiscal quarter; 12 (iii) within thirty (30) days of the end of each month, an unaudited income statement and a statement of cash flows for such month andan unaudited balance sheet as of the end of such month, in reasonable detail; and(iv) as soon as practicable, but in any event thirty (30) days prior to the end of each fiscal year, an annual budget for the next fiscal year,prepared on a monthly basis.2.2 Inspection Covenants. The Company shall permit each Major Investor, at such Major Investor’s expense, to visit and inspect the Company’sproperties, to examine its books of account and records and to discuss the Company’s affairs, finances and accounts with its officers (including the use of anauditor in such inspection and discussion), all at such reasonable times as may be requested by such Major Investor; provided, however, that the Companyshall not be obligated pursuant to this Section 2.2 to provide access to any information which it reasonably considers, upon advice of legal counsel, to be tradesecret or similar confidential information.2.3 Termination of Information and Inspection Covenants. The covenants set forth in Section 2.1 and 2.2 shall terminate and be of no furtherforce or effect when either (i) the Company consummates its IPO; (ii) when the Company first becomes subject to the periodic reporting requirements ofSections 12(g) or 15(d) of the 1934 Act; or (iii) the closing of any transaction or series of related transactions by the Company (including, without limitation,any reorganization, merger or consolidation) which will result in the Company’s stockholders immediately prior to such transaction not holding (by virtue ofsuch shares or securities issued solely with respect thereto) at least 50% of the voting power of the surviving or continuing entity.2.4 Right of First Offer. Subject to the terms and conditions specified in this Section 2.4, for so long as any Major Investor owns any shares ofoutstanding Preferred Stock, the Company hereby grants to such Major Investor a right of first offer with respect to future sales by the Company of its Shares(as hereinafter defined). A Major Investor shall be entitled to apportion the right of first offer hereby granted it among itself and its partners, members,directors, entities under common control and affiliates in such proportions as it deems appropriate.Each time the Company proposes to offer any shares of, or securities convertible into or exercisable for any shares of, any class of its capitalstock (“Shares”), the Company shall first make an offering of such Shares to each Major Investor in accordance with the following provisions:(a) The Company shall deliver a notice by certified mail (“Notice”) to the Major Investors stating (i) its bona fide intention to offer such Shares,(ii) the number of such Shares to be offered, and (iii) the price and terms, if any, upon which it proposes to offer such Shares.(b) By written notification received by the Company, within twenty (20) calendar days after receipt of the Notice, the Major Investor may elect topurchase or obtain, at the price and on the terms specified in the Notice, up to that portion of such Shares which equals 13 the proportion that the number of shares of Common Stock issued and held, or issuable upon conversion of the Preferred Stock then held, by such MajorInvestor bears to the total number of shares of Common Stock of the Company then outstanding (assuming full conversion and exercise of all outstandingoptions, warrants and other convertible or exercisable securities). The Company shall promptly, in writing, inform each Investor which purchases all theshares available to it (“Fully-Exercising Investor”) of any other Major Investor’s failure to do likewise. During the ten (10) calendar day period commencingafter receipt of such information, each Fully-Exercising Investor shall be entitled to obtain that portion of the Shares for which Major Investors were entitled tosubscribe but which were not subscribed for by the Investors which is equal to the proportion that the number of shares of Common Stock issued and held,or issuable upon conversion of the Preferred Stock then held, by such Fully-Exercising Investor bears to the total number of shares of common stock issuedand held, or issuable upon conversion of the Preferred Stock then held, by all Fully-Exercising Investors who wish to purchase some of the unsubscribedshares.(c) If all Shares referred to in the Notice which Major Investors are entitled to obtain pursuant to subsection 2.4(b) are not elected to be obtained asprovided in subsection 2.4(b) hereof, the Company may, during the sixty (60) day period following the expiration of the period provided in subsection 2.4(b)hereof, offer the remaining unsubscribed portion of such Shares to any person or persons at a price not less than, and upon terms no more favorable to theofferee than those specified in the Notice. If the Company does not enter into an agreement for the sale of the Shares within such period, or if such agreement isnot consummated within 60 days of the execution thereof, the right provided hereunder shall be deemed to be revived and such Shares shall not be offeredunless first reoffered to the Major Investors in accordance herewith.(d) The right of first offer in this Section 2.4 shall not be applicable:(i) to the issuance or sale of shares of Common Stock or other securities, or rights convertible into, or entitling the holder thereof to receivedirectly or indirectly, additional shares of Common Stock (hereinafter referred to as “Common Stock Equivalents”), to employees, consultants or directorsof the Company or persons having a professional relationship with or providing services to the Company, directly or pursuant to a stock option plan oragreement or other stock option arrangements so long as such plan, agreements or arrangements have been approved by the Board of Directors of the Company(including a majority of the directors designated by the holders of the Preferred Stock);(ii) to the issuance or sale of Common Stock or Common Stock Equivalents in connection with a bona fide acquisition of technology bythe Company or a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale of assets, sale or exchange of stock orotherwise, approved by the Board of Directors of the Company (including a majority of the directors designated by the holders of the Preferred Stock);(iii) to the issuance or sale of Common Stock or Common Stock Equivalents, warrants or other securities or rights in connection with abona fide loan transaction or bank financing or otherwise in connection with commercial credit and equipment financing arrangements or to a strategic partnerof the Company, in each case as approved by the Board of 14 Directors of the Company (including a majority of the directors designated by the holders of the Preferred Stock);(iv) to or after consummation of a bona fide, firmly underwritten public offering of shares of Common Stock, registered under the Actpursuant to a registration statement on Form S-1;(v) to the issuance of Common Stock or Common Stock Equivalents issued or issuable pursuant to a resolution unanimously approvedby approved by the Board of Directors of the Company (including a majority of the directors designated by the holders of the Preferred Stock);(vi) to the issuance of securities pursuant to the conversion or exercise of convertible or exercisable securities that are, or have been,approved for issuance by a majority of the Company’s Board of Directors (including a majority of the directors designated by the holders of the PreferredStock);(vii) to the issuance of securities in connection with a split or subdivision of the outstanding shares of Common Stock or a dividend orother distribution payable in additional shares of Common Stock or Common Stock Equivalents without payment of any consideration by such holder for theadditional shares of Common Stock or the Common Stock Equivalents (including the additional shares of Common Stock issuable upon conversion orexercise thereof); or(viii) to the issuance of any shares of Series E Preferred Stock pursuant to the Series E Agreement or any subsequent closing thereof or theissuance of the any shares of Common Stock upon conversion of shares of Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock,Series D Preferred Stock or Series E Preferred Stock.(e) The right of first offer set forth in this Section 2.4 may not be assigned or transferred except to affiliates of a Major Investor.2.5 Qualified Small Business. The Company shall not take, or not fail to take, any action that would reasonably be expected to cause the Stockto fail to qualify as “qualified small business stock” within the meaning of Sections 1045 and 1202 of the Internal Revenue Code of 1986, as amended, andSections 18152.5 and 18038.5 of the California Revenue and Taxation Code; provided that, notwithstanding the foregoing, the Company shall not beobligated to take any action, or refrain from any action, which in its good faith business judgment is not in the best interests of the Company or itsstockholders. In the event that the Company is or becomes aware that the Stock will or may fail to qualify as a “qualified small business stock” within themeaning of Sections 1045 and 1202 of the Internal Revenue Code of 1986, as amended, and Sections 18152.5 and 18038.5 of the California Revenue andTaxation Code, the Company will promptly notify the holders of the Stock, and will consult in good faith with Investors regarding a mutually agreeable andreasonable and alternative course of action that would preserve such status. Upon request by a holder of the Stock, the Company shall conduct a reasonableinvestigation to determine whether the Stock qualifies as “qualified small business stock” meaning of Sections 1045 and 1202 of the Internal Revenue Code of1986, as amended, 15 and Sections 18152.5 and 18038.5 of the California Revenue and Taxation Code, and shall deliver to such holder a duly executed Certificate ofRepresentation in substantially the form attached hereto as Exhibit A (the “QSBS Certificate”) as expeditiously as reasonably possible, but in no event laterthan 30 days following the Company’s receipt of such request. If the Company is unable to deliver an executed QSBS Certificate because representationstatement 2 in the QSBS Certificate is inaccurate, the Company covenants and agrees to deliver a statement explaining the reasons for such inaccuracy. TheCompany’s obligation to furnish a written statement pursuant to this Section 2.5 shall continue notwithstanding the fact that a class of the Company’s stockmay be traded on an established securities market.2.6 Employee and Other Stock Arrangements. The Company has issued or reserved for issuance an aggregate of 15,500,411 shares of CommonStock (or Common Stock Equivalents) for issuance to employees, consultants and directors of the Company and persons having a professional relationshipwith or providing services to the Company, pursuant to the Company’s 2000 Stock Option/Stock Issuance Plan (the “Option Plan”). The Company shall notincrease the number of shares of Common Stock reserved under the Option Plan without the approval of a majority of the members of its Board of Directors.Unless otherwise approved by a majority of the members of its Board of Directors, all shares of Common Stock or Common Stock Equivalents issued underthe Option Plan shall initially be unvested and shall vest twenty-five percent (25%) at the end of the first year of service, with the remaining seventy-fivepercent (75%) vesting in 36 equal monthly installments thereafter, subject to continued service to the Company. The Company shall have a right to repurchaseany unvested shares issued to any person pursuant to the Option Plan upon the termination, with or without cause, of such person’s employment and shallalso have a right of first refusal with respect to any shares of vested stock proposed to be transferred by an employee (subject to the standard exceptions setforth in the Company’s form documents under the Option Plan).2.7 Proprietary Information Agreements. The Company will cause each person now or hereafter employed by it or any subsidiary to execute theCompany’s standard agreement regarding confidentiality, proprietary information and inventions.2.8 Assignment of Right of First Refusal. The Company hereby covenants and agrees to assign to each Major Investor, on a pro-rata basis as setforth below, to the extent permitted under the Option Plan, the First Refusal Right granted to the Company under each Stock Purchase Agreement (a “StockPurchase Agreement”) and Stock Issuance Agreement (a “Stock Issuance Agreement”) entered into with each person to whom an option is granted orshares are issued under the Option Plan in the event the Company does not exercise such First Refusal Right, such that the Major Investors shall have identicalrights and obligations (except as herein provided) to those of the Company with respect to the exercise of a First Refusal Right for such shares; provided,however, that each Major Investor may elect to purchase or obtain, at the price and on the terms specified in the Disposition Notice (as such term is defined ineach Stock Purchase Agreement or Stock Issuance Agreement, as the case may be) that number of shares equal to the proportion that the number of shares ofRegistrable Securities then held by such stockholder bears to the total number of shares of Registrable Securities of the Company then held by all other MajorInvestors. The Company covenants agrees to take all such further actions as may be necessary in order to enforce the foregoing First Refusal Right, includingthe imposition of stop-transfer instructions with respect to such shares. The Company further 16 covenants and agrees that all issuances of Common Stock (or Common Stock Equivalents) to its employees, consultants and directors shall be made eitherunder the Option Plan or pursuant to an agreement containing provisions substantially similar to those set forth Articles E and G(1) of the form of StockPurchase Agreement concerning rights of first refusal.3. Miscellaneous.3.1 Successors and Assigns. Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and bebinding upon the respective successors and assigns of the parties (including transferees of any shares of Registrable Securities). Nothing in this Agreement,express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies,obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.3.2 Governing Law. This Agreement shall be governed by and construed under the laws of the State of California as applied to agreements amongCalifornia residents entered into and to be performed entirely within California.3.3 Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of whichtogether shall constitute one and the same instrument.3.4 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing orinterpreting this Agreement.3.5 Notices. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemedeffectively given upon personal delivery to the party to be notified or five (5) days after deposit with the United States Post Office, by registered or certifiedmail, postage prepaid and addressed to the party to be notified at the address indicated for such party on the signature page hereof, or at such other address assuch party may designate by ten (10) days’ advance written notice to the other parties.3.6 Expenses. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitledto reasonable attorneys’ fees, costs and necessary disbursements in addition to any other relief to which such party may be entitled.3.7 Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived(either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the holders of amajority of the Registrable Securities then outstanding; provided, however, no such waiver or amendment shall be effective as to a Holder if it adverselyimpacts such Holder in a manner different than the other Holders. Any amendment or waiver effected in accordance with this paragraph shall be binding uponeach Holder of any Registrable Securities then outstanding, each future Holder of all such Registrable Securities, and the Company. Each undersigned MajorInvestor having rights of first offer under Section 2.4 of the Prior Agreement, 17 hereby waives any rights to purchase additional shares of Series E Preferred Stock in excess of those shares of Series E Preferred Stock purchased by suchMajor Investor under the Series E Agreement.3.8 Severability. If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excludedfrom this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with itsterms.3.9 Aggregation of Stock. All shares of Registrable Securities held or acquired by affiliated entities or persons (including former and currentpartners, former and current members and former and current stockholders, the estates and family members of any such partners, members, retired partnersor retired members and any trusts for the benefit of any of the foregoing persons) shall be aggregated together for the purpose of determining the availability ofany rights under this Agreement.3.10 Entire Agreement. This Agreement (including the Exhibits hereto, if any) constitutes the full and entire understanding and agreement betweenthe parties with regard to the subjects hereof and thereof and supersedes all prior written agreements and negotiations and oral understandings with respectthereto, including but not limited to the Prior Agreement and any similar provisions set forth in the Warrants.3.11 Recapitalizations, Etc. Subject to Section 2.2 hereof, the provisions of this Agreement (including any calculation of share ownership) shallapply, to the full extent set forth herein with respect to the Registrable Securities and to the Common Stock, to any and all shares of capital stock of theCompany or any capital stock, partnership or member units or any other security evidencing ownership interests in any successor or assign of the Company(whether by merger, consolidation, sale of assets or otherwise) that may be issued in respect of, in exchange for, or in substitution of the Common Stock byreason of any stock dividend, split, combination, recapitalization, liquidation, reclassification, merger, consolidation or otherwise.3.12 Additional Parties. In the event the Company issues additional shares of its Series E Preferred Stock pursuant to the Series E Agreement, anypurchaser of such additional shares shall become a party to this Agreement by executing and delivering an additional counterpart signature page to thisAgreement and such purchaser shall be deemed to be an “Investor” hereunder. Schedule A hereto may be updated from time to time after the date hereof toreflect any subsequent purchasers, successors and permitted assigns.[Remainder of this page intentionally left blank] 18 IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written. COMPANY:INPHI CORPORATIONBy: /s/ John S. Edmunds Name: John S. Edmunds Title: Chief Financial OfficerAddress: 3945 Freedom Circle, Suite 1100 Santa Clara, CA 95054[Signature Page to Amended and Restated Investors’ Rights Agreement] FOUNDERS:LOI NGUYEN Name: Loi NguyenAddress: 2393 Townsgate Rd, Ste. 101 Westlake Village, CA 91361 GOPAL RAGHAVAN Name: Gopal RaghavanAddress: 517 Oakbury Court Thousand Oaks, CA 91360 TIMOTHY SEMONES/s/ Timothy SemonesName: Timothy SemonesAddress: 105 Madison Avenue P.O. Box 6496 Ketchum, ID 83340 ASHOK DHAWAN Name: Ashok DhawanAddress: 1909 Smokey Ridge Avenue Thousand Oaks, CA 91362[Signature Page to Amended and Restated Investors’ Rights Agreement] FOUNDERS:LOI NGUYEN Name: Loi NguyenAddress: 2393 Townsgate Rd, Ste. 101 Westlake Village, CA 91361 GOPAL RAGHAVAN Name: Gopal RaghavanAddress: 517 Oakbury Court Thousand Oaks, CA 91360 TIMOTHY SEMONES Name: Timothy SemonesAddress: 105 Madison Avenue P.O. Box 6496 Ketchum, ID 83340 ASHOK DHAWAN/s/ Ashok DhawanName: Ashok DhawanAddress: 1909 Smokey Ridge Avenue Thousand Oaks, CA 91362[Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Authosis Capital IncPrint Name of Investor/s/ ILLEGIBLESignature of InvestorTam Ping LUI Chairman & CEOPrint Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mailRoom 2101-2 Westlands Centre20 Westlands RoadQuarry Bay, Hong KongTel: +852-2960-4611Fax: +852-2960-0185e-mail: dlui@startupcv.com[Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Michael BalogPrint Name of Investor/s/ Michael BalogSignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail128 Porchuck Rd.Greenwich CT 06831415 407 8002MG BALOG@gmail.com [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Andrew A. BoganPrint Name of Investor/s/ Andrew A. BoganSignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail435 Sheridan Ave 102Palo Alto, CA 94306 aabogan@alumni.princeton.edu [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Thomas R. Bogan 8/28/10Print Name of Investor/s/ Thomas R. BoganSignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mailThomas R Bogan95 Chestnut StreetBoston, MA 02108 tom@boganassociates.com[Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Ronald F. GreenspanPrint Name of InvestorBy: /s/ Ronald F. GreenspanSignature of InvestorTrustee, Chapter 7 EstatePrint Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mailFTI Consulting633 West 5th Street 16th flLos Angeles, CA 90071213.452.6006 213.452.6099ron.greenspan@fticonsulting.com[Signature Page to Amended and Restated Investor’s Rights Agreement] MARILEE BROOKS, TTEE, MARILEEBROOKS TRUST, U/A DTD 1/16/08By: /s/ Marilee BrooksName: Marilee BrooksTitle: TrusteeAddress:[Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Joseph ChiPrint Name of Investor/s/ Joseph ChiSignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail22 Falkner DriveLadera Ranch, CA 92694 [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Todd CutlerPrint Name of Investor/s/ Todd CutlerSignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail1020 Abingdon LnJohns Creek, GA 30022 tgcutler@gmail.com [Signature Page to Amended and Restated Investors’ Rights Agreement] DALI, HOOK PARTNERS, L.P.By: /s/ Paul DaliName: Paul DaliTitle: General PartnerAddress: 3000 Sand Hill Road, Building One Suite 185 Menlo Park, CA 94025DALI, HOOK ENTREPRENEURS FUND, L.P.By: /s/ Paul DaliName: Paul DaliTitle: General PartnerAddress: 3000 Sand Hill Road, Building One Suite 185 Menlo Park, CA 94025DALI, HOOK ANNEX FUND, L.P.By: /s/ Paul DaliName: Paul DaliTitle: General PartnerAddress: 3000 Sand Hill Road, Building One Suite 185 Menlo Park, CA 94025 [Signature Page to Amended and Restated Investors’ Rights Agreement] HOOK PARTNERS V, L.P.By: /s/ David HookName: David HookTitle: General PartnerAddress: Two Galleria Tower, Suite 167013455 Noel RoadDallas, TX 75240DHP B FUND, L.P.By: /s/ David HookName: David HookTitle: General PartnerAddress: Two Galleria Tower, Suite 167013455 Noel RoadDallas, TX 75240 [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Fallen Oak PartnersPrint Name of Investor/s/ ILLEGIBLESignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:ILLEGIBLE Rev. Living TrustILLEGIBLE 7/9/2007ILLEGIBLEPrint Name of Investor/s/ ILLEGIBLESignature of InvestorSeth Gersch, TrusteePrint Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail200 Robin RdHillsborough CA 94010 650-344-6300sgersch@ILLEGIBLE [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Jordan GersonPrint Name of Investor/s/ Jordan GersonSignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Mark R GordonPrint Name of Investor/s/ Mark R Gordon 8/10/2010Signature of InvestorPrint Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail565 Barbara WayHillsborough, CA 94010markrgordon@gmail.com [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Michael B. GordonPrint Name of Investor/s/ Michael B. GordonSignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail428 Maple StPalo Alto CA94301 [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Elizabeth T. HallPrint Name of Investor/s/ Elizabeth T. HallSignature of InvestorPrint Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail5 SMOKE TREE DR.LADERA RANCH, CA 97694ethallz@hotmail.com [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Chelsea HardestyPrint Name of Investor/s/ Chelsea HardestySignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail98 RYAN AVENUEMILL VALLEY, CA 94941PH: 415-300-6881FAX: 415-366-1448cehardesty@gmail.com [Signature Page to Amended and Restated Investors’ Rights Agreement] INTERNATIONAL VENTURE CAPITALINVESTMENT CORPORATIONBy: /s/ Lip-Bu TanName: Lip-Bu TanTitle: PresidentAddress: One California Street, Suite 2800 San Francisco, CA 94111INTERNATIONAL VENTURE CAPITALINVESTMENT III CORP.By: /s/ Lip-Bu TanName: Lip-Bu TanTitle: PresidentAddress: One California Street, Suite 2800 San Francisco, CA 94111BI WALDEN VENTURES KETIGA SDN. BHD.By: Name: Lip-Bu TanTitle: PresidentAddress: One California Street, Suite 2800 San Francisco, CA 94111SEED VENTURES III PTE LTD.By: Name: Lip-Bu TanTitle: PresidentAddress: One California Street, Suite 2800 San Francisco, CA 94111 [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:FAMILY TRUST DTD JAN 29, 1998/s/ Russell A & Colene R JohnsonPrint Name of Investor/s/ Russell JohnsonSignature of InvestorTrusteePrint Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mailKPLJ VENTURES2777 YULUPA AVE No. 161SANTA ROSA, CA 95405707 569 1685rjohnson@kpljventures.com [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:John Dirk KinleyPrint Name of Investor/s/ John Dirk KinleySignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail John Dirk Kinley1503 EATON AVESAN CARLOS, CA 94070415.596.0010 (CELL)dirk_kinley@yahoo.comdkinley@gmail.com [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:/s/ Scott KovalikPrint Name of Investor/s/ Scott KovalikSignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail10 Lombardy LnOrinda CA 94563work 415-248-2220fax 415-398-7100cell 925-285-9669 [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:KTB networkPrint Name of Investor/s/ ILLEGIBLESignature of InvestorPartner of KTB VenturesPrint Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail203 Redwood Shores Parkway, Suite 610Redwood City, CA 94065Phone) 650-324-4681Fax) 650-324-4682email) ILLEGIBLE [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Kathlene W. LowePrint Name of Investor/s/ Kathlene W. LoweSignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail59 CAMBRIA DRIVECORONA DEL MAR, CA 92625TEL 949.640.7565FAX 949.640.6477email: Klowe@me.com [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Paul S. MaderaPrint Name of Investor/s/ Paul S. MaderaSignature of Investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail2 SUTHERLAND DR.ATHERTON, CA 94027 pmadera@meritechcapital.com [Signature Page to Amended and Restated Investors’ Rights Agreement] MAYFIELD XI,a Delaware Limited PartnershipBy: Mayfield XI Management, L.L.C.Its: General PartnerBy: /s/ ILLEGIBLEIts: Managing DirectorAddress: 2800 Sand Hill Road Menlo Park, CA 94025MAYFIELD XI QUALIFIED,a Delaware Limited PartnershipBy: Mayfield XI Management, L.L.C.Its: General PartnerBy: /s/ ILLEGIBLEIts: Managing DirectorAddress: 2800 Sand Hill Road Menlo Park, CA 94025MAYFIELD ASSOCIATES FUND VI,a Delaware Limited PartnershipBy: Mayfield XI Management, L.L.C.Its: General PartnerBy: /s/ ILLEGIBLEIts: Managing DirectorAddress: 2800 Sand Hill Road Menlo Park, CA 94025 [Signature Page to Amended and Restated Investors’ Rights Agreement] MAYFIELD PRINCIPALS FUND II,a Delaware Limited Liability CompanyBy: Mayfield XI Management, L.L.C.Its: Managing DirectorBy: /s/ ILLEGIBLEIts: Managing DirectorAddress: 2800 Sand Hill Road Menlo Park, CA 94025 [Signature Page to Amended and Restated Investors’ Rights Agreement] NARRA VENTURE CAPITAL, L.P.By: /s/ Francisco S.A. SandejasName: Francisco S.A. SandejasTitle: Authorized SignatoryAddress: Unit 105, Plaza B Northgate Cyberzone Muntinlupa City, 1781 Philippines [Signature Page to Amended and Restated Investors’ Rights Agreement] PACVEN WALDEN VENTURES V, L.P.By: Pacven Walden Management V, Co., Ltd. As General Partner of Pacven Walden Ventures V, L.P.By: /s/ Lip-Bu TanName: Lip-Bu TanIts: DirectorAddress: One California Street, Suite 2800San Francisco, CA 94111PACVEN WALDEN VENTURES PARALLEL V-A C.V.By: Pacven Walden Management V, Co., Ltd. As General Partner of Pacven Walden Ventures Parallel V-A C.V.By: /s/ Lip-Bu TanName: Lip-Bu TanIts: DirectorAddress: One California Street, Suite 2800 San Francisco, CA 94111PACVEN WALDEN VENTURES PARALLEL V-B C.V.By: Pacven Walden Management V, Co., Ltd. As General Partner of Pacven Walden Ventures Parallel V-B C.V.By: /s/ Lip-Bu TanName: Lip-Bu TanIts: DirectorAddress: One California Street, Suite 2800 San Francisco, CA 94111 [Signature Page to Amended and Restated Investors’ Rights Agreement] PACVEN WALDEN VENTURES VASSOCIATES FUND, L.P.By: Pacven Walden Management V, Co., Ltd. As General Partner of Pacven Walden Ventures V Associates Fund, L.P.By: /s/ Lip-Bu TanName: Lip-Bu TanIts: DirectorAddress: One California Street, Suite 2800 San Francisco, CA 94111PACVEN WALDEN VENTURES V-QP ASSOCIATESFUND, L.P.By: Pacven Walden Management V, Co., Ltd. As General Partner of Pacven Walden Ventures V-QP Associates Fund, L.P.By: /s/ Lip-Bu TanName: Lip-Bu TanIts: DirectorAddress: One California Street, Suite 2800 San Francisco, CA 94111ASIAN VENTURE CAPITAL INVESTMENTCORPORATIONBy: /s/ Lip-Bu TanName: Lip-Bu TanTitle: PresidentAddress: One California Street, Suite 2800 San Francisco, CA 94111 [Signature Page to Amended and Restated Investors’ Rights Agreement] PACVEN WALDEN VENTURES VI, L.P.By: Pacven Walden Management VI, Co., Ltd. As General Partner of Pacven Walden Ventures VI,L.P.By: /s/ Lip-Bu TanName: Lip-Bu TanIts: DirectorPACVEN WALDEN VENTURES PARALLEL VI, L.P.By: Pacven Walden Management VI, Co., Ltd. As General Partner of Pacven Walden Ventures ParallelVI, L.P.By: /s/ Lip-Bu TanName: Lip-Bu TanIts: Director [Signature Page to Amended and Restated Investors’ Rights Agreement] INTERNATIONAL VENTURE CAPITALINVESTMENT CORPORATIONBy: Name: Lip-Bu TanTitle: PresidentAddress: One California Street, Suite 2800 San Francisco, CA 94111INTERNATIONAL VENTURE CAPITALINVESTMENT III CORP.By: Name: Lip-Bu TanTitle: PresidentAddress: One California Street, Suite 2800 San Francisco, CA 94111BI WALDEN VENTURES KETIGA SDN. BHD.By: Name: Lip-Bu TanTitle: PresidentAddress: One California Street, Suite 2800 San Francisco, CA 94111SEED VENTURES III PTE LTD.By: /s/ Hock Voon LooName: Hock Voon LooTitle: DirectorAddress: One California Street, Suite 2800 San Francisco, CA 94111 [Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:John SkeenPrint Name of Investor/s/ John SkeenSignature of investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail [Signature Page to Amended and Investors’ Right Agreement] INVESTORS:ROBERT T. SLAYMAKERPrint Name of Investor/s/ ROBERT T. SLAYMAKERSignature of investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail1 BELVEDERE WAYBELVEDERE, CA 94920 415-730-1979 (MOBILE) 415-435-0749 (FAX) RT SLAY@COMCAST.NET[Signature Page to Amended and Investors’ Right Agreement] INVESTORS:IllegiblePrint Name of Investor/s/ IllegibleSignature of investor Print Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail [Signature Page to Amended and Investors’ Right Agreement] SVB FINANCIAL GROUPBy: /s/ Michael kruseName: Michael kruseTitle: TreasurerAddress: 3003 Tasman Dr Attn: Jen Chin Santa Clara, CA 95054[Signature Page to Amended and Investors’ Right Agreement] INVESTORS:SAMSUNG ELECTRONICS CO., LTDBy: Name: Address: SVIC NO. 4 NEW TECHNOLOGY BUSINESSINVESTMENT, L.L.P.By: Name: Myung Ku KangAddress: Samsung Ventures Investment Corp.Samsung Electronics Bldg,.1320-10, Seocho-2dong, Seocho-guSeoul 137-965, Korea SVIC NO. 6 NEW TECHNOLOGY BUSINESSINVESTMENT, L.L.P.By: /s/ MYUNGKU KANGName: MYUNGKU KANG Vice President/CFOAddress: 29 Samsung Electronics Bldg,.1320-10, Seocho-2dong, Seocho-gu,Seoul, Korea[Signature Page to Amended and Investors’ Right Agreement]th INVESTORS: SAMSUNG ELECTRONICS CO., LTD.By: Name: Address: SVIC NO. 4 NEW TECHNOLOGY BUSINESSINVESTMENT, L.L.P.By: /s/ Myung Ku KangName: Myung Ku KangAddress: Samsung Ventures Investment Corp. Samsung Electronics Bldg,. 1320-10, Seocho-2dong, Seocho-gu Seoul 137-965, Korea SVIC NO. 6 NEW TECHNOLOGY BUSINESSINVESTMENT, L.L.P.By: Name: Address: [Signature Page to Amended and Restated Investors’ Rights Agreement] TVP II LLCBy: Name: Title: Address: SAM SRINIVASANBy: /s/ illegibleAddress: 2854 Grapevine Terrace Fremont, CA 94539[Signature Page to Amended and Restated Investors’ Rights Agreement] TALLWOOD I, L.P.By: TALLWOOD MANAGEMENT CO. LLC, General PartnerBy: /s/ IllegibleName: Address: 400 Hamilton Avenue Suite 230 Palo Alto, CA 94301[Signature Page to Amended and Restated Investors’ Rights Agreement] TEAK CAPITAL SDN BHD, A COMPANYINCORPORATED UNDER THE COMPANIESACT, 1965 (MALAYSIA)By: /s/ CHOK KWEE BEEName: CHOK KWEE BEETitle: MANAGING DIRECTORAddress: #22-01, MENARA DION NO. 27 JALAN SULTAN ISMAIL 50250 KUALA LUMPUR MALAYSIA TEL: (603) 2031.2202 FAX: (603) 2031.2205[Signature Page to Amended and Restated Investors’ Rights Agreement] KTBNETWORK CO., LTD.By: /s/ Bum-Soo KimName: Bum-Soo KimTitle: Address: 720 University Ave, Suite 100 Palo Alto, CA 94301 TECH VENTURES II, L.P.By: /s/ IllegibleName: Title: Address: c/o 17/F ROBINSON SUMMIT CENTER 6783 AYALA AVENUE MAKATI CITY 1226 PHILIPPINES[Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:TW PartnersIllegibleIllegiblePrint Name of Investor/s/ IllegibleSignature of InvestorIllegiblePrint Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail 650-740-8028 Illegible Fax 650-529-9301[Signature Page to Amended and Investors’ Right Agreement] VENTURE LENDING & LEASING III, LLCBy: /s/ David WanekName: David WanekTitle: Vice PresidentAddress: 2010 No. First Street Suite 310 San Jose, CA 95131[Signature Page to Amended and Restated Investors’ Rights Agreement] INVESTORS:Richard A. YoungDonna L. YoungPrint Name of Investor/s/ Richard A. Young/s/ Donna L. YoungSignature of InvestorTrustees of the Young TrustPrint Title of Signatory (if applicable)Address, Phone Number, Fax Number and e-mail22588 Lazy Oak Ct.Cupertino CA 95014408-255-9437donnayoung2@att.netRichard.young@att.net[Signature Page to Amended and Restated Investors’ Rights Agreement] SCHEDULE ASCHEDULE OF STOCKHOLDERSAndrew A. BoganAsian Venture Capital Investment CorporationAuthosis Capital Inc.Brobeck, Phleger & Harrison LLPBruce R. HallettBullsEye Ventures, LLCDali, Hook Annex Fund, L.P.Dali, Hook Entrepreneur Fund, L.P.Dali, Hook Partners, L.P.David HayesDavid PiehlerDHP B Fund, L.P.Elizabeth T. HallEllen S. BancroftFallen Oak Partners, L.P.Gabrielle M. WirthGoyatek Technology Inc.Grand Prestige Invest LimitedHook Partners V, L.P.International Venture Capital Investment CorporationInternational Venture Capital Investment III Corp.John S. BakerJoseph H. ChiKathleen W. LoweKTBnetwork Co., Ltd.Laura Brower HunterMayfield Associates Fund VIMayfield Principals Fund IIMayfield XIMayfield XI Qualified Narra Venture Capital, L.P.OptiGrab II LLC (shares transferred to Chelsea Hardesty, Christian S. Hall, Gersch Gean Rev Living Trust uad 07/09/07 Seth J. Gersch & Alisa D. GeanMD TTEES, Jim Jungjohann, John Dirk Kinley, John K. Skeen, Jordan Gersch, M. Hill Jeffries, Marie O’Brien, Mark R. Gordon, Matthew L. Clark,Michael B. Gordon, Michael G. Balog and Stacia L. Balog, Trustees, Balog Trust u/a/d 12/08/05, Nevin Tod Spieker, Paul S. Madera, Paul Washkewicz,Robert D. Ward, Robert T. Slaymaker, Russell A. Johnson & Colene Johnson Family Trust Date: January 29, 1998, Scott Kovalik, Tim McSweeney, ToddG. CutlerPacven Walden Ventures Parallel V-A C.V.Pacven Walden Ventures Parallel V-B. C.V.Pacven Walden Ventures Parallel VI, L.P.Pacven Walden Ventures V Associates Fund, L.P.Pacven Walden Ventures V, L.P.Pacven Walden Ventures VI, L.P.Pacven Walden Ventures V-QP Associates Fund, L.P.Patrick ArringtonPower Quotient International Ltd.Richard A. FinkSam SrinivasanSamsung Electronics Co., Ltd.Seed Ventures III Ptd Ltd.Stephen R. FinnSVIC No. 4 New Technology Business Investment L.L.P.SVIC No. 6 New Technology Business Investment L.L.P.Tallwood I, L.PTeak Capital Sdn Bhd, a company incorporated under the CompaniesAct, 1965 (Malaysia)Tech Ventures II L.P.The Young Trust Dated July 27, 1993Thomas R. BoganTVP II LLCTW Partners Venture Lending & Leasing III, LLCComerica BankMarilee Brooks, TTEE, Marilee Brooks Trust, U/A DTD 1/16/08SVB Financial Group SCHEDULE BFOUNDERS Name of Founder No. of Shares ofCommon Stock HeldLoi Nguyen 167,777Gopal Raghavan 334,777Timothy Semones 177,777Ashok Dhawan 467,782 SCHEDULE 1.1(h)Warrants Issued Warrant Holder Number of Shares Type of SharesVenture Lending & Leasing III, LLC 19,504 Series BVenture Lending & Leasing III, LLC 15,603 Series BSVB Financial Group 5,000 Series DComerica Bank 30,000 CommonMarilee Brooks 60,000 Common EXHIBIT AINPHI Corporation,a Delaware corporationCERTIFICATE OF REPRESENTATIONSREGARDING QUALIFIED SMALL BUSINESS STOCKTHIS CERTIFICATE OF REPRESENTATIONS REGARDING QUALIFIED SMALL BUSINESS STOCK (the “Certificate”) is executed as of , by INPHI Corporation, a Delaware corporation (the “Company”), for the benefit of (the “Purchaser”). As usedherein, the term “Stock” means those shares of Company stock issued by the Company to Purchaser and described more fully on Schedule A hereto.RepresentationsSubject to the limitations and qualifications set forth below, the Company hereby represents as follows:1. The Company has conducted a reasonable investigation into the question of whether the Stock is “qualified small business stock” (“QSBS”) within themeaning of Section 1202(c) of the Internal Revenue Code of 1986, as amended (the “Code”);1. The Company has conducted a reasonable investigation into the question of whether the Stock is “qualified small business stock” (“QSBS”) withinthe meaning of Section 1202(c) of the Internal Revenue Code of 1986, as amended (the “Code”); and2. To the best of the Company’s knowledge after reasonably diligent inquiry: (i) at all times prior to and immediately following the date hereof, theCompany, together with any subsidiaries required to be aggregated with the Company (the “Controlled Group”) pursuant to section 1202(d)(3) of the Code,has been and will be a United States domestic C corporation with aggregate gross assets of less than $50,000,000; (ii) the Stock will be originally issued to theInvestor on the date hereof in exchange for money within the meaning of Code section 1202(c)(1); (iii) the Company is an “eligible corporation” within themeaning of Code section 1202(e)(4); (iv) at least 80 percent (by value) of the Company’s assets are used in the active conduct of one or more qualified trades orbusinesses within the state of California within the meaning of Code section 1202(e) and California Revenue and Taxation Code section 18152.5; (v) asdescribed in Code section 1202(c)(3), (a) during the one year period preceding the date hereof, the Company has not made one or more purchases of its stockwith an aggregate value (as of the time of the respective purchases) exceeding five percent of the aggregate value of all of the Company’s stock as of thebeginning of such period, and (b) during the two year period preceding the date hereof, the Company has not directly or indirectly purchased any of its stockfrom the Investor; (vi) as of and immediately following the date hereof, at least 80 percent of the Controlled Group’s payroll will be attributable to employmentlocated within the state of California within the meaning of California Revenue and Taxation Code section 18152.5; and (vii) the Company agrees to submit to the Internal RevenueService, the California Franchise Tax Board, and the Investors such reports or other materials as such agencies may require;3. The Company agrees use its reasonable business efforts to not take, or fail to take, any action which would cause the Stock to fail to qualify as“qualified small business stock” within the meaning of Sections 1045 and 1202 of the Code and Sections 18152.5 and 18038.5 of the California Revenueand Taxation Code. In the event that the Company is or becomes aware that the Stock will or may fail to qualify as “qualified small business stock” withinthe meaning of Sections 1045 and 1202 of the Code or Sections 18152.5 and 18038.5 of the California Revenue and Taxation Code, the Company willpromptly notify Purchaser;4. Upon request by Purchaser, the Company shall conduct a reasonable investigation to determine whether the Stock qualify as “qualified smallbusiness stock” within the meaning of Code Sections 1045 and 1202 and Sections 18152.5 and 18038.5 of the California Revenue and Taxation Code, andshall transmit, in writing, the results of such investigation to Purchaser as expeditiously as reasonably possible, but in no event later than 30 days followingthe Company’s receipt of such request; and5. As of the date first above written, and assuming that Purchaser has not sold the Stock, all of the Stock is QSBS.Qualifications and Limitations1. Qualification of the Stock as QSBS is based, in part, on the value of Company stock or other assets at certain relevant times. For purposes of therepresentations made in this Certificate, the Company has made a good faith determination of such values, taking into account all material facts andcircumstances, but cannot guarantee that the Internal Revenue Service or California tax authorities will not successfully assert that such determination isincorrect.2. Qualification of the Stock as QSBS is based, in part, on whether the Company has been engaged in the active conduct of one or more qualifiedtrades or businesses. The term “qualified trade or business” set forth in Section 1202(e)(3) of the Code is not clearly defined in all respects. For purposes of therepresentations made in this Certificate, the Company has made a good faith effort to apply the definition of qualified trade or business set forth inSection 1202(e)(3) of the Code, but cannot guarantee that the Internal Revenue Service or California tax authorities will not successfully assert a contrarydefinition.3. Qualification of the Stock as QSBS is based, in part, on whether at least eighty percent (by value) of the Company’s assets have been used in theactive conduct of one or more qualified trades or businesses. For this purpose, assets held as “working capital” of a qualified trade or business within themeaning of Section 1202(e)(6) of the Code are treated as used in the active conduct of such trade or business. The term “working capital” set forth inSection 1202(e)(6) of the Code is not clearly defined in all respects. For purposes of the representations made in this Certificate, the Company has made a goodfaith effort to apply the definition of working capital set forth in Section 1202(e)(6) of the Code, but cannot guarantee that the Internal Revenue Service or California tax authorities will notsuccessfully assert a contrary definition.4. Qualification of the Stock as QSBS is based, in part, on whether the Company purchased any of its stock from a person related to Purchaser duringa relevant testing period. For purposes of the representations made in this Certificate, the Company has made a good faith determination that such purchasesdid not occur, but cannot guarantee that the Internal Revenue Service or California tax authorities will not successfully assert that such determination isincorrect.5. While the representations contained herein are made in good faith, the Company assumes no liability for the failure of the Stock to qualify as QSBSIN WITNESS WHEREOF, the Company has executed this Certificate as of the date first above written. INPHI CORPORATIONBy: Name: Title: SCHEDULE A Class/Type of Stock Certificate Number Number of Shares Issue Date Series Preferred , 200 Series Preferred , 200 Series Preferred , 200 Series Preferred , 200 Exhibit 10.2INPHI CORPORATION2010 STOCK INCENTIVE PLAN(Adopted by the Board of Directors on June 7, 2010and amended and restated by theBoard on February 22, 2011) Table of Contents Page SECTION 1. ESTABLISHMENT AND PURPOSE. 1 SECTION 2. DEFINITIONS. 1 (a) “Affiliate” 1 (b) “Award” 1 (c) “Board of Directors” 1 (d) “Change in Control” 1 (e) “Code” 2 (f) “Committee” 2 (g) “Company” 2 (h) “Consultant” 3 (i) “Employee” 3 (j) “Exchange Act” 3 (k) “Exercise Price” 3 (l) “Fair Market Value” 3 (m) “ISO” 3 (n) “Nonstatutory Option” or “NSO” 3 (o) “Offeree” 3 (p) “Option” 4 (q) “Optionee” 4 (r) “Outside Director” 4 (s) “Parent” 4 (t) “Participant” 4 (u) “Plan” 4 (v) “Purchase Price” 4 (w) “Restricted Share” 4 (x) “Restricted Share Agreement” 4 (y) “SAR” 4 (z) “SAR Agreement” 4 (aa) “Service” 4 (bb) “Share” 4 (cc) “Stock” 5 (dd) “Stock Option Agreement” 5 (ee) “Stock Unit” 5 - i - (ff) “Stock Unit Agreement” 5 (gg) “Subsidiary” 5 (hh) “Total and Permanent Disability” 5 SECTION 3. ADMINISTRATION. 5 (a) Committee Composition 5 (b) Committee for Non-Officer Grants 5 (c) Committee Procedures 5 (d) Committee Responsibilities 6 SECTION 4. ELIGIBILITY. 7 (a) General Rule 7 (b) Automatic Grants to Outside Directors 7 (c) Ten-Percent Stockholders 8 (d) Attribution Rules 8 (e) Outstanding Stock 8 SECTION 5. STOCK SUBJECT TO PLAN. 9 (a) Basic Limitation 9 (b) Section 162(m) Award Limitation 9 (c) Additional Shares 9 SECTION 6. RESTRICTED SHARES. 9 (a) Restricted Stock Agreement 10 (b) Payment for Awards 10 (c) Vesting 10 (d) Voting and Dividend Rights 10 (e) Restrictions on Transfer of Shares 10 SECTION 7. TERMS AND CONDITIONS OF OPTIONS. 10 (a) Stock Option Agreement 10 (b) Number of Shares 10 (c) Exercise Price 10 (d) Withholding Taxes 11 (e) Exercisability and Term 11 (f) Exercise of Options 11 (g) Effect of Change in Control 11 (h) No Rights as a Stockholder 11 (i) Modification, Extension and Renewal of Options 11 (j) Restrictions on Transfer of Shares 12 (k) Buyout Provisions 12 - ii - SECTION 8. PAYMENT FOR SHARES. 12 (a) General Rule 12 (b) Surrender of Stock 12 (c) Services Rendered 12 (d) Cashless Exercise 12 (e) Exercise/Pledge 12 (f) Promissory Note 13 (g) Other Forms of Payment 13 (h) Limitations under Applicable Law 13 SECTION 9. STOCK APPRECIATION RIGHTS. 13 (a) SAR Agreement 13 (b) Number of Shares 13 (c) Exercise Price 13 (d) Exercisability and Term 13 (e) Effect of Change in Control 13 (f) Exercise of SARs 14 (g) Modification or Assumption of SARs 14 (h) Buyout Provisions 14 SECTION 10. STOCK UNITS. 14 (a) Stock Unit Agreement 14 (b) Payment for Awards 14 (c) Vesting Conditions 14 (d) Voting and Dividend Rights 14 (e) Form and Time of Settlement of Stock Units 15 (f) Death of Recipient 15 (g) Creditors’ Rights 15 SECTION 11. ADJUSTMENT OF SHARES. 15 (a) Adjustments 15 (b) Dissolution or Liquidation 16 (c) Reorganizations 16 (d) Reservation of Rights 16 SECTION 12. DEFERRAL OF AWARDS. 16 (a) Committee Powers 16 (b) General Rules 17 SECTION 13. AWARDS UNDER OTHER PLANS. 17 SECTION 14. PAYMENT OF DIRECTOR’S FEES IN SECURITIES. 17 (a) Effective Date 17 (b) Elections to Receive NSOs, Restricted Shares or Stock Units 17 (c) Number and Terms of NSOs, Restricted Shares or Stock Units 17 - iii - SECTION 15. LEGAL AND REGULATORY REQUIREMENTS. 17 SECTION 16. WITHHOLDING TAXES. 18 (a) General 18 (b) Share Withholding 18 SECTION 17. OTHER PROVISIONS APPLICABLE TO AWARDS. 18 (a) Transferability 18 (b) Substitution and Assumption of Awards 19 (c) Qualifying Performance Criteria 19 SECTION 18. NO EMPLOYMENT RIGHTS. 20 SECTION 19. DURATION AND AMENDMENTS. 20 (a) Term of the Plan 20 (b) Right to Amend or Terminate the Plan 20 (c) Effect of Termination 20 SECTION 20. EXECUTION. 21 - iv - INPHI CORPORATION2010 STOCK INCENTIVE PLAN(as amended and restated on February 22, 2011)SECTION 1. ESTABLISHMENT AND PURPOSE.The Plan was adopted by the Board of Directors on June 7, 2010, and shall be effective immediately prior to the closing of the initial offering of Stock tothe public pursuant to a registration statement filed by the Company with the Securities and Exchange Commission (the “Effective Date”). The Plan wasamended and restated on February 22, 2011. The purpose of the Plan is to promote the long-term success of the Company and the creation of stockholdervalue by (a) encouraging Employees, Outside Directors and Consultants to focus on critical long-range objectives, (b) encouraging the attraction and retentionof Employees, Outside Directors and Consultants with exceptional qualifications and (c) linking Employees, Outside Directors and Consultants directly tostockholder interests through increased stock ownership. The Plan seeks to achieve this purpose by providing for Awards in the form of restricted shares,stock units, options (which may constitute incentive stock options or nonstatutory stock options) or stock appreciation rights.SECTION 2. DEFINITIONS.(a) “Affiliate” shall mean any entity other than a Subsidiary, if the Company and/or one or more Subsidiaries own not less than 50% of such entity.(b) “Award” shall mean any award of an Option, a SAR, a Restricted Share or a Stock Unit under the Plan.(c) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from time to time.(d) “Change in Control” shall mean the occurrence of any of the following events: (i)A change in the composition of the Board of Directors occurs, as a result of which fewer than one-half of the incumbent directors aredirectors who either:(A) Had been directors of the Company on the “look-back date” (as defined below) (the “original directors”); or(B) Were elected, or nominated for election, to the Board of Directors with the affirmative votes of at least a majority of the aggregate of theoriginal directors who were still in office at the time of the election or nomination and the directors whose election or nomination was previously soapproved (the “continuing directors”); or (ii)Any “person” (as defined below) who by the acquisition or aggregation of securities, is or becomes the “beneficial owner” (as defined inRule 13d-3 under the Exchange Act), directly or indirectly, of securities of the - 1 - Company representing 50% or more of the combined voting power of the Company’s then outstanding securities ordinarily (and apartfrom rights accruing under special circumstances) having the right to vote at elections of directors (the “Base Capital Stock”); except thatany change in the relative beneficial ownership of the Company’s securities by any person resulting solely from a reduction in theaggregate number of outstanding shares of Base Capital Stock, and any decrease thereafter in such person’s ownership of securities, shallbe disregarded until such person increases in any manner, directly or indirectly, such person’s beneficial ownership of any securities ofthe Company; or (iii)The consummation of a merger or consolidation of the Company with or into another entity or any other corporate reorganization, ifpersons who were not stockholders of the Company immediately prior to such merger, consolidation or other reorganization ownimmediately after such merger, consolidation or other reorganization 50% or more of the voting power of the outstanding securities of eachof (A) the continuing or surviving entity and (B) any direct or indirect parent corporation of such continuing or surviving entity; or (iv)The sale, transfer or other disposition of all or substantially all of the Company’s assets.For purposes of subsection (d)(i) above, the term “look-back” date shall mean the later of (1) the Effective Date or (2) the date 24 months prior to the dateof the event that may constitute a Change in Control.For purposes of subsection (d)(ii)) above, the term “person” shall have the same meaning as when used in Sections 13(d) and 14(d) of the Exchange Actbut shall exclude (1) a trustee or other fiduciary holding securities under an employee benefit plan maintained by the Company or a Parent or Subsidiary and(2) a corporation owned directly or indirectly by the stockholders of the Company in substantially the same proportions as their ownership of the Stock.Any other provision of this Section 2(d) notwithstanding, a transaction shall not constitute a Change in Control if its sole purpose is to change the stateof the Company’s incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held theCompany’s securities immediately before such transaction, and a Change in Control shall not be deemed to occur if the Company files a registration statementwith the United States Securities and Exchange Commission for the initial offering of Stock to the public.(e) “Code” shall mean the Internal Revenue Code of 1986, as amended.(f) “Committee” shall mean the Compensation Committee as designated by the Board of Directors, which is authorized to administer the Plan, asdescribed in Section 3 hereof.(g) “Company” shall mean Inphi Corporation, a Delaware corporation. - 2 - (h) “Consultant” shall mean a consultant or advisor who provides bona fide services to the Company, a Parent, a Subsidiary or an Affiliate as anindependent contractor (not including service as a member of the Board of Directors) or a member of the board of directors of a Parent or a Subsidiary, in eachcase who is not an Employee.(i) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent, a Subsidiary or an Affiliate.(j) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended.(k) “Exercise Price” shall mean, in the case of an Option, the amount for which one Share may be purchased upon exercise of such Option, asspecified in the applicable Stock Option Agreement. “Exercise Price,” in the case of a SAR, shall mean an amount, as specified in the applicable SARAgreement, which is subtracted from the Fair Market Value of one Share in determining the amount payable upon exercise of such SAR.(l) “Fair Market Value” with respect to a Share, shall mean the market price of one Share, determined by the Committee as follows: (i)If the Stock was traded over-the-counter on the date in question, then the Fair Market Value shall be equal to the last transaction pricequoted for such date by the OTC Bulletin Board or, if not so quoted, shall be equal to the mean between the last reported representativebid and asked prices quoted for such date by the principal automated inter-dealer quotation system on which the Stock is quoted or, if theStock is not quoted on any such system, by the Pink Quote system; (ii)If the Stock was traded on any established stock exchange (such as the New York Stock Exchange, The Nasdaq Global Market or TheNasdaq Global Select Market) or national market system on the date in question, then the Fair Market Value shall be equal to the closingprice reported for such date by the applicable exchange or system; and (iii)If none of the foregoing provisions is applicable, then the Fair Market Value shall be determined by the Committee in good faith on suchbasis as it deems appropriate.In all cases, the determination of Fair Market Value by the Committee shall be conclusive and binding on all persons.(m) “ISO” shall mean an employee incentive stock option described in Section 422 of the Code.(n) “Nonstatutory Option” or “NSO” shall mean an employee stock option that is not an ISO.(o) “Offeree” shall mean an individual to whom the Committee has offered the right to acquire Shares under the Plan (other than upon exercise of anOption). - 3 - (p) “Option” shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares.(q) “Optionee” shall mean an individual or estate who holds an Option or SAR.(r) “Outside Director” shall mean a member of the Board of Directors who is not a common-law employee of, or paid consultant to, the Company, aParent or a Subsidiary.(s) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the Company, if each of thecorporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the othercorporations in such chain. A corporation that attains the status of a Parent on a date after the adoption of the Plan shall be a Parent commencing as of suchdate.(t) “Participant” shall mean an individual or estate who holds an Award.(u) “Plan” shall mean this 2010 Stock Incentive Plan of Inphi Corporation, as amended from time to time.(v) “Purchase Price” shall mean the consideration for which one Share may be acquired under the Plan (other than upon exercise of an Option), asspecified by the Committee.(w) “Restricted Share” shall mean a Share awarded under the Plan.(x) “Restricted Share Agreement” shall mean the agreement between the Company and the recipient of a Restricted Share which contains the terms,conditions and restrictions pertaining to such Restricted Shares.(y) “SAR” shall mean a stock appreciation right granted under the Plan.(z) “SAR Agreement” shall mean the agreement between the Company and an Optionee which contains the terms, conditions and restrictions pertainingto his or her SAR.(aa) “Service” shall mean service as an Employee, Consultant or Outside Director, subject to such further limitations as may be set forth in the Plan orthe applicable Stock Option Agreement, SAR Agreement, Restricted Share Agreement or Stock Unit Agreement. Service does not terminate when an Employeegoes on a bona fide leave of absence, that was approved by the Company in writing, if the terms of the leave provide for continued Service crediting, or whencontinued Service crediting is required by applicable law. However, for purposes of determining whether an Option is entitled to ISO status, an Employee’semployment will be treated as terminating three months after such Employee went on leave, unless such Employee’s right to return to active work is guaranteedby law or by a contract. Service terminates in any event when the approved leave ends, unless such Employee immediately returns to active work. TheCompany determines which leaves of absence count toward Service, and when Service terminates for all purposes under the Plan.(bb) “Share” shall mean one share of Stock, as adjusted in accordance with Section 11 (if applicable). - 4 - (cc) “Stock” shall mean the Common Stock of the Company.(dd) “Stock Option Agreement” shall mean the agreement between the Company and an Optionee that contains the terms, conditions and restrictionspertaining to such Option.(ee) “Stock Unit” shall mean a bookkeeping entry representing the Company’s obligation to deliver one Share (or distribute cash) on a future date inaccordance with the provisions of a Stock Unit Agreement.(ff) “Stock Unit Agreement” shall mean the agreement between the Company and the recipient of a Stock Unit which contains the terms, conditionsand restrictions pertaining to such Stock Unit.(gg) “Subsidiary” shall mean any corporation, if the Company and/or one or more other Subsidiaries own not less than 50% of the total combinedvoting power of all classes of outstanding stock of such corporation. A corporation that attains the status of a Subsidiary on a date after the adoption of thePlan shall be considered a Subsidiary commencing as of such date.(hh) “Total and Permanent Disability” shall mean any permanent and total disability as defined by section 22(e)(3) of the Code.SECTION 3. ADMINISTRATION.(a) Committee Composition. The Plan shall be administered by the Board or a Committee appointed by the Board. The Committee shall consist of twoor more directors of the Company. In addition, to the extent required by the Board, the composition of the Committee shall satisfy (i) such requirements as theSecurities and Exchange Commission may establish for administrators acting under plans intended to qualify for exemption under Rule 16b-3 (or itssuccessor) under the Exchange Act; and (ii) such requirements as the Internal Revenue Service may establish for outside directors acting under plans intendedto qualify for exemption under Section 162(m)(4)(C) of the Code.(b) Committee for Non-Officer Grants. The Board may also appoint one or more separate committees of the Board, each composed of one or moredirectors of the Company who need not satisfy the requirements of Section 3(a), who may administer the Plan with respect to Employees who are notconsidered officers or directors of the Company under Section 16 of the Exchange Act, may grant Awards under the Plan to such Employees and maydetermine all terms of such grants. Within the limitations of the preceding sentence, any reference in the Plan to the Committee shall include such committee orcommittees appointed pursuant to the preceding sentence. To the extent permitted by applicable laws, the Board of Directors may also authorize one or moreofficers of the Company to designate Employees, other than officers under Section 16 of the Exchange Act, to receive Awards and/or to determine the numberof such Awards to be received by such persons; provided, however, that the Board of Directors shall specify the total number of Awards that such officersmay so award.(c) Committee Procedures. The Board of Directors shall designate one of the members of the Committee as chairman. The Committee may holdmeetings at such times and - 5 - places as it shall determine. The acts of a majority of the Committee members present at meetings at which a quorum exists, or acts reduced to or approved inwriting (including via email) by all Committee members, shall be valid acts of the Committee.(d) Committee Responsibilities. Subject to the provisions of the Plan, the Committee shall have full authority and discretion to take the followingactions: (i)To interpret the Plan and to apply its provisions; (ii)To adopt, amend or rescind rules, procedures and forms relating to the Plan; (iii)To adopt, amend or terminate sub-plans established for the purpose of satisfying applicable foreign laws including qualifying forpreferred tax treatment under applicable foreign tax laws; (iv)To authorize any person to execute, on behalf of the Company, any instrument required to carry out the purposes of the Plan; (v)To determine when Awards are to be granted under the Plan; (vi)To select the Offerees and Optionees; (vii)To determine the number of Shares to be made subject to each Award; (viii)To prescribe the terms and conditions of each Award, including (without limitation) the Exercise Price and Purchase Price, and the vestingor duration of the Award (including accelerating the vesting of Awards, either at the time of the Award or thereafter, without the consent ofthe Participant), to determine whether an Option is to be classified as an ISO or as a Nonstatutory Option, and to specify the provisions ofthe agreement relating to such Award; (ix)To amend any outstanding Award agreement, subject to applicable legal restrictions and to the consent of the Participant if the Participant’srights or obligations would be materially impaired; (x)To prescribe the consideration for the grant of each Award or other right under the Plan and to determine the sufficiency of suchconsideration; (xi)To determine the disposition of each Award or other right under the Plan in the event of a Participant’s divorce or dissolution of marriage; (xii)To determine whether Awards under the Plan will be granted in replacement of other grants under an incentive or other compensation planof an acquired business; - 6 - (xiii)To correct any defect, supply any omission, or reconcile any inconsistency in the Plan or any Award agreement; (xiv)To establish or verify the extent of satisfaction of any performance goals or other conditions applicable to the grant, issuance,exercisability, vesting and/or ability to retain any Award; and (xv)To take any other actions deemed necessary or advisable for the administration of the Plan.Subject to the requirements of applicable law, the Committee may designate persons other than members of the Committee to carry out its responsibilities andmay prescribe such conditions and limitations as it may deem appropriate, except that the Committee may not delegate its authority with regard to the selectionfor participation of or the granting of Options or other rights under the Plan to persons subject to Section 16 of the Exchange Act. All decisions, interpretationsand other actions of the Committee shall be final and binding on all Offerees, all Optionees, and all persons deriving their rights from an Offeree or Optionee.No member of the Committee shall be liable for any action that he has taken or has failed to take in good faith with respect to the Plan, any Option, or anyright to acquire Shares under the Plan.SECTION 4. ELIGIBILITY.(a) General Rule. Only common-law employees of the Company, a Parent or a Subsidiary shall be eligible for the grant of ISOs. Only Employees,Consultants and Outside Directors shall be eligible for the grant of Restricted Shares, Stock Units, Nonstatutory Options or SARs.(b) Automatic Grants to Outside Directors (i)Each Outside Director who first joins the Board of Directors on or after the Effective Date, and who was not previously an Employee,shall receive a grant of Stock Units with respect to a number of Shares having an aggregate fair market value equal to $160,000 calculatedon the date of grant, on the date of his or her election to the Board of Directors. The Stock Units granted under this Section 4(b)(i) shallvest annually over a 4-year period beginning on the day which is one year after the date of grant, at an annual rate of 25% of the totalnumber of Stock Units subject to such Award. Notwithstanding the foregoing, each such Option shall become vested if a Change inControl occurs with respect to the Company during such Outside Director’s Service. (ii)On the first business day following the conclusion of each regular annual meeting of the Company’s stockholders, commencing with theannual meeting occurring after the Effective Date, each Outside Director who was not elected to the Board for the first time at such meetingand who will - 7 - continue serving as a member of the Board of Directors thereafter shall receive a grant of Stock Units with respect to a number of Shareshaving an aggregate fair market value equal to $80,000 calculated on the date of grant, provided that such Outside Director has served onthe Board of Directors for at least six months. Each Stock Unit granted under this Section 4(b)(ii) shall become fully vested on the firstanniversary of the date of grant; provided, however, that each such Option shall become exercisable in full immediately prior to the nextregular annual meeting of the Company’s stockholders following such date of grant in the event such meeting occurs prior to such firstanniversary date. Notwithstanding the foregoing, each Stock Unit granted under this Section 4(b)(ii) shall become vested if a Change inControl occurs with respect to the Company during such Outside Director’s Service.(c) Ten-Percent Stockholders. An Employee who owns more than 10% of the total combined voting power of all classes of outstanding stock of theCompany, a Parent or Subsidiary shall not be eligible for the grant of an ISO unless such grant satisfies the requirements of Section 422(c)(5) of the Code.(d) Attribution Rules. For purposes of Section 4(c) above, in determining stock ownership, an Employee shall be deemed to own the stock owned,directly or indirectly, by or for such Employee’s brothers, sisters, spouse, ancestors and lineal descendants. Stock owned, directly or indirectly, by or for acorporation, partnership, estate or trust shall be deemed to be owned proportionately by or for its stockholders, partners or beneficiaries.(e) Outstanding Stock. For purposes of Section 4(c) above, “outstanding stock” shall include all stock actually issued and outstanding immediatelyafter the grant. “Outstanding stock” shall not include shares authorized for issuance under outstanding options held by the Employee or by any other person. - 8 - SECTION 5. STOCK SUBJECT TO PLAN.(a) Basic Limitation. Shares offered under the Plan shall be authorized but unissued Shares or treasury Shares. The aggregate number of Sharesauthorized for issuance as Awards under the Plan shall not exceed 2,000,000 Shares, plus (x) any Shares subject to outstanding options or forfeiturerestrictions under the Company’s 2000 Stock Option/Stock Issuance Plan (the “Predecessor Plan”) on the effective date of this Plan that are subsequentlyforfeited or terminated for any reason before being exercised and any reserved shares not issued or subject to outstanding grants under the Predecessor Plan onthe effective date of this Plan, such number of additional Shares not to exceed an aggregate of 1,000,000 Shares, and (y) an annual increase on the first day ofeach fiscal year beginning in 2011 and ending in 2020, in an amount equal to the lesser of (i) 3,000,000 Shares, (ii) 5% of the outstanding Shares on the lastday of the immediately preceding year or (iii) an amount determined by the Board. No more than 10,000,000 Shares may be delivered in the aggregate pursuantto the exercise of ISOs granted under the Plan plus, to the extent allowable under Section 422 of the Code and the Treasury Regulations promulgatedthereunder, any Shares that become available for issuance under the Plan pursuant to Section 5(c). The limitations of this Section 5(a) shall be subject toadjustment pursuant to Section 11. The number of Shares that are subject to Options or other Awards outstanding at any time under the Plan shall not exceedthe number of Shares which then remain available for issuance under the Plan. The Company shall at all times reserve and keep available sufficient Shares tosatisfy the requirements of the Plan.(b) Section 162(m) Award Limitation. Notwithstanding any contrary provisions of the Plan, and subject to the provisions of Section 11, noParticipant may receive Options, SARs, Restricted Shares or Stock Units under the Plan in any calendar year that relate to an aggregate of more than 3,000,000Shares, and no more than two times this amount in the first year of employment, and the maximum aggregate amount of cash that may be paid to anyParticipant during any calendar year with respect to Awards payable in cash shall be $2,000,000.(c) Additional Shares. If Restricted Shares or Shares issued upon the exercise of Options are forfeited, then such Shares shall again become availablefor Awards under the Plan. If Stock Units, Options or SARs are forfeited or terminate for any reason before being exercised or settled, or an Award is settled incash without the delivery of Shares to the holder, then any Shares subject to the Award shall again become available for Awards under the Plan. Only thenumber of Shares (if any) actually issued in settlement of Awards shall reduce the number available in Section 5(a) and the balance shall again becomeavailable for Awards under the Plan. Any Shares withheld to satisfy the grant or exercise price or tax withholding obligation pursuant to any Award shall againbecome available for Awards under the Plan. Notwithstanding the foregoing provisions of this Section 5(c), Shares that have actually been issued shall notagain become available for Awards under the Plan, except for Shares that are forfeited and do not become vested.SECTION 6. RESTRICTED SHARES.(a) Restricted Stock Agreement. Each grant of Restricted Shares under the Plan shall be evidenced by a Restricted Stock Agreement between therecipient and the Company. Such Restricted Shares shall be subject to all applicable terms of the Plan and may be subject to any other terms that are notinconsistent with the Plan. The provisions of the various Restricted Stock Agreements entered into under the Plan need not be identical. - 9 - (b) Payment for Awards. Restricted Shares may be sold or awarded under the Plan for such consideration as the Committee may determine, including(without limitation) cash, cash equivalents, full-recourse promissory notes, past services and future services.(c) Vesting. Each Award of Restricted Shares may or may not be subject to vesting. Vesting shall occur, in full or in installments, upon satisfaction ofthe conditions specified in the Restricted Stock Agreement. A Restricted Stock Agreement may provide for accelerated vesting in the event of the Participant’sdeath, disability or retirement or other events. The Committee may determine, at the time of granting Restricted Shares of thereafter, that all or part of suchRestricted Shares shall become vested in the event that a Change in Control occurs with respect to the Company.(d) Voting and Dividend Rights. The holders of Restricted Shares awarded under the Plan shall have the same voting, dividend and other rights as theCompany’s other stockholders. A Restricted Stock Agreement, however, may require that the holders of Restricted Shares invest any cash dividends receivedin additional Restricted Shares. Such additional Restricted Shares shall be subject to the same conditions and restrictions as the Award with respect to whichthe dividends were paid.(e) Restrictions on Transfer of Shares. Restricted Shares shall be subject to such rights of repurchase, rights of first refusal or other restrictions as theCommittee may determine. Such restrictions shall be set forth in the applicable Restricted Stock Agreement and shall apply in addition to any generalrestrictions that may apply to all holders of Shares.SECTION 7. TERMS AND CONDITIONS OF OPTIONS.(a) Stock Option Agreement. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the Optionee and theCompany. Such Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are notinconsistent with the Plan and which the Committee deems appropriate for inclusion in a Stock Option Agreement. The Stock Option Agreement shall specifywhether the Option is an ISO or an NSO. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.(b) Number of Shares. Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide for theadjustment of such number in accordance with Section 11.(c) Exercise Price. Each Stock Option Agreement shall specify the Exercise Price. The Exercise Price of an ISO shall not be less than 100% of the FairMarket Value of a Share on the date of grant, except as otherwise provided in 4(c), and the Exercise Price of an NSO shall not be less 100% of the Fair MarketValue of a Share on the date of grant. Notwithstanding the foregoing, Options may be granted with an Exercise Price of less than 100% of the Fair MarketValue per Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code. Subject to theforegoing in this Section 7(c), the Exercise Price under any Option shall be determined by the Committee in its sole discretion. The Exercise Price shall bepayable in one of the forms described in Section 8. - 10 - (d) Withholding Taxes. As a condition to the exercise of an Option, the Optionee shall make such arrangements as the Committee may require for thesatisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such exercise. The Optionee shall also makesuch arrangements as the Committee may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise inconnection with the disposition of Shares acquired by exercising an Option.(e) Exercisability and Term. Each Stock Option Agreement shall specify the date when all or any installment of the Option is to become exercisable.The Stock Option Agreement shall also specify the term of the Option; provided that the term of an ISO shall in no event exceed 10 years from the date of grant(five years for ISOs granted to Employees described in Section 4(c)). A Stock Option Agreement may provide for accelerated exercisability in the event of theOptionee’s death, disability, or retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of theOptionee’s Service. Options may be awarded in combination with SARs, and such an Award may provide that the Options will not be exercisable unless therelated SARs are forfeited. Subject to the foregoing in this Section 7(e), the Committee at its sole discretion shall determine when all or any installment of anOption is to become exercisable and when an Option is to expire.(f) Exercise of Options. Each Stock Option Agreement shall set forth the extent to which the Optionee shall have the right to exercise the Optionfollowing termination of the Optionee’s Service with the Company and its Subsidiaries, and the right to exercise the Option of any executors or administratorsof the Optionee’s estate or any person who has acquired such Option(s) directly from the Optionee by bequest or inheritance. Such provisions shall bedetermined in the sole discretion of the Committee, need not be uniform among all Options issued pursuant to the Plan, and may reflect distinctions based onthe reasons for termination of Service.(g) Effect of Change in Control. The Committee may determine, at the time of granting an Option or thereafter, that such Option shall becomeexercisable as to all or part of the Shares subject to such Option in the event that a Change in Control occurs with respect to the Company.(h) No Rights as a Stockholder. An Optionee, or a transferee of an Optionee, shall have no rights as a stockholder with respect to any Shares coveredby his Option until the date of the issuance of a stock certificate for such Shares. No adjustments shall be made, except as provided in Section 11.(i) Modification, Extension and Renewal of Options. Within the limitations of the Plan, the Committee may modify, extend or renew outstandingoptions or may accept the cancellation of outstanding options (to the extent not previously exercised), whether or not granted hereunder, in return for the grantof new Options for the same or a different number of Shares and at the same or a different Exercise Price, or in return for the grant of a different Award for thesame or a different number of Shares. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, materiallyimpair his or her rights or obligations under such Option. - 11 - (j) Restrictions on Transfer of Shares. Any Shares issued upon exercise of an Option shall be subject to such special forfeiture conditions, rights ofrepurchase, rights of first refusal and other transfer restrictions as the Committee may determine. Such restrictions shall be set forth in the applicable StockOption Agreement and shall apply in addition to any general restrictions that may apply to all holders of Shares.(k) Buyout Provisions. The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents an Option previously granted or(b) authorize an Optionee to elect to cash out an Option previously granted, in either case at such time and based upon such terms and conditions as theCommittee shall establish.SECTION 8. PAYMENT FOR SHARES.(a) General Rule. The entire Exercise Price or Purchase Price of Shares issued under the Plan shall be payable in lawful money of the United States ofAmerica at the time when such Shares are purchased, except as provided in Section 8(b) through Section 8(g) below.(b) Surrender of Stock. To the extent that a Stock Option Agreement so provides, payment may be made all or in part by surrendering, or attesting tothe ownership of, Shares which have already been owned by the Optionee or his representative. Such Shares shall be valued at their Fair Market Value on thedate when the new Shares are purchased under the Plan. The Optionee shall not surrender, or attest to the ownership of, Shares in payment of the ExercisePrice if such action would cause the Company to recognize compensation expense (or additional compensation expense) with respect to the Option for financialreporting purposes.(c) Services Rendered. At the discretion of the Committee, Shares may be awarded under the Plan in consideration of services rendered to the Companyor a Subsidiary. If Shares are awarded without the payment of a Purchase Price in cash, the Committee shall make a determination (at the time of the Award)of the value of the services rendered by the Offeree and the sufficiency of the consideration to meet the requirements of Section 6(b).(d) Cashless Exercise. To the extent that a Stock Option Agreement so provides, payment may be made all or in part by delivery (on a form prescribedby the Committee) of an irrevocable direction to a securities broker to sell Shares and to deliver all or part of the sale proceeds to the Company in payment ofthe aggregate Exercise Price.(e) Exercise/Pledge. To the extent that a Stock Option Agreement so provides, payment may be made all or in part by delivery (on a form prescribed bythe Committee) of an irrevocable direction to a securities broker or lender to pledge Shares, as security for a loan, and to deliver all or part of the loan proceedsto the Company in payment of the aggregate Exercise Price.(f) Promissory Note. To the extent that a Stock Option Agreement or Restricted Stock Agreement so provides, payment may be made all or in part bydelivering (on a form prescribed by the Company) a full-recourse promissory note. - 12 - (g) Other Forms of Payment. To the extent that a Stock Option Agreement or Restricted Stock Agreement so provides, payment may be made in anyother form that is consistent with applicable laws, regulations and rules.(h) Limitations under Applicable Law. Notwithstanding anything herein or in a Stock Option Agreement or Restricted Stock Agreement to the contrary,payment may not be made in any form that is unlawful, as determined by the Committee in its sole discretion.SECTION 9. STOCK APPRECIATION RIGHTS.(a) SAR Agreement. Each grant of a SAR under the Plan shall be evidenced by a SAR Agreement between the Optionee and the Company. Such SARshall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan. The provisions of the variousSAR Agreements entered into under the Plan need not be identical.(b) Number of Shares. Each SAR Agreement shall specify the number of Shares to which the SAR pertains and shall provide for the adjustment ofsuch number in accordance with Section 11.(c) Exercise Price. Each SAR Agreement shall specify the Exercise Price. The Exercise Price of a SAR shall not be less than 100% of the Fair MarketValue of a Share on the date of grant. Notwithstanding the foregoing, SARs may be granted with an Exercise Price of less than 100% of the Fair Market Valueper Share on the date of grant pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code. Subject to the foregoing inthis Section 9(c), the Exercise Price under any SAR shall be determined by the Committee in its sole discretion.(d) Exercisability and Term. Each SAR Agreement shall specify the date when all or any installment of the SAR is to become exercisable. The SARAgreement shall also specify the term of the SAR. A SAR Agreement may provide for accelerated exercisability in the event of the Optionee’s death, disabilityor retirement or other events and may provide for expiration prior to the end of its term in the event of the termination of the Optionee’s service. SARs may beawarded in combination with Options, and such an Award may provide that the SARs will not be exercisable unless the related Options are forfeited. A SARmay be included in an ISO only at the time of grant but may be included in an NSO at the time of grant or thereafter. A SAR granted under the Plan mayprovide that it will be exercisable only in the event of a Change in Control.(e) Effect of Change in Control. The Committee may determine, at the time of granting a SAR or thereafter, that such SAR shall become fullyexercisable as to all Common Shares subject to such SAR in the event that a Change in Control occurs with respect to the Company.(f) Exercise of SARs. Upon exercise of a SAR, the Optionee (or any person having the right to exercise the SAR after his or her death) shall receive fromthe Company (a) Shares, (b) cash or (c) a combination of Shares and cash, as the Committee shall determine. The amount of cash and/or the Fair MarketValue of Shares received upon exercise of SARs shall, in theaggregate, be equal to the amount by which the Fair Market Value (on the date of surrender) of the Shares subject to the SARs exceeds the Exercise Price. - 13 - (g) Modification or Assumption of SARs. Within the limitations of the Plan, the Committee may modify, extend or assume outstanding SARs or mayaccept the cancellation of outstanding SARs (whether granted by the Company or by another issuer) in return for the grant of new SARs for the same or adifferent number of shares and at the same or a different exercise price, or in return for the grant of a different Award for the same or a different number ofShares. The foregoing notwithstanding, no modification of a SAR shall, without the consent of the holder, materially impair his or her rights or obligationsunder such SAR.(h) Buyout Provisions. The Committee may at any time (a) offer to buy out for a payment in cash or cash equivalents a SAR previously granted, or(b) authorize an Optionee to elect to cash out a SAR previously granted, in either case at such time and based upon such terms and conditions as theCommittee shall establish.SECTION 10. STOCK UNITS.(a) Stock Unit Agreement. Each grant of Stock Units under the Plan shall be evidenced by a Stock Unit Agreement between the recipient and theCompany. Such Stock Units shall be subject to all applicable terms of the Plan and may be subject to any other terms that are not inconsistent with the Plan.The provisions of the various Stock Unit Agreements entered into under the Plan need not be identical.(b) Payment for Awards. To the extent that an Award is granted in the form of Stock Units, no cash consideration shall be required of the Awardrecipients.(c) Vesting Conditions. Each Award of Stock Units may or may not be subject to vesting. Vesting shall occur, in full or in installments, uponsatisfaction of the conditions specified in the Stock Unit Agreement. A Stock Unit Agreement may provide for accelerated vesting in the event of theParticipant’s death, disability or retirement or other events. The Committee may determine, at the time of granting Stock Units or thereafter, that all or part ofsuch Stock Units shall become vested in the event that a Change in Control occurs with respect to the Company.(d) Voting and Dividend Rights. The holders of Stock Units shall have no voting rights. Prior to settlement or forfeiture, any Stock Unit awardedunder the Plan may, at the Committee’s discretion, carry with it a right to dividend equivalents. Such right entitles the holder to be credited with an amountequal to all cash dividends paid on one Share while the Stock Unit is outstanding. Dividend equivalents may be converted into additional Stock Units.Settlement of dividend equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Prior to distribution, any dividendequivalents which are not paid shall be subject to the same conditions and restrictions (including without limitation, any forfeiture conditions) as the StockUnits to which they attach.(e) Form and Time of Settlement of Stock Units. Settlement of vested Stock Units may be made in the form of (a) cash, (b) Shares or (c) anycombination of both, as determined by - 14 - the Committee. The actual number of Stock Units eligible for settlement may be larger or smaller than the number included in the original Award, based onpredetermined performance factors. Methods of converting Stock Units into cash may include (without limitation) a method based on the average Fair MarketValue of Shares over a series of trading days. A Stock Unit Agreement may provide that vested Stock Units may be settled in a lump sum or in installments.A Stock Unit Agreement may provide that the distribution may occur or commence when all vesting conditions applicable to the Stock Units have beensatisfied or have lapsed, or it may be deferred to any later date. The amount of a deferred distribution may be increased by an interest factor or by dividendequivalents. Until an Award of Stock Units is settled, the number of such Stock Units shall be subject to adjustment pursuant to Section 11.(f) Death of Recipient. Any Stock Units Award that becomes payable after the recipient’s death shall be distributed to the recipient’s beneficiary orbeneficiaries. Each recipient of a Stock Units Award under the Plan shall designate one or more beneficiaries for this purpose by filing the prescribed formwith the Company. A beneficiary designation may be changed by filing the prescribed form with the Company at any time before the Award recipient’s death.If no beneficiary was designated or if no designated beneficiary survives the Award recipient, then any Stock Units Award that becomes payable after therecipient’s death shall be distributed to the recipient’s estate.(g) Creditors’ Rights. A holder of Stock Units shall have no rights other than those of a general creditor of the Company. Stock Units represent anunfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Stock Unit Agreement.SECTION 11. ADJUSTMENT OF SHARES.(a) Adjustments. In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a declaration of a dividendpayable in a form other than Shares in an amount that has a material effect on the price of Shares, a combination or consolidation of the outstanding Stock (byreclassification or otherwise) into a lesser number of Shares, a recapitalization, a spin-off or a similar occurrence, the Committee shall make appropriate andequitable adjustments in: (i)The number of Options, SARs, Restricted Shares and Stock Units available for future Awards under Section 5; (ii)The limitations set forth in Sections 5(a) and (b); (iii)The number of Shares covered by each outstanding Option and SAR; (iv)The Exercise Price under each outstanding Option and SAR; and (v)The number of Stock Units included in any prior Award which has not yet been settled.(b) Dissolution or Liquidation. To the extent not previously exercised or settled, Options, SARs and Stock Units shall terminate immediately prior tothe dissolution or liquidation of the Company. - 15 - (c) Reorganizations. In the event that the Company is a party to a merger or other reorganization, outstanding Awards shall be subject to the agreementof merger or reorganization. Subject to compliance with Section 409A of the Code, such agreement shall provide for: (i)The continuation of the outstanding Awards by the Company, if the Company is a surviving corporation; (ii)The assumption of the outstanding Awards by the surviving corporation or its parent or subsidiary; (iii)The substitution by the surviving corporation or its parent or subsidiary of its own awards for the outstanding Awards; (iv)Full exercisability or vesting and accelerated expiration of the outstanding Awards; or (v)Settlement of the intrinsic value of the outstanding Awards in cash or cash equivalents followed by cancellation of such Awards.(d) Reservation of Rights. Except as provided in this Section 11, a Participant shall have no rights by reason of any subdivision or consolidation ofshares of stock of any class, the payment of any dividend or any other increase or decrease in the number of shares of stock of any class. Any issue by theCompany of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereofshall be made with respect to, the number or Exercise Price of Shares subject to an Award. The grant of an Award pursuant to the Plan shall not affect in anyway the right or power of the Company to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, to merge orconsolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets. In the event of any change affecting the Shares or the Exercise Priceof Shares subject to an Award, including a merger or other reorganization, for reasons of administrative convenience, the Company in its sole discretion mayrefuse to permit the exercise of any Award during a period of up to thirty (30) days prior to the occurrence of such event.SECTION 12. DEFERRAL OF AWARDS.(a) Committee Powers. Subject to compliance with Section 409A of the Code, the Committee (in its sole discretion) may permit or require a Participantto: (i)Have cash that otherwise would be paid to such Participant as a result of the exercise of a SAR or the settlement of Stock Units credited toa deferred compensation account established for such Participant by the Committee as an entry on the Company’s books; (ii)Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR converted into an equalnumber of Stock Units; or - 16 - (iii)Have Shares that otherwise would be delivered to such Participant as a result of the exercise of an Option or SAR or the settlement of StockUnits converted into amounts credited to a deferred compensation account established for such Participant by the Committee as an entryon the Company’s books. Such amounts shall be determined by reference to the Fair Market Value of such Shares as of the date whenthey otherwise would have been delivered to such Participant.(b) General Rules. A deferred compensation account established under this Section 12 may be credited with interest or other forms of investmentreturn, as determined by the Committee. A Participant for whom such an account is established shall have no rights other than those of a general creditor of theCompany. Such an account shall represent an unfunded and unsecured obligation of the Company and shall be subject to the terms and conditions of theapplicable agreement between such Participant and the Company. If the deferral or conversion of Awards is permitted or required, the Committee (in its solediscretion) may establish rules, procedures and forms pertaining to such Awards, including (without limitation) the settlement of deferred compensationaccounts established under this Section 12.SECTION 13. AWARDS UNDER OTHER PLANS.The Company may grant awards under other plans or programs. Such awards may be settled in the form of Shares issued under this Plan. SuchShares shall be treated for all purposes under the Plan like Shares issued in settlement of Stock Units and shall, when issued, reduce the number of Sharesavailable under Section 5.SECTION 14. PAYMENT OF DIRECTOR’S FEES IN SECURITIES.(a) Effective Date. No provision of this Section 14 shall be effective unless and until the Board has determined to implement such provision.(b) Elections to Receive NSOs, Restricted Shares or Stock Units. An Outside Director may elect to receive his or her annual retainer payments and/ormeeting fees from the Company in the form of cash, NSOs, Restricted Shares or Stock Units, or a combination thereof, as determined by the Board. SuchNSOs, Restricted Shares and Stock Units shall be issued under the Plan. An election under this Section 14 shall be filed with the Company on the prescribedform.(c) Number and Terms of NSOs, Restricted Shares or Stock Units. The number of NSOs, Restricted Shares or Stock Units to be granted to OutsideDirectors in lieu of annual retainers and meeting fees that would otherwise be paid in cash shall be calculated in a manner determined by the Board. The termsof such NSOs, Restricted Shares or Stock Units shall also be determined by the Board.SECTION 15. LEGAL AND REGULATORY REQUIREMENTS.Shares shall not be issued under the Plan unless the issuance and delivery of such Shares complies with (or is exempt from) all applicable requirementsof law, including (without - 17 - limitation) the Securities Act of 1933, as amended, the rules and regulations promulgated thereunder, state securities laws and regulations and the regulationsof any stock exchange on which the Company’s securities may then be listed, and the Company has obtained the approval or favorable ruling from anygovernmental agency which the Company determines is necessary or advisable. The Company shall not be liable to a Participant or other persons as to: (a) thenon-issuance or sale of Shares as to which the Company has not obtained from any regulatory body having jurisdiction the authority deemed by theCompany’s counsel to be necessary to the lawful issuance and sale of any Shares under the Plan; and (b) any tax consequences expected, but not realized, byany Participant or other person due to the receipt, exercise or settlement of any Award granted under the Plan.SECTION 16. WITHHOLDING TAXES.(a) General. To the extent required by applicable federal, state, local or foreign law, a Participant or his or her successor shall make arrangementssatisfactory to the Company for the satisfaction of any withholding tax obligations that arise in connection with the Plan. The Company shall not be requiredto issue any Shares or make any cash payment under the Plan until such obligations are satisfied.(b) Share Withholding. The Committee may permit a Participant to satisfy all or part of his or her withholding or income tax obligations by having theCompany withhold all or a portion of any Shares that otherwise would be issued to him or her or by surrendering all or a portion of any Shares that he or shepreviously acquired. Such Shares shall be valued at their Fair Market Value on the date when taxes otherwise would be withheld in cash. In no event may aParticipant have Shares withheld that would otherwise be issued to him or her in excess of the number necessary to satisfy the minimum legally required taxwithholding.SECTION 17. OTHER PROVISIONS APPLICABLE TO AWARDS.(a) Transferability. Unless the agreement evidencing an Award (or an amendment thereto authorized by the Committee) expressly provides otherwise, noAward granted under this Plan, nor any interest in such Award, may be sold, assigned, conveyed, gifted, pledged, hypothecated or otherwise transferred inany manner (prior to the vesting and lapse of any and all restrictions applicable to Shares issued under such Award), other than by will or the laws of descentand distribution; provided, however, that an ISO may be transferred or assigned only to the extent consistent with Section 422 of the Code. Any purportedassignment, transfer or encumbrance in violation of this Section 17(a) shall be void and unenforceable against the Company.(b) Substitution and Assumption of Awards. The Committee may make Awards under the Plan by assumption, substitution or replacement of stockoptions, stock appreciation rights, stock units or similar awards granted by another entity (including a Parent or Subsidiary), if such assumption,substitution or replacement is in connection with an asset acquisition, stock acquisition, merger, consolidation or similar transaction involving the Company(and/or its Parent or Subsidiary) and such other entity (and/or its affiliate). Notwithstanding any provision of the Plan (other than the maximum number ofShares that may be issued under the Plan), the terms of such assumed, substituted or replaced Awards shall be as the Committee, in its discretion, determinesis appropriate. - 18 - (c) Qualifying Performance Criteria. The number of Shares or other benefits granted, issued, retainable and/or vested under an Award may be madesubject to the attainment of performance goals. The Committee may utilize any performance criteria selected by it in its sole discretion to establish performancegoals; provided, however, that where any Award is intended to qualify for exemption from the deduction limitation of Section 162(m) of the Code as “qualifiedperformance-based compensation,” the following conditions shall apply:(i) The amount potentially available under an Award shall be subject to the attainment of pre-established, objective performance goals relating to aspecified period of service based on one or more of the following performance criteria: (a) cash flow, (b) earnings per share, (c) earnings before interest,taxes and amortization, (d) return on equity, (e) total stockholder return, (f) share price performance, (g) return on capital, (h) return on assets or netassets, (i) revenue, (j) income or net income, (k) operating income or net operating income, (l) operating profit or net operating profit, (m) operatingmargin or profit margin, (n) return on operating revenue, (o) return on invested capital, (p) market segment shares, (q) costs, (r) expenses, (s) regulatorybody approval for commercialization of a product, or (t) implementation or completion of critical projects (“Qualifying Performance Criteria”), any ofwhich may be measured either individually, alternatively or in any combination, applied to either the Company as a whole or to a business unit orSubsidiary, either individually, alternatively or in any combination, and measured either annually or cumulatively over a period of years, on anabsolute basis or relative to a pre-established target, to previous years’ results or to a designated comparison group or index, in each case as specified bythe Committee in the Award;(ii) The Committee may appropriately adjust any evaluation of performance under a Qualifying Performance Criteria to exclude any of thefollowing events that occurs during a performance period: (i) asset write-downs, (ii) litigation or claim judgments or settlements, (iii) the effect of changesin tax law, accounting principles or other such laws or provisions affecting reported results, (iv) accruals for reorganization and restructuring programsand (v) any extraordinary nonrecurring items as described in Accounting Principles Board Opinion No. 30 and/or in managements’ discussion andanalysis of financial condition and results of operations appearing in the Company’s annual report to stockholders for the applicable year, in each casewithin the time prescribed by, and otherwise in compliance with, Section 162(m) of the Code;(iii) The Committee shall establish the applicable performance goals in writing and an objective method for determining the Award earned by aParticipant if the goals are attained, while the outcome is substantially uncertain and not later than the 90 day of the performance period (but in no eventafter 25% of the period of service with respect to which the performance goals relate has elapsed), and shall determine and certify in writing, for eachParticipant, the extent to which the performance goals have been met prior to payment or vesting of the Award; and - 19 -th (iv) The Committee may not in any event increase the amount of compensation payable under the Plan upon the attainment of the pre-establishedperformance goals to a Participant who is a “covered employee” within the meaning of Section 162(m) of the Code.SECTION 18. NO EMPLOYMENT RIGHTS.No provision of the Plan, nor any Award granted under the Plan, shall be construed to give any person any right to become, to be treated as, or to remainan Employee or Consultant. The Company and its Subsidiaries reserve the right to terminate any person’s Service at any time and for any reason, with orwithout notice.SECTION 19. DURATION AND AMENDMENTS.(a) Term of the Plan. The Plan, as set forth herein, shall terminate automatically on June 6, 2020 and may be terminated on any earlier date pursuant toSubsection (b) below.(b) Right to Amend or Terminate the Plan. The Board of Directors may amend or terminate the Plan at any time and from time to time. Rights andobligations under any Award granted before amendment of the Plan shall not be materially impaired by such amendment, except with consent of theParticipant. An amendment of the Plan shall be subject to the approval of the Company’s stockholders only to the extent required by applicable laws,regulations or rules.(c) Effect of Termination. No Awards shall be granted under the Plan after the termination thereof. The termination of the Plan shall not affect Awardspreviously granted under the Plan.[Remainder of this page intentionally left blank] - 20 - SECTION 20. EXECUTION.To record the adoption of the Plan, as amended and restated, by the Board of Directors, the Company has caused its authorized officer to execute thesame. INPHI CORPORATIONBy Name Title - 21 - INPHI CORPORATION2010 STOCK INCENTIVE PLANNOTICE OF STOCK OPTION GRANTYou have been granted the following Option to purchase Common Stock of INPHI CORPORATION (the “Company”) under the Company’s 2010 StockIncentive Plan (the “Plan”): Name of Optionee: [Name of Optionee]Total Number of Option Shares Granted: [Total Number of Shares]Type of Option: ¨ Incentive Stock Option ¨ Nonstatutory Stock OptionExercise Price Per Share: $ Grant Date: [Date of Grant]Vesting Commencement Date: [Vesting Commencement Date]Vesting Schedule: [This Option becomes exercisable with respect to the first 1/4th of theShares subject to this Option when you complete 12 months of continuousService as an Employee or a Consultant from the Vesting CommencementDate. Thereafter, this Option becomes exercisable with respect to anadditional 1/48th of the Shares subject to this Option when you completeeach additional month of such Service.] [Vesting TBD by Bd or comm.]Expiration Date: [Expiration Date] This Option expires earlier if your Service terminatesearlier, as described in the Stock Option Agreement.By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted underand governed by the term and conditions of the Plan and the Stock Option Agreement (the “Agreement”), both of which are attached to and madea part of this document.By signing this document you further agree that the Company may deliver by e-mail all documents relating to the Plan or this Award(including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company isrequired to deliver to its security holders (including without limitation, annual reports and proxy statements). You also agree that the Companymay deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company.If the Company posts these documents on a website, it will notify you by e-mail. OPTIONEE: INPHI CORPORATION By: Optionee’s Signature Title: Optionee’s Printed Name - 1 - INPHI CORPORATION2010 STOCK INCENTIVE PLANSTOCK OPTION AGREEMENT Tax Treatment This Option is intended to be an incentive stock option under Section 422 of the Internal Revenue Code or a nonstatutory option,as provided in the Notice of Stock Option Grant. Even if this Option is designated as an incentive stock option, it shall bedeemed to be a nonstatutory option to the extent required by the $100,000 annual limitation under Section 422(d) of the InternalRevenue Code.Vesting This Option becomes exercisable in installments, as shown in the Notice of Stock Option Grant. This Option will in no eventbecome exercisable for additional Shares after your Service as an Employee or a Consultant has terminated for any reason.Term This Option expires in any event at the close of business at Company headquarters on the day before the 10th anniversary of theGrant Date, as shown on the Notice of Stock Option Grant (fifth anniversary for a more than 10% stockholder as provided underthe Plan if this is an incentive stock option). This Option may expire earlier if your Service terminates, as described below.RegularTermination If your Service terminates for any reason except death or “Total and Permanent Disability” (as defined in the Plan), then thisOption will expire at the close of business at Company headquarters on the date three (3) months after the date your Serviceterminates (or, if earlier, the Expiration Date). The Company determines when your Service terminates for this purpose and allpurposes under the Plan and its determinations are conclusive and binding on all persons.Death If your Service terminates because of death, then this Option will expire at the close of business at Company headquarters on thedate 12 months after the date your Service terminates (or, if earlier, the Expiration Date). During that period of up to 12 months,your estate or heirs may exercise the Option.Disability If your Service terminates because of your Total and Permanent Disability, then this Option will expire at the close of business atCompany headquarters on the date 12 months after the date your Service terminates (or, if earlier, the Expiration Date).Leaves of Absence For purposes of this Option, your Service does not terminate when you go on a military leave, a sick leave or another bona fideleave of absence, if the leave was approved by the Company in writing and if continued crediting of Service is required by theterms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediately returnto active work. - 1 - If you go on a leave of absence, then the vesting schedule specified in the Notice of Stock Option Grant may be adjusted inaccordance with the Company’s leave of absence policy or the terms of your leave. If you commence working on a part-time basis,then the vesting schedule specified in the Notice of Stock Option Grant may be adjusted in accordance with the Company’s part-timework policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.Restrictions onExercise The Company will not permit you to exercise this Option if the issuance of Shares at that time would violate any law or regulation.The inability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessaryto the lawful issuance and sale of the Company stock pursuant to this Option shall relieve the Company of any liability with respectto the non-issuance or sale of the Company stock as to which such approval shall not have been obtained.Notice of Exercise When you wish to exercise this Option you must provide a notice of exercise form in accordance with such procedures as areestablished by the Company and communicated to you from time to time. Any notice of exercise must specify how many Shares youwish to purchase and how your Shares should be registered. The notice of exercise will be effective when it is received by theCompany. If someone else wants to exercise this Option after your death, that person must prove to the Company’s satisfaction thathe or she is entitled to do so.Form of Payment When you submit your notice of exercise, you must include payment of the Option exercise price for the Shares you are purchasing.Payment may be made in the following form(s): • Your personal check, a cashier’s check or a money order. • Certificates for Shares that you own, along with any forms needed to effect a transfer of those Shares to the Company. The valueof the Shares, determined as of the effective date of the Option exercise, will be applied to the Option exercise price. Instead ofsurrendering Shares, you may attest to the ownership of those Shares on a form provided by the Company and have the samenumber of Shares subtracted from the Shares issued to you upon exercise of the Option. However, you may not surrender orattest to the ownership of Shares in payment of the exercise price if your action would cause the Company to recognize acompensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes. • By delivery on a form approved by the Company of an irrevocable direction to a securities broker approved by the Company tosell all or part of the Shares that are issued to you when you exercise this Option and to deliver to the Company from the saleproceeds an amount - 2 - sufficient to pay the Option exercise price and any withholding taxes. The balance of the sale proceeds, if any, will be delivered toyou. The directions must be given by providing a notice of exercise form approved by the Company. • By delivery on a form approved by the Company of an irrevocable direction to a securities broker or lender approved by theCompany to pledge Shares that are issued to you when you exercise this Option as security for a loan and to deliver to theCompany from the loan proceeds an amount sufficient to pay the Option exercise price and any withholding taxes. The directionsmust be given by providing a notice of exercise form approved by the Company. • Any other form permitted by the Committee in its sole discretion. Notwithstanding the foregoing, payment may not be made in any form that is unlawful, as determined by the Committee in its solediscretion.WithholdingTaxes and StockWithholding You will not be allowed to exercise this Option unless you make arrangements acceptable to the Company to pay any withholdingtaxes that may be due as a result of this Award or the Option exercise. These arrangements, at the sole discretion of the Company,may include (a) having the Company withhold taxes from the proceeds of the sale of the Shares, either through a voluntary sale orthrough a mandatory sale arranged by the Company (on your behalf pursuant to this authorization), (b) having the Companywithhold Shares that otherwise would be issued to you when you exercise this Option having a Fair Market Value equal to the amountnecessary to satisfy the minimum statutory withholding amount, or (c) any other arrangement approved by the Company. The FairMarket Value of any Shares withheld, determined as of the effective date of the Option exercise, will be applied as a credit against thewithholding taxes. You also authorize the Company, or your actual employer, to satisfy all withholding obligations of the Companyor your actual employer with respect to this Award from your wages or other cash compensation payable to you by the Company oryour actual employer.Restrictions onResale You agree not to sell any Shares at a time when applicable laws, Company policies or an agreement between the Company and itsunderwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after thetermination of your Service as the Company may specify.Transfer of Option In general, only you can exercise this Option prior to your death. You may not sell, transfer, assign, pledge or otherwise dispose ofthis Option, other than as designated by you by will or by the laws of descent and distribution, except as provided below. Forinstance, you may not use this Option as security for a loan. If you attempt to do any of these things, this Option will immediatelybecome invalid. You may in any event dispose of this Option in your will. Regardless of any marital property settlement - 3 - agreement, the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligatedto recognize your former spouse’s interest in your Option in any other way. However, if this Option is designated as a nonstatutory stock option in the Notice of Stock Option Grant, then the Committeemay, in its sole discretion, allow you to transfer this Option as a gift to one or more family members. For purposes of thisAgreement, “family member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, former spouse,sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (includingadoptive relationships), any individual sharing your household (other than a tenant or employee), a trust in which one or moreof these individuals have more than 50% of the beneficial interest, a foundation in which you or one or more of these personscontrol the management of assets, and any entity in which you or one or more of these persons own more than 50% of thevoting interest. In addition, if this Option is designated as a nonstatutory stock option in the Notice of Stock Option Grant, then theCommittee may, in its sole discretion, allow you to transfer this option to your spouse or former spouse pursuant to a domesticrelations order in settlement of marital property rights. The Committee will allow you to transfer this Option only if both you and the transferee(s) execute the forms prescribed by theCommittee, which include the consent of the transferee(s) to be bound by this Agreement.Retention Rights Neither your Option nor this Agreement gives you the right to be employed or retained by the Company or a subsidiary of theCompany in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with orwithout cause.StockholderRights Your Options carry neither voting rights nor rights to dividends. You, or your estate or heirs, have no rights as a stockholderof the Company unless and until you have exercised this Option by giving the required notice to the Company and paying theexercise price. No adjustments will be made for dividends or other rights if the applicable record date occurs before youexercise this Option, except as described in the Plan.Adjustments In the event of a stock split, a stock dividend or a similar change in Company Shares, the number of Shares covered by thisOption and the exercise price per Share shall be adjusted pursuant to the Plan.Successors andAssigns Except as otherwise provided in the Plan or this Agreement, every term of this Agreement shall be binding upon and inure to thebenefit of the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees and assigns.Notice Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon theearliest of personal - 4 - delivery, receipt or the third full day following mailing with postage and fees prepaid, addressed to the other party hereto atthe address last known in the Company’s records or at such other address as such party may designate by ten (10) days’advance written notice to the other party hereto.Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-lawprovisions).The Plan and OtherAgreements The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in the Agreement shall have themeanings assigned to them in the Plan. This Agreement and the Plan constitute the entire understanding between you and theCompany regarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded.This Agreement may be amended by the Committee without your consent; however, if any such amendment wouldmaterially impair your rights or obligations under the Agreement, this Agreement may be amended only by another writtenagreement, signed by you and the Company.BY SIGNING THE COVER SHEET OF THIS AGREEMENT,YOU AGREE TO ALL OF THE TERMS AND CONDITIONSDESCRIBED ABOVE AND IN THE PLAN. - 5 - INPHI CORPORATION2010 STOCK INCENTIVE PLANNOTICE OF CASH EXERCISE OF STOCK OPTIONOPTIONEE INFORMATION:Name: Social Security Number: Address: Employee Number: OPTION INFORMATION: Date of Grant: , 200 Type of Stock Option:Exercise Price per Share: $ ¨ Nonstatutory (NSO)Total number of Shares of INPHI CORPORATION (the“Company”) covered by option: ¨ Incentive (ISO)Number of Shares of the Company for which option is being exercised now: (“Purchased Shares”).Total exercise price for the Purchased Shares: $ Form of payment enclosed:¨ Check for $ , payable to “Inphi Corporation”Name(s) in which the Purchased Shares should be registered:______________________________________________________ The certificate for the Purchased Shares should be sent to the following address: ACKNOWLEDGMENTS: 1.I understand that all sales of Purchased Shares are subject to compliance with the Company’s policy on securities trades. 2.I hereby acknowledge that I received and read a copy of the prospectus describing the Company’s 2010 Stock Incentive Plan and the tax consequences ofan exercise. 3.In the case of a nonstatutory option, I understand that I must recognize ordinary income equal to the spread between the fair market value of thePurchased Shares on the date of exercise and the exercise price. I further understand that I am required to pay withholding taxes at the time of exercising anonstatutory option. 4.In the case of an incentive stock option, I agree to notify the Company if I dispose of the Purchased Shares before I have met both of the tax holdingperiods applicable to incentive stock options (that is, if I make a disqualifying disposition).SIGNATURE AND DATE:__________________________________ _________ __, 200_ - 1 - INPHI CORPORATION2010 STOCK INCENTIVE PLANNOTICE OF RESTRICTED STOCK AWARDYou have been granted the following Restricted Shares of Common Stock of INPHI CORPORATION (the “Company”) under the Company’s 2010Stock Incentive Plan (the “Plan”): Date of Grant: [Date of Grant] Name of Recipient: [Name of Recipient] Total Number of Shares Granted: [Total Shares] Fair Market Value per Share: $[Value Per Share] Total Fair Market ValueOf Award: $[Total Value] Vesting Commencement Date: [ ] Vesting Schedule: [The Shares subject to this Award vest when youcomplete twelve months of continuous Service as anEmployee or a Consultant from the VestingCommencement Date.][Sample language – actual vesting to be inserted.] By your signature and the signature of the Company’s representative below, you and the Company agree that these Restricted Shares aregranted under and governed by the term and conditions of the Plan and the Restricted Stock Agreement (the “Agreement”), both of which areattached to and made a part of this document.By signing this document you further agree that the Company may deliver by e-mail all documents relating to the Plan or this Award(including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company isrequired to deliver to its security holders (including without limitation, annual reports and proxy statements). You also agree that the Companymay deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company.If the Company posts these documents on a website, it will notify you by e-mail. [NAME OF RECIPIENT] INPHI CORPORATION By: Title: - 1 - INPHI CORPORATION2010 STOCK INCENTIVE PLANRESTRICTED STOCK AGREEMENT Payment For Shares No cash payment is required for the Shares you receive. You are receiving the Shares in consideration for Services renderedby you.Vesting The Shares that you are receiving will vest in installments, as shown in the Notice of Restricted Stock Award. No additional Shares vest after your Service as an Employee or a Consultant has terminated for any reason.Shares Restricted Unvested Shares will be considered “Restricted Shares.” Except to the extent permitted by the Committee, you may not sell,transfer, assign, pledge or otherwise dispose of Restricted Shares.Forfeiture If your Service terminates for any reason, then your Shares will be forfeited to the extent that they have not vested before thetermination date and do not vest as a result of termination. This means that the Restricted Shares will immediately revert tothe Company. You receive no payment for Restricted Shares that are forfeited. The Company determines when your Serviceterminates for this purpose and all purposes under the Plan and its determinations are conclusive and binding on all persons.Leaves Of Absence For purposes of this Award, your Service does not terminate when you go on a military leave, a sick leave or another bonafide leave of absence, if the leave was approved by the Company in writing and if continued crediting of Service is requiredby the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless youimmediately return to active work. If you go on a leave of absence, then the vesting schedule specified in the Notice of Restricted Stock Award may be adjustedin accordance with the Company’s leave of absence policy or the terms of your leave. If you commence working on a part-time basis, then the vesting schedule specified in the Notice of Restricted Stock Award may be adjusted in accordance withthe Company’s part-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.Stock Certificates The certificates for the Restricted Shares have stamped on them a special legend referring to the forfeiture restrictions. Inaddition to or in lieu of imposing the legend, the Company may hold the certificates in escrow. As your vested percentageincreases, you may request (at reasonable intervals) that the Company release to you a non-legended certificate for your vestedShares. - 1 - Stockholder Rights During the period of time between the date of grant and the date the Restricted Shares become vested, you shall have all therights of a stockholder with respect to the Restricted Shares except for the right to transfer the Restricted Shares, as set forthabove. Accordingly, you shall have the right to vote the Restricted Shares and to receive any cash dividends paid withrespect to the Restricted Shares.Withholding Taxes No Shares will be released to you unless you have made arrangements acceptable to the Company to pay withholding taxesthat may be due as a result of this Award or the vesting of the Shares. These arrangements, at the sole discretion of theCompany, may include (a) having the Company withhold taxes from the proceeds of the sale of the Shares, either through avoluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization), (b)having the Company withhold Shares that otherwise would be released to you when they vest having a Fair Market Valueequal to the amount necessary to satisfy the minimum statutory withholding amount, or (c) any other arrangementapproved by the Company. The Fair Market Value of any Shares withheld, determined as of the date when taxes otherwisewould have been withheld in cash, will be applied as a credit against the withholding taxes. You also authorize theCompany, or your actual employer, to satisfy all withholding obligations of the Company or your actual employer withrespect to this Award from your wages or other cash compensation payable to you by the Company or your actual employer.Restrictions On Resale You agree not to sell any Shares at a time when applicable laws, Company policies or an agreement between the Companyand its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period oftime after the termination of your Service as the Company may specify.No Retention Rights Neither your Award nor this Agreement gives you the right to be employed or retained by the Company or a subsidiary ofthe Company in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time,with or without cause.Adjustments In the event of a stock split, a stock dividend or a similar change in Company Shares, or a merger or a reorganization of theCompany, the forfeiture provisions described above will apply to all new, substitute or additional securities or other assetsto which you are entitled by reason of your ownership of the Shares. - 2 - Successors and Assigns Except as otherwise provided in the Plan or this Agreement, every term of this Agreement shall be binding upon and inure tothe benefit of the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees and assigns.Notice Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given uponthe earliest of personal delivery, receipt or the third full day following mailing with postage and fees prepaid, addressed to theother party hereto at the address last known in the Company’s records or at such other address as such party may designateby ten (10) days’ advance written notice to the other party hereto.Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-lawprovisions).The Plan and OtherAgreements The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in this Agreement shall have themeanings assigned to them in the Plan. This Agreement and the Plan constitute the entire understanding between you and theCompany regarding this Award. Any prior agreements, commitments or negotiations concerning this Award are superseded.This Agreement may be amended by the Committee without your consent; however, if any such amendment wouldmaterially impair your rights or obligations under the Agreement, this Agreement may be amended only by another writtenagreement, signed by you and the Company.BY SIGNING THE COVER SHEET OF THIS AGREEMENT,YOU AGREE TO ALL OF THE TERMS AND CONDITIONSDESCRIBED ABOVE AND IN THE PLAN. - 3 - INPHI CORPORATION2010 STOCK INCENTIVE PLANNOTICE OF STOCK UNIT AWARDYou have been granted the following Stock Units representing Common Stock of INPHI CORPORATION (the “Company”) under the Company’s 2010Stock Incentive Plan (the “Plan”). Name of Participant: Total Number of Stock Units Granted: Date of Grant: , Vesting Commencement Date: , Vesting Schedule: [The Stock Units subject to this Award vest when you complete each[12 months] of continuous Service as an Employee or a Consultantfrom the Vesting Commencement Date.] [Sample language – actualvesting to be inserted.]By your signature and the signature of the Company’s representative below, you and the Company agree that these Stock Units aregranted under and governed by the term and conditions of the Plan and the Stock Unit Agreement (the “Agreement”), both of which are attachedto and made a part of this document.By signing this document you further agree that the Company may deliver by e-mail all documents relating to the Plan or this Award(including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company isrequired to deliver to its security holders (including without limitation, annual reports and proxy statements). You also agree that the Companymay deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company.If the Company posts these documents on a website, it will notify you by e-mail. [NAME OF PARTICIPANT] INPHI CORPORATION By: Its: Print Name INPHI CORPORATION2010 STOCK INCENTIVE PLANSTOCK UNIT AGREEMENT Payment for StockUnits No cash payment is required for the Stock Units you receive. You are receiving the Stock Units in consideration for Servicesrendered by you.Vesting The Stock Units that you are receiving will vest in installments, as shown in the Notice of Stock Unit Award.No additional Stock Units vest after your Service as an Employee or a Consultant has terminated for any reason.Forfeiture If your Service terminates for any reason, then your Award expires immediately as to the number of Stock Units that have notvested before the termination date and do not vest as a result of termination. This means that the unvested Stock Units will immediately be cancelled. You receive no payment for Stock Units that areforfeited. The Company determines when your Service terminates for this purpose and all purposes under the Plan and its determinationsare conclusive and binding on all persons.Leaves of Absence For purposes of this Award, your Service does not terminate when you go on a military leave, a sick leave or another bona fideleave of absence, if the leave of absence was approved by the Company in writing and if continued crediting of Service is requiredby the terms of the leave or by applicable law. But your Service terminates when the approved leave ends, unless you immediatelyreturn to active work.If you go on a leave of absence, then the vesting schedule specified in the Notice of Stock Unit Award may be adjusted inaccordance with the Company’s leave of absence policy or the terms of your leave. If you commence working on a part-timebasis, then the vesting schedule specified in the Notice of Stock Unit Award may be adjusted in accordance with the Company’spart-time work policy or the terms of an agreement between you and the Company pertaining to your part-time schedule.Nature of Stock Units Your Stock Units are mere bookkeeping entries. They represent only the Company’s unfunded and unsecured promise to issueShares on a future date. As a holder of Stock Units, you have no rights other than the rights of a general creditor of the Company. -1- No Voting Rights orDividends Your Stock Units carry neither voting rights nor rights to dividends. You, or your estate or heirs, have no rights as astockholder of the Company unless and until your Stock Units are settled by issuing Shares. No adjustments will be madefor dividends or other rights if the applicable record date occurs before your Shares are issued, except as described in the Plan.Stock UnitsNontransferable You may not sell, transfer, assign, pledge or otherwise dispose of any Stock Units. For instance, you may not use your StockUnits as security for a loan. If you attempt to do any of these things, your Stock Units will immediately become invalid.Settlement of Stock Units Each of your vested Stock Units will be settled when it vests. At the time of settlement, you will receive one Share for each vested Stock Unit; provided, however, that no fractional Shareswill be issued or delivered pursuant to the Plan or this Agreement, and the Committee will determine whether cash will be paidin lieu of any fractional Share or whether such fractional Share and any rights thereto will be canceled, terminated or otherwiseeliminated. In addition, the Shares are issued to you subject to the condition that the issuance of the Shares not violate any lawor regulation.Withholding Taxes andStock Withholding No Shares will be distributed to you unless you have made arrangements acceptable to the Company to pay withholding taxesthat may be due as a result of this Award or the settlement of the Stock Units. These arrangements, at the sole discretion of theCompany, may include (a) having the Company withhold taxes from the proceeds of the sale of the Shares, either through avoluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization), (b)having the Company withhold Shares that otherwise would be distributed to you when the Stock Units are settled having aFair Market Value equal to the amount necessary to satisfy the minimum statutory withholding amount, or (c) any otherarrangement approved by the Company. The Fair Market Value of any Shares withheld, determined as of the date when taxesotherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. You also authorize theCompany, or your actual employer, to satisfy all withholding obligations of the Company or your actual employer with respectto this Award from your wages or other cash compensation payable to you by the Company or your actual employer. -2- Restrictions on Resale You agree not to sell any Shares at a time when applicable laws, Company policies or an agreement between the Companyand its underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of timeafter the termination of your Service as the Company may specify.No Retention Rights Neither your Award nor this Agreement gives you the right to be employed or retained by the Company or a subsidiary of theCompany in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with orwithout cause.Adjustments In the event of a stock split, a stock dividend or a similar change in Company Shares, the number of Stock Units coveredby this Award shall be adjusted pursuant to the Plan.Successors and Assigns Except as otherwise provided in the Plan or this Agreement, every term of this Agreement shall be binding upon and inure tothe benefit of the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees and assigns.Notice Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given uponthe earliest of personal delivery, receipt or the third full day following mailing with postage and fees prepaid, addressed to theother party hereto at the address last known in the Company’s records or at such other address as such party may designateby ten (10) days’ advance written notice to the other party hereto.Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-lawprovisions).The Plan and OtherAgreements The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in this Agreement shall have themeanings assigned to them in the Plan. This Agreement and the Plan constitute the entire understanding between you and theCompany regarding this Award. Any prior agreements, commitments or negotiations concerning this Award are superseded.This Agreement may be amended by the Committee without your consent; however, if any such amendment wouldmaterially impair your rights or obligations under the Agreement, this Agreement may be amended only by another writtenagreement, signed by you and the Company.BY SIGNING THE COVER SHEET OF THIS AGREEMENT,YOU AGREE TO ALL OF THE TERMS AND CONDITIONSDESCRIBED ABOVE AND IN THE PLAN. -3- INPHI CORPORATION2010 STOCK INCENTIVE PLANNOTICE OF STOCK OPTION GRANTYou have been granted the following Option to purchase Common Stock of INPHI CORPORATION (the “Company”) under the Company’s 2010 StockIncentive Plan (the “Plan”): Name of Optionee: [Name of Optionee]Total Number of Option Shares Granted: [Total Number of Shares]Type of Option: Nonstatutory Stock OptionExercise Price Per Share: $ Grant Date: [Date of Grant]Vesting Commencement Date: [Vesting Commencement Date]Vesting Schedule: [INITIAL: This Option shall vest and become exercisable over a four-year period beginning on the daywhich is the one month anniversary of the Grant Date, at a monthly rate of 2.0833% of the total number ofShares subject to this Option. Notwithstanding the foregoing, this Option shall fully vest and becomeexercisable upon a Change in Control that occurs during your continued Service as an Outside Director.][ANNUAL: This Option shall vest and become exercisable on the earliest of (i) the first anniversary of theGrant Date, (ii) immediately prior to the next regular annual meeting of the Company’s stockholdersfollowing such Grant Date, or (iii) a Change in Control, subject to your continued Service as an OutsideDirector.]Expiration Date: This Option expires on the earlier of (i) the day before the tenth anniversary of the Grant Date of this Optionor (ii) the date twelve months after the termination of your Service for any reason, provided, however, ifthis Option has not vested upon the termination of your Service as an Outside Director for any reason, itshall terminate immediately.By your signature and the signature of the Company’s representative below, you and the Company agree that this Option is granted underand governed by the term and conditions of the Plan and the Stock Option Agreement (the “Agreement”), both of which are attached to and madea part of this document.By signing this document you further agree that the Company may deliver by e-mail all documents relating to the Plan or this Award(including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company isrequired to deliver to its security holders (including without limitation, annual reports and proxy statements). You also agree that the Companymay deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company.If the Company posts these documents on a website, it will notify you by e-mail. INPHI CORPORATIONNOTICE OF STOCK OPTIONS GRANT- 1 - OPTIONEE: INPHI CORPORATION By: Optionee’s Signature Title: Optionee’s Printed Name INPHI CORPORATIONNOTICE OF STOCK OPTIONS GRANT- 1 - INPHI CORPORATION2010 STOCK INCENTIVE PLANSTOCK OPTION AGREEMENT Tax Treatment This Option is not intended to be an incentive stock option under Section 422 of the Internal Revenue Code.Vesting This Option becomes exercisable in installments, as shown in the Notice of Stock Option Grant. This Option will in no event becomeexercisable for additional Shares after your Service as an Outside Director has terminated for any reason. Notwithstanding theforegoing, vesting of this Option is subject to acceleration as shown in the Notice of Stock Option GrantTerm This Option expires as shown on the Notice of Stock Option Grant.Restrictions onExercise The Company will not permit you to exercise this Option if the issuance of Shares at that time would violate any law or regulation. Theinability of the Company to obtain approval from any regulatory body having authority deemed by the Company to be necessary to thelawful issuance and sale of the Company stock pursuant to this Option shall relieve the Company of any liability with respect to thenon-issuance or sale of the Company stock as to which such approval shall not have been obtained.Notice of Exercise When you wish to exercise this Option you must provide a notice of exercise form in accordance with such procedures as areestablished by the Company and communicated to you from time to time. Any notice of exercise must specify how many Shares youwish to purchase and how your Shares should be registered. The notice of exercise will be effective when it is received by the Company.If someone else wants to exercise this Option after your death, that person must prove to the Company’s satisfaction that he or she isentitled to do so.Form of Payment When you submit your notice of exercise, you must include payment of the Option exercise price for the Shares you are purchasing.Payment may be made in the following form(s): • Your personal check, a cashier’s check or a money order. • Certificates for Shares that you own, along with any forms needed to effect a transfer of those Shares to the Company. The value ofthe Shares, determined as of the effective date of the Option exercise, will be applied to the Option exercise price. Instead ofsurrendering Shares, you may attest to the ownership of those Shares on a form provided by the Company and have the samenumber of Shares subtracted from the Shares issued to you upon exercise of the Option. However, you may not surrender or attestto the ownership of Shares in payment of the exercise price if your action would cause the Company to recognize a INPHI CORPORATIONNOTICE OF STOCK OPTIONS GRANT- 1 - compensation expense (or additional compensation expense) with respect to this Option for financial reporting purposes. • By delivery on a form approved by the Company of an irrevocable direction to a securities broker approved by the Company tosell all or part of the Shares that are issued to you when you exercise this Option and to deliver to the Company from the saleproceeds an amount sufficient to pay the Option exercise price and any withholding taxes. The balance of the sale proceeds, if any,will be delivered to you. The directions must be given by providing a notice of exercise form approved by the Company. Notwithstanding the foregoing, payment may not be made in any form that is unlawful, as determined by the Committee in its solediscretion.Withholding Taxesand StockWithholding You will not be allowed to exercise this Option unless you make arrangements acceptable to the Company to pay any withholdingtaxes that may be due as a result of this Award or the Option exercise. These arrangements, at the sole discretion of the Company,may include (a) having the Company withhold taxes from the proceeds of the sale of the Shares, either through a voluntary sale orthrough a mandatory sale arranged by the Company (on your behalf pursuant to this authorization), (b) having the Companywithhold Shares that otherwise would be issued to you when you exercise this Option having a Fair Market Value equal to the amountnecessary to satisfy the minimum statutory withholding amount, or (c) any other arrangement approved by the Company. The FairMarket Value of any Shares withheld, determined as of the effective date of the Option exercise, will be applied as a credit against thewithholding taxes. You also authorize the Company, or your actual employer, to satisfy all withholding obligations of the Companyor your actual employer with respect to this Award from your wages or other cash compensation payable to you by the Company oryour actual employer.Restrictions onResale You agree not to sell any Shares at a time when applicable laws, Company policies or an agreement between the Company and itsunderwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after thetermination of your Service as the Company may specify.Transfer of Option In general, only you can exercise this Option prior to your death. You may not sell, transfer, assign, pledge or otherwise dispose ofthis Option, other than as designated by you by will or by the laws of descent and distribution, except as provided below. Forinstance, you may not use this Option as security for a loan. If you attempt to do any of these things, this Option will immediatelybecome invalid. You may in any event dispose of this Option in your will. Regardless of any marital property settlement agreement,the Company is not obligated to honor a notice of exercise from your former spouse, nor is the Company obligated to recognize your INPHI CORPORATIONNOTICE OF STOCK OPTIONS GRANT- 2 - former spouse’s interest in your Option in any other way. However, the Committee may, in its sole discretion, allow you to transfer this Option as a gift to one or more family members. Forpurposes of this Agreement, “family member” means a child, stepchild, grandchild, parent, stepparent, grandparent, spouse, formerspouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law (includingadoptive relationships), any individual sharing your household (other than a tenant or employee), a trust in which one or more of theseindividuals have more than 50% of the beneficial interest, a foundation in which you or one or more of these persons control themanagement of assets, and any entity in which you or one or more of these persons own more than 50% of the voting interest. In addition, the Committee may, in its sole discretion, allow you to transfer this option to your spouse or former spouse pursuant to adomestic relations order in settlement of marital property rights. The Committee will allow you to transfer this Option only if both you and the transferee(s) execute the forms prescribed by theCommittee, which include the consent of the transferee(s) to be bound by this Agreement.RetentionRights Neither your Option nor this Agreement gives you the right to be employed or retained by the Company or a subsidiary of the Company inany capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause.StockholderRights Your Options carry neither voting rights nor rights to dividends. You, or your estate or heirs, have no rights as a stockholder of theCompany unless and until you have exercised this Option by giving the required notice to the Company and paying the exercise price. Noadjustments will be made for dividends or other rights if the applicable record date occurs before you exercise this Option, except asdescribed in the Plan.Adjustments In the event of a stock split, a stock dividend or a similar change in Company Shares, the number of Shares covered by this Option andthe exercise price per Share shall be adjusted pursuant to the Plan.Successors andAssigns Except as otherwise provided in the Plan or this Agreement, every term of this Agreement shall be binding upon and inure to the benefit ofthe parties hereto and their respective heirs, legatees, legal representatives, successors, transferees and assigns.Notice Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon the earliest ofpersonal delivery, receipt or the third full day following mailing with postage and fees prepaid, addressed to the other party hereto at theaddress last known in the Company’s records or at such other address as such party may designate by ten (10) days’ advance writtennotice to the other party hereto. INPHI CORPORATIONNOTICE OF STOCK OPTIONS GRANT- 3 - Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-lawprovisions).The Plan andOther Agreements The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in the Agreement shall have the meaningsassigned to them in the Plan. This Agreement and the Plan constitute the entire understanding between you and the Companyregarding this Option. Any prior agreements, commitments or negotiations concerning this Option are superseded. This Agreementmay be amended by the Committee without your consent; however, if any such amendment would materially impair your rights orobligations under the Agreement, this Agreement may be amended only by another written agreement, signed by you and theCompany.BY SIGNING THE COVER SHEET OF THIS AGREEMENT,YOU AGREE TO ALL OF THE TERMS AND CONDITIONSDESCRIBED ABOVE AND IN THE PLAN. INPHI CORPORATIONNOTICE OF STOCK OPTIONS GRANT- 4 - INPHI CORPORATION2010 STOCK INCENTIVE PLANNOTICE OF CASH EXERCISE OF STOCK OPTIONOPTIONEE INFORMATION: Name: Social Security Number: Address: Employee Number: OPTION INFORMATION: Date of Grant: _______________,200__ Type of Stock Option: NonstatutoryExercise Price per Share: $______________ Total number of Shares of INPHI CORPORATION (the “Company”) covered byoption: __________ Number of Shares of the Company for which option is being exercised now: (“Purchased Shares”). Total exercise price for the Purchased Shares:$ Form of payment enclosed: ¨Check for $ , payable to “Inphi Corporation”Name(s) in which the Purchased Shares should be registered:_______________________________________________________ The certificate for the Purchased Shares should be sent to the followingaddress: ACKNOWLEDGMENTS: 1.understand that all sales of Purchased Shares are subject to compliance with the Company’s policy on securities trades.2.I hereby acknowledge that I received and read a copy of the prospectus describing the Company’s 2010 Stock Incentive Plan and the tax consequences ofan exercise.3.I understand that I must recognize ordinary income equal to the spread between the fair market value of the Purchased Shares on the date of exercise andthe exercise price. I further understand that I am required to pay withholding taxes at the time of exercising the option.SIGNATURE AND DATE: ,200 INPHI CORPORATIONNOTICE OF STOCK OPTIONS GRANT- 1 - INPHI CORPORATION2010 STOCK INCENTIVE PLANNOTICE OF STOCK UNIT AWARDYou have been granted the following Stock Units representing Common Stock of INPHI CORPORATION (the “Company”) under the Company’s 2010Stock Incentive Plan (the “Plan”). Name of Participant: Total Number of Stock UnitsGranted: Date of Grant: ___________ ____, _____Vesting Commencement Date: ___________ ____, _____ Vesting Schedule: [The Stock Units subject to this Award vest when you complete each [12 months] of continuous Service as an OutsideDirector from the Vesting Commencement Date.] [Sample language – actual vesting to be inserted.] Notwithstandingthe foregoing, the Stock Units subject to this Award shall fully vest and become exercisable upon a Change in Control thatoccurs during your continued Service as an Outside Director.By your signature and the signature of the Company’s representative below, you and the Company agree that these Stock Units aregranted under and governed by the term and conditions of the Plan and the Stock Unit Agreement (the “Agreement”), both of which are attachedto and made a part of this document.By signing this document you further agree that the Company may deliver by e-mail all documents relating to the Plan or this Award(including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company isrequired to deliver to its security holders (including without limitation, annual reports and proxy statements). You also agree that the Companymay deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company.If the Company posts these documents on a website, it will notify you by e-mail. [Name of Participant] INPHI CORPORATION By: Its: Print Name INPHI CORPORATION2010 STOCK INCENTIVE PLANSTOCK UNIT AGREEMENT Payment for StockUnits No cash payment is required for the Stock Units you receive. You are receiving the Stock Units in consideration for Servicesrendered by you.Vesting The Stock Units that you are receiving will vest in installments, as shown in the Notice of Stock Unit Award.No additional Stock Units vest after your Service as an Outside Director has terminated for any reason.Forfeiture If your Service terminates for any reason, then your Award expires immediately as to the number of Stock Units that have notvested before the termination date and do not vest as a result of termination.This means that the unvested Stock Units will immediately be cancelled. You receive no payment for Stock Units that are forfeited.The Company determines when your Service terminates for this purpose and all purposes under the Plan and its determinations areconclusive and binding on all persons.Nature of Stock Units Your Stock Units are mere bookkeeping entries. They represent only the Company’s unfunded and unsecured promise to issueShares on a future date. As a holder of Stock Units, you have no rights other than the rights of a general creditor of the Company.No Voting Rights orDividends Your Stock Units carry neither voting rights nor rights to dividends. You, or your estate or heirs, have no rights as a stockholder ofthe Company unless and until your Stock Units are settled by issuing Shares. No adjustments will be made for dividends or otherrights if the applicable record date occurs before your Shares are issued, except as described in the Plan.Stock UnitsNontransferable You may not sell, transfer, assign, pledge or otherwise dispose of any Stock Units. For instance, you may not use your StockUnits as security for a loan. If you attempt to do any of these things, your Stock Units will immediately become invalid.Settlement of StockUnits Each of your vested Stock Units will be settled when it vests. - 1 - At the time of settlement, you will receive one Share for each vested Stock Unit; provided, however, that no fractional Shareswill be issued or delivered pursuant to the Plan or this Agreement, and the Committee will determine whether cash will be paidin lieu of any fractional Share or whether such fractional Share and any rights thereto will be canceled, terminated or otherwiseeliminated. In addition, the Shares are issued to you subject to the condition that the issuance of the Shares not violate any lawor regulation.Withholding Taxes andStock Withholding No Shares will be distributed to you unless you have made arrangements acceptable to the Company to pay withholding taxesthat may be due as a result of this Award or the settlement of the Stock Units. These arrangements, at the sole discretion of theCompany, may include (a) having the Company withhold taxes from the proceeds of the sale of the Shares, either through avoluntary sale or through a mandatory sale arranged by the Company (on your behalf pursuant to this authorization), (b)having the Company withhold Shares that otherwise would be distributed to you when the Stock Units are settled having aFair Market Value equal to the amount necessary to satisfy the minimum statutory withholding amount, or (c) any otherarrangement approved by the Company. The Fair Market Value of any Shares withheld, determined as of the date when taxesotherwise would have been withheld in cash, will be applied as a credit against the withholding taxes. You also authorize theCompany, or your actual employer, to satisfy all withholding obligations of the Company or your actual employer with respectto this Award from your wages or other cash compensation payable to you by the Company or your actual employer.Restrictions on Resale You agree not to sell any Shares at a time when applicable laws, Company policies or an agreement between the Company andits underwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time afterthe termination of your Service as the Company may specify.No Retention Rights Neither your Award nor this Agreement gives you the right to be employed or retained by the Company or a subsidiary of theCompany in any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with orwithout cause.Adjustments In the event of a stock split, a stock dividend or a similar change in Company Shares, the number of Stock Units covered bythis Award shall be adjusted pursuant to the Plan.Successors and Assigns Except as otherwise provided in the Plan or this Agreement, every term of this Agreement shall be binding upon and inure to the - 2 - benefit of the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees and assigns.Notice Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon the earliest ofpersonal delivery, receipt or the third full day following mailing with postage and fees prepaid, addressed to the other party hereto at theaddress last known in the Company’s records or at such other address as such party may designate by ten (10) days’ advance writtennotice to the other party hereto.Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-lawprovisions).The Plan andOtherAgreements The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in this Agreement shall have the meaningsassigned to them in the Plan. This Agreement and the Plan constitute the entire understanding between you and the Company regardingthis Award. Any prior agreements, commitments or negotiations concerning this Award are superseded. This Agreement may be amendedby the Committee without your consent; however, if any such amendment would materially impair your rights or obligations under theAgreement, this Agreement may be amended only by another written agreement, signed by you and the Company.BY SIGNING THE COVER SHEET OF THIS AGREEMENT,YOU AGREE TO ALL OF THE TERMS AND CONDITIONSDESCRIBED ABOVE AND IN THE PLAN. - 3 - INPHI CORPORATION2010 STOCK INCENTIVE PLANNOTICE OF RESTRICTED STOCK AWARDYou have been granted the following Restricted Shares of Common Stock of Inphi Corporation (the “Company”) under the Company’s 2010 StockIncentive Plan (the “Plan”): Date of Grant: [Date of Grant]Name of Recipient: [Name of Recipient]Total Number of Shares Granted: [Total Shares]Fair Market Value per Share: $[Value Per Share]Total Fair Market Value Of Award: $[Total Value]Vesting Commencement Date: [__________]Vesting Schedule: [The Shares subject to this Award vest when you complete twelve months of continuous Service as an Outside Directorfrom the Vesting Commencement Date.] [Sample language – actual vesting to be inserted.] Notwithstanding theforegoing, the Shares subject to this Award shall fully vest and become exercisable upon a Change in Control that occursduring your continued Service as an Outside Director.By your signature and the signature of the Company’s representative below, you and the Company agree that these Restricted Shares aregranted under and governed by the term and conditions of the Plan and the Restricted Stock Agreement (the “Agreement”), both of which areattached to and made a part of this document.By signing this document you further agree that the Company may deliver by e-mail all documents relating to the Plan or this Award(including without limitation, prospectuses required by the Securities and Exchange Commission) and all other documents that the Company isrequired to deliver to its security holders (including without limitation, annual reports and proxy statements). You also agree that the Companymay deliver these documents by posting them on a website maintained by the Company or by a third party under contract with the Company.If the Company posts these documents on a website, it will notify you by e-mail. [NAME OF RECIPIENT] INPHI CORPORATION By: INPHI CORPORATIONNOTICE OF STOCK OPTIONS GRANT- 1 - Title: MERU NETWORKS, INC.NOTICE OF STOCK OPTIONS GRANT-2 - INPHI CORPORATION2010 STOCK INCENTIVE PLANRESTRICTED STOCK AGREEMENT Payment For Shares No cash payment is required for the Shares you receive. You are receiving the Shares in consideration for Services rendered byyou.Vesting The Shares that you are receiving will vest in installments, as shown in the Notice of Restricted Stock Award. No additional Shares vest after your Service as an Outside Director has terminated for any reason.Shares Restricted Unvested Shares will be considered “Restricted Shares.” Except to the extent permitted by the Committee, you may not sell,transfer, assign, pledge or otherwise dispose of Restricted Shares.Forfeiture If your Service terminates for any reason, then your Shares will be forfeited to the extent that they have not vested before thetermination date and do not vest as a result of termination. This means that the Restricted Shares will immediately revert to theCompany. You receive no payment for Restricted Shares that are forfeited. The Company determines when your Serviceterminates for this purpose and all purposes under the Plan and its determinations are conclusive and binding on all persons.Stock Certificates The certificates for the Restricted Shares have stamped on them a special legend referring to the forfeiture restrictions. In additionto or in lieu of imposing the legend, the Company may hold the certificates in escrow. As your vested percentage increases, youmay request (at reasonable intervals) that the Company release to you a non-legended certificate for your vested Shares.Stockholder Rights During the period of time between the date of grant and the date the Restricted Shares become vested, you shall have all the rightsof a stockholder with respect to the Restricted Shares except for the right to transfer the Restricted Shares, as set forth above.Accordingly, you shall have the right to vote the Restricted Shares and to receive any cash dividends paid with respect to theRestricted Shares.Withholding Taxes No Shares will be released to you unless you have made arrangements acceptable to the Company to pay withholding taxes thatmay be due as a result of this Award or the vesting of the Shares. These arrangements, at the sole discretion of the Company, mayinclude (a) having the Company withhold taxes from the proceeds of the sale of the Shares, either through a voluntary sale orthrough a INPHI CORPORATIONNOTICE OF STOCK OPTIONS GRANT- 1 - mandatory sale arranged by the Company (on your behalf pursuant to this authorization), (b) having the Company withhold Sharesthat otherwise would be released to you when they vest having a Fair Market Value equal to the amount necessary to satisfy theminimum statutory withholding amount, or (c) any other arrangement approved by the Company. The Fair Market Value of any Shareswithheld, determined as of the date when taxes otherwise would have been withheld in cash, will be applied as a credit against thewithholding taxes. You also authorize the Company, or your actual employer, to satisfy all withholding obligations of the Company oryour actual employer with respect to this Award from your wages or other cash compensation payable to you by the Company or youractual employer.Restrictions OnResale You agree not to sell any Shares at a time when applicable laws, Company policies or an agreement between the Company and itsunderwriters prohibit a sale. This restriction will apply as long as your Service continues and for such period of time after thetermination of your Service as the Company may specify.No RetentionRights Neither your Award nor this Agreement gives you the right to be employed or retained by the Company or a subsidiary of the Companyin any capacity. The Company and its subsidiaries reserve the right to terminate your Service at any time, with or without cause.Adjustments In the event of a stock split, a stock dividend or a similar change in Company Shares, or a merger or a reorganization of the Company,the forfeiture provisions described above will apply to all new, substitute or additional securities or other assets to which you are entitledby reason of your ownership of the Shares.Successors andAssigns Except as otherwise provided in the Plan or this Agreement, every term of this Agreement shall be binding upon and inure to the benefitof the parties hereto and their respective heirs, legatees, legal representatives, successors, transferees and assigns.Notice Any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon the earliest ofpersonal delivery, receipt or the third full day following mailing with postage and fees prepaid, addressed to the other party hereto at theaddress last known in the Company’s records or at such other address as such party may designate by ten (10) days’ advance writtennotice to the other party hereto.Applicable Law This Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-law INPHI CORPORATIONNOTICE OF STOCK OPTIONS GRANT- 2 - provisions).The Plan and OtherAgreements The text of the Plan is incorporated in this Agreement by reference. All capitalized terms in this Agreement shall have the meaningsassigned to them in the Plan. This Agreement and the Plan constitute the entire understanding between you and the Companyregarding this Award. Any prior agreements, commitments or negotiations concerning this Award are superseded. This Agreementmay be amended by the Committee without your consent; however, if any such amendment would materially impair your rights orobligations under the Agreement, this Agreement may be amended only by another written agreement, signed by you and theCompany.BY SIGNING THE COVER SHEET OF THIS AGREEMENT,YOU AGREE TO ALL OF THE TERMS AND CONDITIONSDESCRIBED ABOVE AND IN THE PLAN. INPHI CORPORATIONNOTICE OF STOCK OPTIONS GRANT- 3 - Exhibit 10.14Confidential treatment requested.Confidential portions of this document have been redacted and have been separately filed with the Commission. [Cadence logo] SOFTWARE LICENSE AND MAINTENANCE AGREEMENT Agreement No.: 07INPH0629Date of Agreement: This (“), entered into as of the date specified above, is by and between Systems, Inc., a Delaware corporation having a principal place of business at 2655 Seely Avenue, San Jose, California 95134-1937, USA (“Cadence”),and Inphi Corporation, having a place of business at 2393 Townsgate Road #101, Westlake Village, CA 91361 (“Customer”). Customer desires to obtainfrom Cadence, either directly or through an authorized Cadence reseller, rights to Use certain Licensed Materials on either a Subscription or 99-year Licensebasis, as defined below. License Keys to the Licensed Materials may be purchased either from Cadence or an authorized Cadence reseller. Therefore, Cadenceand Customer agree as follows: 1. DEFINITIONSThe following definitions apply herein:(a) “Acquired Cadence Software” means Software acquired byCadence after the commencement of the Term of Use in a Product Quotationas the result of an acquisition by Cadence of either a third party, or thetechnology of a third party.(b) “Design Elements” means library elements, libraries, symbols,simulation or behavioral models, circuit and logic elements and anyUpdates thereto included with, and used in conjunction with Software.(c) “Designated Equipment” means either: (i) a server identified byserial number, or host I.D. on which the Licensed Materials are stored, or(ii) a computer or workstation, as identified by its serial number, host I.D.number or ethernet address, to which the Licensed Materials aredownloaded and Used only upon the issuance of a License Key. TheDesignated Equipment shall be of a manufacture, make and model, andhave the configuration, capacity, (i.e., memory/disk), operating softwareversion level and pre-requisite and co-requisite applications, prescribed inthe documentation as necessary or desirable for the operation of theSoftware.(d) “Documentation” means the user manuals and other writtenmaterials that describe the Software, its operation and matters related to itsUse, which Cadence generally makes available to its commercial licenseesfor use with the Software and any Updated, improved or modifiedversion(s) of such materials, whether provided in published writtenmaterial, on magnetic media or communicated by electronic means.(e) “Effective Date” means the date specified in each ProductQuotation representing the commencement of the Term of Use for theLicensed Materials.(f) “Initial Configuration” means the specific group of LicensedMaterials listed in each Product Quotation that represents the LicensedMaterials available for Use by the Customer on the Effective Date. (g) “License Key” means a physical or electronic activation keyprovided to a Customer that authorizes: (i) the Licensed Materials,including version number and quantity that is licensed to a Customer;(ii) the Designated Equipment; and (iii) the codes that Customer must inputtoaccess the Licensed Materials on the Designated Equipment.(h) “Licensed Materials” means the specific group of Software,Design Elements and the associated Documentation licensed to Customer.Unless otherwise specified in the Product Quotation, Licensed Materialsexcludes New Technology, Upgrades and Acquired Cadence Software.(i) “Maintenance Service(s)” shall mean the services which Cadencemakes available to Customer related to the Licensed Materials as is moreparticularly described in Section 9 (Technical Support) herein.(j) “New Technology or Upgrade” means any enhancement(s) oraddition(s) to Software (other than an Update) which Cadence does notmake available to its commercial customers as a part of the standardMaintenance Service offering, but rather is only provided subject topayment of a separate fee. Neither New Technology, Acquired CadenceSoftware nor Upgrades are covered by, and will not be provided inconsideration of the Fees already paid by Customer unless otherwisespecified in a Product Quotation.(k) “Product Quotation” means a written quotation from Cadence (orone of its affiliates) to Customer identifying the Licensed Materials, InitialConfiguration, quantity, charges, Term of Use and other informationrelevant to a specific transaction which Cadence is quoting to Customer.Each Product Quotation will be included as an attachment to this Agreementand incorporated herein by reference.(l) “Remix” means the exchange of Licensed Materials for other oradditional Licensed Materials subject to the limitations set forth in theapplicable Product Quotation.(m) “Software” means any applications programming code orexecutable computer program(s), and any Updates thereto.(n) “Subscription” means the license of Software for a fixed period oftime that is less than 99 years in which the Fee for Maintenance Services isincluded within the Fee quoted for the entire Term of Use. (o) “Term of Use” means that period of time Customer has Use of theLicensed Materials as specified in each Product Quotation. 2(p) “Then Current Configuration” means the specific group ofLicensed Materials being Used by Customer after Remix.(q) “Update” means a Software modification released by Cadence ona general, regularly scheduled basis as a standard Maintenance Serviceoffering to its other commercial customers. Updated may include revisionsto the Documentation. Updates do not include any Acquired CadenceSoftware, Upgrades or New Technology.(r) “Use” means copying all or any portion of Software, DesignElements and/or License Key into the Designated Equipment or transmittingit to the Designated Equipment for; (i) executing or processing instructionscontained in the Software, (ii) using, executing or modifying any of theDesign Elements, or (iii) loading data into or displaying, viewing orextracting output results from or otherwise operating any portion of theSoftware or Design Elements, solely for the purpose of Customer’s internaldesign and manufacture of electronic circuits and systems.(s) “99-year License” means the license of Software for a period of99 years in which the Licensee Fees are quoted separately fromMaintenance Fees and in which Maintenance Services are not automaticallyincluded during the Term of Use, except for the first year.2. SCOPE AND BACKGROUNDUnder this Agreement Customer can: (i) acquire licenses for a specificnumber of Licensed Materials and related Documentation on either aSubscription or 99-year License basis, and (ii) obtain MaintenanceServices for the Licensed Materials pursuant to the provisions of thisAgreement. For Software licensed on a Subscription basis, Customer shallbe permitted to Use the Software on a wide area network (“WAN”) basis asdescribed in the applicable Product Quotation. For any Software acquiredby Customer through an authorized Cadence reseller the followingprovisions of this Agreement shall not apply: 4, 6, 13.3(b) and 13.3(c).While Cadence shall remain the “licensor” for purposes of the grant of thelicenses and other rights hereunder, and Customer shall remain the“licensee” for purposes of the obligations contained herein, Customer shallcontract directly with the reseller for the purchase of License Keys and anyMaintenance Services on Software provided by such authorized Cadencereseller.3. LICENSE GRANT (a) Grant: Subject to Customer’s timely payment of the Fees as setforth in Section 4 and subject to the limitations set forth in Sections 3(b)and 3(c), Cadence, either directly or by and through one of its affiliates,hereby grants Customer, for the Term of Use as specified in each ProductQuotation, a non-transferable, non-exclusive, license to: (i) Use the quantityof Licensed Materials identified in the applicable Product Quotation on theDesignated Equipment as established by the number of License Keysissued for the Licensed Materials; and (ii) Use the Documentation as isreasonably necessary for Customer’s licensed Use of the LicensedMaterials. Allrights not expressly granted to Customer pursuant to this Agreement arereserved by Cadence.(b) Limitations: All rights, title and interest in the Licensed Materialsshall remain the exclusive property of Cadence and/or its licensors. TheLicensed Materials are the confidential and proprietary property of Cadenceor third parties from whom Cadence has obtained the appropriate rights.Customer shall not Use or copy the Licensed Materials except as expresslypermitted herein. Customer may only Use those Licensed Materialsspecified in the applicable Product Quotation. Customer shall not modify,disassemble, decompile or reverse translate or create derivative works fromthe Licensed Materials or otherwise attempt to derive the source code, or letany third party do so. No right or license is granted or implied under any ofCadence, or its licensors’, patents, copyrights, trademarks, trade names,service marks or other intellectual property rights to Use the LicensedMaterials or to authorize others to Use the Licensed Materials beyond therights and restrictions set forth in this Agreement. By the way of exampleand not limitation, Customer shall neither use the Software or DesignElements or output of any Software or Design Elements for benchmarkingpurposes (which means any form of competitive analysis of the LicensedMaterials versus competitive tool products), nor permit any third party todo so. Customer shall not remove or alter any of Cadence’s or its licensors’restrictive or ownership legends appearing on or in the Licensed Materialsand shall reproduce such legends on all copies permitted to be made.Customer may periodically Remix the Initial Configuration or the ThenCurrent Configuration only if specified in the Product Quotation andsubject to the limitations set forth in the Product Quotation. Upon requestby Cadence, Customer shall execute a Certificate of Discontinued Use uponthe completion of each Remix for those Licensed Materials that areexchanged or terminated in the Remix.(c) Restrictions: Customer shall not let the Licensed Materials beaccessed or used by third parties or anyone other than Customer’semployees whose duties require such access or use. Notwithstanding theforegoing, Customer’s authorized consultants and subcontractors (excludingany direct competitors of Cadence) may Use the Licensed Materials on theDesignated Equipment at a Customer facility only, where such Use isincidental to their performing services on Customer’s behalf. Such Use byauthorized consultants and subcontractors must be consistent with thelicense granted to Customer hereunder and Customer must first requiresuch authorized consultants and subcontractors to sign written agreementsobligating them to observe the same restrictions concerning the LicensedMaterials as are contained in this Agreement. In connection with activitiesunder this Agreement, Customer may provide to Cadence suggestions,descriptions, data feedback and other information, either orally or inwriting (collectively, “Feedback”) concerning the Licensed Materials.Customer hereby grants to Cadence and its affiliates, a non-exclusive,perpetual, irrevocable, 3royalty-free, worldwide right and license to make, use, sell, reproduce,modify, sublicense, disclose, distribute and otherwise exploit any suchFeedback. In addition, Cadence shall be the sole owner of anymodifications, additions or other changes made to the Licensed Materialsbased upon such Feedback. The Licensed Materials may contain certainsoftware applications and portions of applications which are provided toCustomer under terms and conditions which are different from thisAgreement (such as open source or community source), or which requireCadence to provide Customer with certain notices and/or information(“Excluded Code”). Cadence will identify such Excluded Code in a text fileor about box or in a file or files referenced thereby (and shall include anyassociated license agreement, notices and other related information therein),or the Excluded Code will contain or be accompanied by its own licenseagreement. Customer’s Use of the Excluded Code will be subject to theterms and conditions of such other license agreement solely to the extentsuch terms and conditions are inconsistent with the terms and conditions ofthis Agreement or are required by such other license agreement. By using ornot uninstalling such Excluded Code after the initial installation of theExcluded Code Customer acknowledges and agrees to all such licenseagreements, notices and information.(d) Records; Audit. Customer shall keep full, clear and accuraterecords to confirm its authorized Use of the Licensed Materials hereunder,including but not limited to ensuring that Customer has not exceeded thenumber of authorized copies of Licensed Materials and other obligationshereunder. Cadence shall have the right to audit such records during regularbusiness hours to confirm Customer’s compliance with its obligationshereunder. Customer shall promptly correct any deficiencies discovered bysuch audit including payment to Cadence of the amount of any shortfall inFees uncovered by such audit plus interest at the rate set forth inSection 4(a) below. If the audit uncovers any shortfall in payment of morethan five percent (5%) for any quarter, then Customer shall also promptlypay to Cadence the costs and expenses of such audit, including fees ofauditors and other professionals incurred by Cadence in connection withsuch audit.4. FEES; TAXES(a) Fees and Payment: Customer shall pay Cadence the license fees(“License Fees”) and maintenance service fees (“Maintenance ServiceFees”) (collectively, the “Fees”). Such Fees shall be remitted so that theyare received by Cadence by the dates and in the amounts set forth in theProduct Quotation and, except as expressly provided herein, are non-refundable. In addition, Customer’s obligation to remit License Feepayments to Cadence in accordance with the payment schedule set forth inthe Product Quotation shall be absolute, unconditional, noncancelleable andnonrefundable, and shall not be subject to any abatement, set-off, claim,counterclaim, adjustment, reduction, or defense for any reason, including,but not limited to, any claims that Cadence failed to perform under thisAgreement or termination of this Agreement. Past due amounts shall besubject to a monthly service charge of one and one-half percent (1/2%) permonth of the unpaid 1balance or the maximum rate allowable by law. In addition to all other sumspayable hereunder, Customer shall pay all reasonable out-of-pocketexpenses incurred by Cadence, including fees and disbursements ofcounsel, in connection with collection and other enforcement proceedingsresulting therefrom or in connection therewith.(b) Taxes: All Fees are net. Customer will pay or reimburse all taxes,duties and assessments, if any due, based on or measured by amountspayable to Cadence in any transaction between Customer and Cadenceunder this Agreement (excluding taxes based on Cadence’s net income)together with any interest or penalties assessed thereon, or furnish Cadencewith evidence acceptable to the taxing authority to sustain an exemptiontherefrom (collectively, “Taxes”).5. TERM AND TERMINATION(a) Term: This Agreement is entered into as of the date specified onthe initial page and shall continue unless terminated as provided inSection 5(c) (“Term”). The Term of Use for Licensed Materials shallcontinue unless the applicable Product Quotation is terminated as providedin Section 5(b). For Software licensed on a 99-year basis, MaintenanceServices are only provided for the initial year. Maintenance Services arethereafter renewable by Customer for additional periods upon issuance of aProduct Quotation by Cadence and payment by Customer of theMaintenance Services Fees.(b) Termination of Product Quotation: Any Product Quotationhereunder may be terminated by Cadence: (i) if Customer fails to pay whendue all or any portion of any amounts payable under such ProductQuotation, and such failure is not cured within ten (10) days after writtennotice; or (ii) in the event of a breach by Customer of any other materialprovision of the Product Quotation where Customer fails to correct suchbreach within thirty (30) days of its receipt of written notice thereof. Inaddition, in the event Customer fails to pay any Fees due under a ProductQuotation, Cadence may delay delivery of any License Key until Customerpays such past due amounts.(c) Termination of Agreement: This Agreement may be terminatedby Cadence immediately if; (i) Customer breaches any provisions ofSection 3 herein, or (ii) Customer becomes insolvent or makes anassignment for the benefit of creditors, or a trustee or receiver is appointedfor Customer or for a substantial part of its assets, or bankruptcy,reorganization or insolvency proceedings shall be instituted by or againstCustomer; or (iii) if Customer breaches any other material provision of thisAgreement and fails to correct such breach within thirty (30) days of itsreceipt of written notice thereof; or (iv) if an “Event of Default” (as definedin the Installment Payment Agreement “IPA”) occurs and is continuingunder any IPA in favor of Cadence or Cadence Credit (if Customer entersinto such an IPA in order to finance the 4License Fees). Termination of this Agreement shall immediately terminateany Product Quotations then in effect.(d) Effect of Termination: Expiration or termination of a ProductQuotation or the Agreement as specified in Sections 5(b) or 5(c) above,shall simultaneously terminate all Customer’s rights for licenses andCadence’s obligations with respect thereto. Within thirty (30) days aftersuch expiration or termination, Customer shall: (i) furnish Cadence writtennotice certifying that the original and all copies, including partial copies, ofthe Licensed Materials furnished by Cadence under this Agreement or madeby Customer as permitted by this Agreement, have either been returned toCadence or destroyed and no copies or portions thereof remain in thepossession of Customer, its employees or agents; and (ii) make promptpayment in full to Cadence for all amounts then due plus the present value(discounted at the lesser of; (a) the then current one year U.S. Treasury BillRate and, (b) the one year U.S. Treasury Bill Rate as of the Effective Date)of the unpaid balance of the License Fees as set forth in the ProductQuotation, together with any applicable Taxes. Sections 3(c), 4, 5(d),11(b), 12, 13.6, 13.7 and 13.8 shall survive expiration or termination ofthis Agreement.6. ORDERINGIf required by Customer, Customer shall order Licensed Materials andMaintenance Services using its standard purchase order forms. AllCustomers orders shall: (i) conform to and cite this Agreement; and(ii) describe the Licensed Materials and/or Maintenance Services ordered (byCadence’s product numbers and nomenclature), and (iii) identify thequantity, price, ship and bill to addresses and (iv) include such other dataas Cadence may reasonably require. This Agreement shall govern allCustomer purchase orders accepted by Cadence during the Term and withinthe scope of this Agreement. Any terms and conditions contained orincorporated by reference in purchase orders, acknowledgements, invoices,confirmations or other business forms of either party which add to or differfrom the terms and conditions of this Agreement or the attachments made apart hereof shall be of no force or effect whatsoever concerning the subjectmatter of this Agreement, and either party’s failure to object thereto shall notbe deemed a waiver of such party’s rights hereunder. Cadence has the rightto discontinue the sale of licenses of the Licensed Materials at any time.Discontinued Licensed Materials, or Licensed Materials for whichMaintenance Services are no longer available, may no longer be Remixed byCustomer or acquired during the Term of Use under a Product Quotation.7. SHIPMENT Upon execution of this Agreement and acceptance of an order byCadence or an authorized Cadence reseller, all Cadence Software isavailable fore download by Customer from Cadence, provided howeverCustomer shall only Use Cadence Software for which a License Key hasbeen purchased from either Cadence or an authorized Cadence reseller.Delivery of any tangible media requested by Customer hereunder shall bemade F.O.B. point of shipment. Customer shall pay all shipping charges,including insurance. Risk of loss shall pass to Customer upon delivery tocarrier.8. COPIES AND TRANSFER(a) Copies: Customer may make a reasonable number of copies ofSoftware for either of the following purposes only: (i) archival purposes; or(ii) for Use as a back-up when the Software is not operational. Customermay make a reasonable number of copies of Design Elements in connectionwith its authorized Use of such Design Elements. All legends, trademarks,trade names, copyright legends and other identifications must be copiedwhen copying the Licensed Materials. Documentation may not be copiedexcept for a reasonable number of printed copies from the Documentationprovided by Cadence.(b) Relocation: The Licensed Materials may only be moved from theDesignated Equipment with Cadence’s prior written consent. Customer willimmediately return Cadence’s Rehost Certificate when the LicensedMaterials are moved. Customer shall completely remove the LicensedMaterials from the previous Designated Equipment.9. TECHNICAL SUPPORTSubject to the terms and conditions of this Agreement, and Customer’stimely payment of applicable Fees, Cadence agrees to use commerciallyreasonable efforts to perform, or have provided, during the Term of Usespecified in a Product Quotation, the following technical assistance withrespect to the Licensed Materials: (a)Maintenance Services:(1) Technical Support: Cadence will make technical assistanceavailable to Customer through Cadence Customer Support between8:00 a.m. and 5:00 p.m., local time (the “Prime Shift”), Monday throughFriday excluding Cadence’s holidays.(2) Issue Resolution Assistance: Cadence will acknowledgereceipt of Customer’s service request (a “SR”) within four (4) Prime Shifthours. Customer’s SR shall include a detailed description of the nature ofthe issue, the conditions under which it occurs and other relevant datasufficient to enable Cadence to reproduce a reported error in order to verifyits existence and diagnose its cause. Upon completion of diagnosis Cadencewill provide Customer appropriate assistance in accordance with Cadence’sstandard commercial practices, including furnishing Customer with anavoidance procedure, bypass, work-around, patch or hot-fix (i.e., aCustomer specific release for a production stopping problem with no work-around) to correct or alleviate the condition reported.(3) Update(s): Cadence will provide Customer Update(s) for theLicensed Materials. Cadence will also provide instructions and/orDocumentation that Cadence considers reasonably necessary to assist in asmooth transition for Use of an Update. 5(4) Communication: Cadence will provide Customer: (i) accessto Cadence’s SourceLink online Customer support service; and, (ii) suchnewsletters and other publications, as Cadence routinely provides or makesaccessible to all Maintenance Service customers to furnish information ontopics such as Software advisories, known problem and solutionsummaries, product release notes, application notes, product descriptions,removal of an item from a product line, training class descriptions andschedules, bulletins about user group activity and the like.(5) Versions Support: Customer acknowledges that, subject toCadence’s End Sale/End Support Process, Cadence will maintain only themost current version of the Licensed Materials. Cadence shall also maintainthe last prior version of the Licensed Materials until the earlier of six (6)months from the release of each new version release, or termination of thisAgreement. (b)Customer’s Responsibilities:Customer shall:(1) Notification: Notify Cadence promptly through Cadence’selectronic problem reporting software available via SourceLink. If Customerdoes not receive Cadence’s acknowledgment of its receipt of such reportwithin four (4) PrimeShift hours, Customer shall promptly re-transmitsuch report.(2) Access: If requested by Cadence, allow Cadence access to theDesignated Equipment and communication facilities during the Prime Shiftand subject to Customer’s security and safety procedures and provideCadence reasonable work space and other normal and customary facilities.(3) Assistance: Provide Cadence with reasonable assistance asrequested if Maintenance Services are performed on site at customer’sfacility and ensure that a Customer employee is present.(4) Test Time: Provide sufficient support and test time onCustomer’s Designated Equipment to allow Cadence to duplicate an errorand verify if it is due to Licensed Materials, and when corrections arecomplete, acknowledge that the error has been resolved.(5) Standard of Care: Provide the same standard of care for theLicensed Materials that Customer applies to its own products or data or likevalue to its business and return any defective Licensed Materials or attest inwriting to the destruction of same as directed by Cadence.(6) Support: Promptly inform Cadence in writing if Customerdevelops interfaces to the Licensed Material, and provide such informationas Cadence determines necessary to properly maintain the LicensedMaterial.(7) Data Necessary: Provide data sufficient to enable Cadenceto replicate a reported error on its own computers as the CRC.(c) Excluded Services: Maintenance Services required in connectionwith or resulting from the following are excluded from this Agreement: ™(1) abuse, misuse, accident or neglect; or, repairs, alterations,and/or modifications which are not permitted under this Agreement andwhich are performed by other than Cadence or its agents; or(2) the relocation of Licensed Materials from one unit ofDesignated Equipment to another or from the Customer location; or makingchanges due to Customer’s decision to reconfigure the Licensed Material orthe system or network upon which it is installed; or(3) maintenance, malfunction, modification of the DesignatedEquipment or its operating system; or(4) Use of the Licensed Material on a hardware platform otherthan the Designated Equipment; or use of other than the most current or lastprior release of the Licensed Material as specified in Section 9(a)(5); or(5) Customer’s failure to maintain configuration environment(i.e., memory disk capacity, operating system revision level, prerequisite orco-requisite items, etc.) specified in the Documentation or to supplyadequate backups.(d) Additional Services: If Cadence agrees to perform servicesrequested by Customer which are not included as part of this Agreement,such services shall be billed to Customer at prices and terms to be agreed bythe parties.10. PROPRIETARY RIGHTS INDEMNITYCadence will defend at its own expense, or its option reimburseCustomer for reasonable costs of defense, in connection with any legalaction brought against Customer to the extent that it is based on a claim orallegation that any Software infringes a U.S. patent or copyright of anythird party, and Cadence will pay any costs and damages finally awardedagainst Customer in any such action that are attributable to any such claimor incurred by Customer through settlement thereof, but shall not beresponsible for any compromise made or expense incurred without itsconsent. However, such defense and payments are subject to the conditionthat Customer gives Cadence prompt written notice of such claim, allowsCadence to direct the defense and settlement of the claim, and cooperateswith Cadence as necessary for defense and settlement of the claim. Shouldany Licensed Materials, or the operation thereof, become or in Cadence’sopinion be likely to become, the subject of such claim, Cadence may, atCadence’s option and expense, procure for Customer the right to continueusing the Licensed Materials, replace or modify the Licensed Materials sothat they become non-infringing, or terminate the license granted hereunderfor such Licensed Materials and refund to Customer the Fees (less areasonable charge for the period during which Customer has hadavailability of such Licensed Materials for Use and of the MaintenanceServices). Cadence will have no liability for any infringement claim to theextent it; (i) is based on modification of Licensed Materials other than byCadence, with or without authorization; or (ii) results from failure ofCustomer to Use and Updated version of the Licensed Materials; or (iii) isbased on the combination or Use of a Licensed Materials with any other 6software, program or device not provided by Cadence if such infringementwould not have arisen but for such use or combination; or (iv) results fromcompliance by Cadence with designs, plans or specifications furnished byCustomer, or (v) is based on any products, devices, software orapplications designed or developed through Use of the Licensed Materials.THE FOREGOING STATES CADENCE’S ENTIRE LIABILITY ANDCUSTOMER’S EXCLUSIVE REMEDY FOR PROPRIETARY RIGHTSINFRINGEMENTS.11. LIMITED WARRANTY(a) Cadence warrants for thirty (30) days after shipment that therecording media by which the Licensed Materials are furnished is free ofmanufacturing defects and shipping damage if the media has been properlyinstalled on the Designated Equipment. Cadence does not warrant thatLicensed Materials will meet Customer’s requirements or that Use of theLicensed Materials will be uninterrupted or error free. As Customer’sexclusive remedy and Cadence’s entire liability for breach of the warrantyherein, Cadence will provide a replacement magnetic media containing theLicensed Materials ordered by Customer.(b) EXCEPT AS PROVIDED ABOVE CADENCE MAKES NOWARRANTIES TO CUSTOMER WITH RESPECT TO THELICENSED MATERIALS OR ANY SERVICE, ADVICE, ORASSISTANCE FURNISHED HEREUNDER, AND NOWARRANTIES OF ANY KIND, WHETHER WRITTEN, ORAL,EXPRESS, IMPLIED OR STATUTORY, INCLUDINGWARRANTIES OF MERCHANTABILITY OR FITNESS FOR APARTICULAR PURPOSE, NON-INFRINGEMENT OR ARISINGFROM COURSE OF DEALING OR USAGE IN TRADE SHALLAPPLY.12. LIMITATION OF LIABILITYCadence’s cumulative liability to Customer for all claims of any kindresulting from Cadence’s performance or breach of this Agreement or theLicensed Materials or Maintenance Services furnished hereunder shall notexceed, to the extent collected by Cadence, the Fees actually received byCadence from Customer under a Product Quotation for the LicensedMaterials or Maintenance Services which are the subject of such claim,regardless of whether Cadence has been advised of the possibility of suchdamages or whether any remedy set forth herein fails of its essential purposeor otherwise. CADENCE SHALL NOT BE LIABLE FOR COSTS OFPROCUREMENT OF SUBSTITUTES, LOSS OF PROFITS,INTERRUPTION OF BUSINESS, OR FOR ANY OTHER SPECIAL,CONSEQUENTIAL OR INCIDENTAL DAMAGES, HOWEVERCAUSED, WHETHER FOR BREACH OF WARRANTY,CONTRACT, TORT, NEGLIGENCE, STRICT LIABILITY OROTHERWISE.13. GENERAL PROVISIONS 13.1 NOTICES Notices to Customer shall be sent to the address on the initial page andto Cadence at 2655 Seely Avenue, San Jose,California 95134 USA, Attn: Legal Department or such new address as aparty specifies to the other in writing. 13.2 EXPORTThe Licensed Materials may not be exported without the prior writtenconsent of Cadence. The Licensed Materials and all related technicalinformation or materials are subject to export controls and (are or may be)licenseable under the U.S. Government export regulations. Customer willnot export, re-export, divert, transfer or disclose, directly or indirectly theLicensed Materials and any related technical information or materialswithout complying strictly with all legal requirements including withoutlimitation obtaining the prior approval of the U.S. Department of Commerceand, if necessary, other agencies or departments of the U.S. Government.Licensee will execute and deliver to Cadence such “Letters of Assurance” asmay be required under applicable export regulations. Customer shallindemnify Cadence against any loss related to Customer’s failure toconform to these requirements. 13.3 ASSIGNMENT(a) No Assignment: Customer may not delegate, assign or transferthis Agreement, or any of its rights and obligations under this Agreement,and any attempt to do so shall be void. Customer agrees that this Agreementbinds Customer and each of its affiliates and the employees, agents,representatives and persons associated with any of them. Without limitationof the foregoing, an assignment, delegation or transfer shall include, but notbe limited to a sale of substantially all of the assets of Customer, a merger,a re-organization, or change in control of fifty percent (50%) or more of theequity of Customer (a “Change in Control”). No transfer, delegation orassignment (including, without limitation, an assignment by operation oflaw) of this Agreement may be made without the prior written consent ofCadence. Such prior written consent by Cadence may be withheld atCadence’s sole discretion. As used in this Agreement, assignment shall notinclude, and no consent shall be required, (1) if Customer raises additionalcapital through sale of equity (either privately or through a public offering)or debt instruments, provided that the additional equity issued does notresult in a Change in Control, (2) if Customer changes its state ofincorporation, or (3) if Customer reorganizes its corporate structure withouta change in its equity structure.(b) Assignment of License Fees: Cadence may sell or assign theLicensee Fees owing under this Agreement to third-parties (“Assignee”).Upon written notice to Customer that the right to the Licensee Fees hereunderhas been assigned, in whole or in part, Customer shall, if requested, pay allassigned amounts directly to Assignee. Customer waives and agrees it willnot assert against Assignee any abatement, set-off, claim, counterclaim, IN WITNESS WHEREOF, THE PARTIES HERETO HAVE ENTERED INTO THIS AGREEMENT AS OF THE DATE OF AGREEMENTSET FORTH ABOVE. CUSTOMER CADENCE DESIGN SYSTEMS, INC.By: /s/ Tim D. Semones By: /s/ Michael J. WilliamsName: Tim D. Semones Name: Michael J. WilliamsTitle: CFO Title: VP and Associate General CounselDate: 6/29/07 Date: 6/29/07 7adjustment, reduction, or defense it may have against Cadence for anyreason, including, but not limited to, any claims that Cadence failed toperform under this Agreement or termination of this Agreement. Customerwaives all rights to make any claim against Assignee for any loss or damageto the Licensed Materials or breach of any warranty, express or implied, asto any matter whatsoever, including but not limited to the LicensedMaterials and service performance, functionality, features, merchantabilityor fitness for a particular purposes, or any indirect, incidental orconsequential damages or loss of business.(c) Obligations: In the event Cadence assigns the Fees due hereunder,Customer shall pay Assignee all Licensee Fees due and payable under thisAgreement, but shall pursue any claims under this Agreement againstCadence. Except as provided in Section 5, neither Cadence nor itsAssignees will interfere with Customer’s quiet enjoyment or Use of theLicensed Materials in accordance with this Agreement’s terms andconditions. Notwithstanding any assignment of the Fees by Cadence,Cadence shall remain obligated to perform all of its obligations under thisAgreement. 13.4 U.S. GOVERNMENT CONTRACT PROVISIONSThis Agreement is for Customer’s temporary acquisition of LicensedMaterials for its internal Use. No Government procurement regulation orcontract clauses or provision shall be deemed a part of any transactionbetween the parties under this Agreement unless its inclusion is required bylaw, or mutually agreed upon in writing by the parties in connection with aspecific transaction. Customer acknowledges that Cadence represents thatthe Licensed Materials and Documentation consist of “commercial computersoftware” and “commercial computer software documentation” as suchterms are defined in 48 C.F.R. 252.227-7014(a)(1) (JUN 1995) and suchLicensed Materials are “commercial computer software” and “commercialcomputer software documentation” as such terms are used in 48 C.F.R.12.212 (OCT 1995); that such Licensed Materials and Documentationconstitute trade secrets of Cadence for all purposes of the Freedom onInformation Act an dif provided to the Government for; (i) acquisition by oron behalf of civilian agencies, areprovided in accordance with the policy set forth in 48 C.F.R. 12.212; or(ii) acquisition by or on behalf of units of the Department of Defense, inaccordance with the policies set forth in 48 C.F.R. 227.7202-1 (JUN 1995)and 227.7202-3 (JUN 1995). 13.5 FORCE MAJEUREExcept for Customer’s payment obligations pursuant to Section 4,neither party shall be liable to the other party for delay in performing itsobligations, or failure to perform any such obligations under thisAgreement, if the delay or failure results from circumstances beyond thereasonable control of the party, including but not limited to, any acts ofGod, governmental act, fire, explosion, accident, war, armed conflict orcivil commotion. 13.6 WAIVER and SEVERABILITYFailure by either party to enforce at any time any provision of thisAgreement, or to exercise any election of options provide herein, shall notconstitute a waiver of such provision or option, nor affect the validity ofthis Agreement or any part thereof, or the right of the waiving party tothereafter enforce each and every such provisions. If any provision of thisAgreement is held invalid or unenforceable, the remainder of the Agreementshall continue in full force and effect. 13.7 GOVERNING LAWThe procedural and substantive laws of the State of California,U.S.A., without regard to its conflicts of laws principles, will govern thisAgreement. Any action brought to enforce this Agreement or its terms shallbe brought within the state or federal courts of Santa Clara County,California. The parties agree that the United Nations Conventions onContracts for the International Sale of Goods (1980) is specifically excludedfrom and shall not apply to this Agreement. 13.8 ENTIRE AGREEMENTThis Agreement and the attachments hereto are the complete andexclusive statement of the agreement between the parties and supersede allproposals, oral or written, and all other communications between the partiesrelating to the subject matter of this Agreement. Only a written instrumentduly executed by authorized representatives of Cadence and Customer maymodify this Agreement. CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.REDACTED MATERIAL IS MARKED WITH ASTERISKS (“***”).PRODUCT QUOTATIONeDAcardAttachment A to the Software License and Maintenance AgreementSLMA-07INPH0629 (“Agreement”) eDAcard Platinum number: TDBQuotation Number: IJR062007Quotation Expiration Date: 29-Jun-07 Inphi Corporation (“CUSTOMER”) Tim Semones 2393 Townsgate Road, Suite 101 Westlake Village, CA 91361 CADENCE DESIGN SYSTEMS, INC. 2655 Seely Avenue San Jose, California 95134Attachment Effective Date: 29-Jun-07 Attachment Expiry Date: *** eDA PLATINUM card eDAcard Activation Period Activation Period Effective Date: 29-Jun-07 Activation Period Expiry Date: *** Termination Date: *** eDAcard Balance: $7,000,000 eDAcard Site(s): Distribution of eDAcard Balance: The following authorized users & specific site(s) will be issued eDAcard(s) as indicated below Ed Miller – Westlake Village, CA 91361 $7,000,000 emiller@inphi-corp.com eDAcard WAN Premium: ***% LOCAL; ***% REGION; ***% MULTI-REGION eDAcard Platinum Discount Rate: ***% Note: All other Licensed Materials not listed in Addendum A may be drawn down as their respective list price less***% discount. eDAcard Platinum number: TBD eDAcard Fees $7,000,000 Payment Terms Total Total Fees Due $7,000,000 Payment Schedule Payment Invoice Date Due Date Total Amount 1 *** *** $*** 2 *** *** $*** 3 *** *** $*** 4 *** *** $*** 5 *** *** $*** 6 *** *** $*** 7 *** *** $*** 8 *** *** $*** 9 *** *** $*** 10 *** *** $*** 11 *** *** $*** 12 *** *** $*** 13 *** *** $*** 14 *** *** $*** 15 *** *** $*** 16 *** *** $*** Total [USD] $7,000,000 The parties hereby agree to the foregoing terms and conditions in addition to the terms and conditions attached hereto whichare hereby incorporated by reference. Inphi CorporationInitials TDS Product quotation Page 1 CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.REDACTED MATERIAL IS MARKED WITH ASTERISKS (“***”).Product QuotationTerms and ConditionsFor Floating PooleDAcard License ModelCustomer and Cadence entered into a Fixed Term License Agreement (Agreement No. FTLA-00TCOM1218) on or about December 18, 2000 (“FTLA”)Customer and Cadence have also entered into the following Product Quotations: Product Quotation Attachment G effective August 31, 2005 (“Attachment G”), Product Quotation Attachment H effective September 26, 2006 (“Attachment H”), and Product Quotation Attachment J effective September 30, 2006(“Attachment J”). The parties are entering into a new Software License and Maintenance Agreement (Agreement No. SLMA-07INPH0629) of even dateherewith (“Agreement”), which will supersede the FTLA. Upon the Effective date of this Product Quotation Attachment (“Attachment”), the FLTA andAttachments G, H, J and all rights, duties and obligations thereunder (except those provisions that survive termination on their own terms, if any, willautomatically terminate). Customer understands and agrees that its right to Use any Licensed Programs (as defined in the FLTA) licensed underAttachments G, & J shall immediately terminate upon the effective date of this Attachment, except that Customer shall have a reasonable period of time, not toexceed thirty (30) days, to transition from the license keys issued under Product Quotation Attachments G, & J to the license key issued under thisAttachment. Customer understands and agrees that upon execution of this Attachment, the rights and obligations of the parties under Attachment H shallimmediately terminate except for; (i) License Keys for Licensed Programs which have not yet expired the Use of which shall continue to be governed by theFTLA, and (ii) those provisions that survive termination on their own terms, if any. Customer understands and agrees that its right to select and Use anyadditional licensed Programs licensed under Attachment H is immediately terminated. Upon execution of this Attachment Customer shall make payment of$*** to Cadence in connection with termination of Attachments G, H, and J.This Product Quotation Attachment (“Attachment”) contains the terms and conditions for Customer’s Use of Licensed Materials based upon Cadence’seDAcard Platinum license model. This Attachment is a Product Quotation as defined in the Software License and Maintenance Agreement (“Agreement”)between the parties hereto. A.eDAcard LICENSING MODEL 1.Availability of Licensed Materials: Cadence’s eDAcard licensing model establishes a mechanism whereby Customer may access, select and UseLicensed Materials through Cadence’s web site (“eDAcard Web Site”) during the eDAcard activation period. The activation period is defined asbeginning on the Activation Period Effective Date and ending on the Activation Period Expiry Date (“eDAcard Activation Period”) as set forth onpage 1 of this Attachment. Use of the Licensed Materials will be pursuant to the terms and conditions of the Agreement and this Attachment. A list of theavailable Licensed Materials can be viewed in the eDAcard Web Site. Licenses for the Licensed Materials, which includes Maintenance Services, can beselected for a pre-determined duration (i.e. weekly, monthly, quarterly, yearly or any combination thereof) (“Term of Use”). In no event, however, shallthe Term of Use for any Licensed Materials licensed during the eDAcard Activation Period extend beyond the Attachment Expiry Date. 2.Licensed Materials: Under this Attachment Customer shall only use Licensed Materials available through the eDAcard Web Site. 3.Accessibility of Licensed Materials: Within the later of five (5) days after: (i) the Activation Period Effective Date or (ii) execution of this Attachmentby Cadence, Cadence shall forward Customer an eDAcard number (“eDAcard number”) to those Customer employees who will be allowed to accessthe eDAcard Web Site (“Authorized Users”). Upon account activation, the Authorized Users will be issued individual login names and passwords(“Authorized User ID”) to be used in conjunction with the eDAcard Number. The Authorized User ID will allow the Authorized Users access to theLicensed Materials on the eDAcard Web Site. Following 2 the authorized Users selection of Licensed Materials over the eDAcard Web Site, the applicable Fees will be deducted from the eDAcard Balance set forthon page 1 of this Attachment. Customer shall be provided with instructions on how to obtain an authorization key for the Licensed Materials. Theability of the Authorized Users to access the eDAcard Web Site for the purpose of selecting additional Licensed Materials shall terminate on the earlier of:(i) the depletion of the eDAcard Balance; (ii) the Activation Period Expiry Date set forth on page 1 of this Attachment; (iii) termination of the Agreementpursuant to Section 5 thereof. 4.eDAcard Balance: The Fee structure for Use of the Licensed Materials implementing the eDAcard licensing model are set forth on the CadenceeDAcard Datasheet available on the eDAcard Web Site. The Fees are based upon the one year time-based license (“TBL”) reference price. TheLicensed Material price is then adjusted per the eDAcard rate table set forth in the eDAcard Datasheet based upon; (1) the type of Licensed Materiallicensed, and (2) the Term of Use. Finally, the applicable Customer discount is applied to arrive at the final Fee for the applicable Licensed Materials.The dollar value as set forth in the eDAcard Balance on page 1 of this Attachment represents the amount the Customer has allocated for selecting andUsing Licensed Materials accessing the eDAcard Web Site. Upon selection of both the Licensed Materials and the Term of Use, the Fee shall beautomatically calculated and debited from the remaining eDAcard Balance. Customer may continue to access the eDAcard Web Site for the purpose ofselecting additional Licensed Materials until the eDAcard Balance is depleted. Customer shall forfeit any remaining portion of the eDAcard Balance notutilized during the eDAcard Activation Period. The one year reference (TBL) price for Licensed Materials and/or the eDAcard rate table may be modifiedat any time by Cadence. 5.General Terms: Customer is solely responsible for: (i) managing its Authorized User; and (ii) maintaining the security of all passwords, user IDs andaccess keys made available by Cadence. Customer acknowledges and agrees that any person who enters an Authorized User ID will be presumed byCadence to be an Authorized User and have the power and authority to bind Customer to the terms of this Attachment and the Agreement. Cadence willnot be under any obligation to verify the identity of any such person. Customer agreed that an order placed through the eDAcard Web Site is theequivalent of a signed Customer purchase order. Customer shall have the right to change, add, or delete Authorized Users upon prior written notice toCadence. In no event are any licenses issued hereunder cancelable nor are any Fees payable hereunder refundable. Customer hereby waives any futurechallenge to the validity and enforceability of any order submitted via the eDAcard licensing model on the grounds that it was electronically transmittedand authorized. Customer is responsible for all costs and charges, including without limitation, phone charges and telecommunications equipment,incurred in order to use the eDAcard licensing model. B.MAINTENANCE SERVICESMaintenance Services are provided by Cadence during the Term of Use. C.PAYMENT SCHEDULECustomer shall remit payment for the Fees as set forth on the page 1 of this Attachment. Cadence shall provide an invoice approximately thirty (30) daysprior to the scheduled payment date. Customer shall make payment to Cadence on or before the payment due date identified on page 1 of thisAttachment. Notwithstanding the foregoing, in the event that the eDAcard Balance is depleted and the Term of Use for all Licensed Materials ends priorto the Activation Period Expiry Date, any remaining payments shall become due and payable immediately upon the expiration of the Term of Use for allLicensed Materials. Customer understands and agrees that the obligation to make payments hereunder is not contingent upon a purchase order beingissued by Customer. If required by Cadence, the obligation to pay the Fees shall be additionally evidenced by an Installment Payment Agreement (“IPA”)executed by Customer. D.ELECTRONIC TRANSFER 3 Upon execution of the Electronic Transmission Agreement, all products under this Agreement will be shipped via electronic transfer per the terms andconditions of such Electronic transmission Agreement. E.WIDE AREA NETWORKSubject to Section 13.2 (“Export”) of the Agreement between the parties hereto and payment of any applicable Fees, Customer is granted the right to allowits employees to remotely access the Licensed Materials through a wide area network (“WAN”). The Licensed Materials must be located on DesignatedEquipment within the same time zone (or Region(s) if Regional WAN rights are acquired) as such employees are located and must only be accessed byemployees within such time zone or Region(s). Customer may select the following options for WAN rights at the time of acquiring the Licensed Materialsunder this Attachment: (1) “None (no WAN rights permitted), (2) “Local (WAN rights only permitted within the same time zone as the DesignatedEquipment, (3) “Region” (WAN rights only permitted within the specific Region selected), and (4) “Multi-Region” (WAN rights permitted in more thanone Region as selected by Customer. Customer’s WAN selection is specified on page 1 of this Attachment. The Regions for such WAN rights are: (i) theAmericas, (2) Europe and Middle East, (3) India, and (4) Asia and Australia (excluding Japan).The parties hereby agree to the foregoing terms and conditions. INPHI CORPORATION CADENCE DESIGN SYSTEMS, INC.By: /s/ Tim D. Semones By: /s/ Michael J. WilliamsName: Tim D. Semones Name: Michael J. WilliamsTitle: CFO Title: VP & Associate General CounselDate: 6/29/07 Date: 6/29/07Please return originals to:Cadence Design Systems, Inc.Attn: Michael J. WilliamsVP & Associate General Counsel2655 Seely AvenueSan Jose, CA 95134 4 CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.REDACTED MATERIAL IS MARKED WITH ASTERISKS (“***”).Product QuotationeDAcardAttachment B to the Software License and Maintenance Agreement SLMA-071NPH0629 (“Agreement”)eDAcard PLATINUM number: TBD Quotation Number: INPH1 101111 DEWQuotation Expiration Date: 15-Dec-10 Inphi Corporation (“CUSTOMER”) Inphi Corporation CADENCE DESIGN SYSTEMS, INC.Robb Johnson Ship-To Address: 100% 2655 Seely Avenue112 S. Lakeview Canyon Road, Suite 100 112 S. Lakeview Canyon Road, Suite 100 San Jose, California 95134Westlake Village, CA 91362 Westlake Village, CA 91362 Attachment Effective Date: 15-Dec-10 Attachment Expiry Date: *** eDAcard eDAcard Activation Period: Activation Period Effective Date: 15-Dec-10 Activation Period Expiry Date: *** Termination Date: *** eDAcard Balance: $250,000 eDAcard Site(s): Distribution of eDAcard Balance The following authorized users & specific(s) will be issued eDAcard(s) as indicated below. Robb Johnson – Westlake Village, CA 91362 $250,000 rjohnson@inphi-corp.com eDAcard WAN Premium: ***% LOCAL; ***% REGION; *** MULTI-REGIONeDAcard Discount Rate: ***% Note: The Licensed Materials may be drawn down at their respective list price less a ***% discount except for the Licensed Materials listed in Addendum A. The Licensed Materials listed in Addendum A may be drawn down at their respective list price less the applicable discount set forth in Addendum A. eDAcard PLATINUM number: TBD eDAcard Fees $250,000 Payment Terms Total Total Fees Due $ 250,000 Payment Schedule Payment Invoice Date Due Date Total Amount 1 *** *** $*** 2 *** *** $*** 3 *** *** $*** 4 *** *** $*** Total [USD] $*** The parties hereby agree to the foregoing terms and conditions in addition to the terms and conditions attached hereto which are hereby incorporated by reference. Cadence Design Systems Confidential Product Quotation 12/7/2010 3:52 PM Page 1 Production QuotationTerms and ConditionsFor Floating PooleDAcard License ModelThis Product Quotation Attachment (“Attachment”), which is appended to the Software License and Maintenance Agreement referenced on page 1 of thisAttachment (“Agreement”), contains the terms and conditions for Customer’s Use of Licensed Materials based upon Cadence’s eDAcard Platinumlicensing model. This Attachment is a Product Quotation as defined in the Agreement. All capitalized terms not otherwise defined herein shall have the samemeaning as ascribed to them in the Agreement. In the event of any conflict between the terms of the Agreement and the terms of this Attachment, the terms of theAgreement shall prevail. A.eDAcard LICENSING MODEL 1.Availability of Licensed Materials: Cadence’s eDAcard licensing model establishes a mechanism whereby Customer may access, select and UseLicensed Materials through Cadence’s web site (“eDAcard Web Site”) during the eDAcard activation period. The activation period is defined asbeginning on the Activation Period Effective Date and ending on the Activation Period Expiry Date (“eDAcard Activation Period”) as set forth on page1 of this Attachment. Use of the Licensed Materials will be pursuant to the terms and conditions of the Agreement and this Attachment. A list of theavailable Licensed Materials can be viewed on the eDAcard Web Site. The Term of Use for licenses for the Licensed Materials, which includesMaintenance Services, can be selected for a pre-determined duration (i.e. weekly, monthly, quarterly, yearly or any combination thereof). In no event,however, shall the Term of Use for any Licensed Materials licensed during the eDAcard Activation Period extend beyond the Attachment Expiry Date. 2.Licensed Materials: Customer shall only Use Licensed Materials available through the eDAcard Web Site. 3.Accessibility of Licensed Materials: Within the later of five (5) days after: (i) the Activation Period Effective Date or, (ii) execution of this Attachmentby Cadence. Cadence shall activate and forward an eDAcard number (“eDAcard number”) to those Customer employees who will be allowed to accessthe eDAcard Web Site (“Authorized Users”). Upon account activation, the Authorized Users will be issued individual login names and passwords (“Authorized User 1D”) to be used in conjunction with the eDAcard Number. The Authorized User ID will allow the Authorized Users access to theLicensed Materials on the eDAcard Web Site. Following the Authorized Users selection of Licensed Materials over the eDAcard Web Site, the applicableFees will be deducted from the eDAcard Balance set forth on page I of this Attachment. Customer shall be provided with instructions on how to obtainan authorization key for the Licensed Materials. The ability of the Authorized Users to access the eDAcard Web Site for the purpose of selectingadditional Licensed Materials shall terminate on the earlier of: (i) the depletion of the eDAcard Balance; (ii) the Activation Period Expiry Date set forth onpage 1 of this Attachment; or (iii) termination of the Agreement pursuant to Section 5 (Term and Termination) thereof. 4.eDAcard Balance: The Fee structure for Use of the Licensed Materials implementing the eDAcard licensing model is set forth on the CadenceeDAcard Datasheet available on the eDAcard Web Site. The Fees are based upon the one year time-based license (“TBL”) reference price. TheLicensed Materials price is then adjusted per the eDAcard rate table set forth in the eDAcard Datasheet based upon: (1) the type of Licensed Materialslicensed plus any applicable regional list price adjustments, and (2) the Term of Use. Finally, the applicable Customer discount is applied to arrive atthe final Fee for the applicable Licensed Materials. The dollar value as set forth in the eDAcard Balance on page I of this Attachment represents theamount the Customer has allocated for selecting and Using Licensed Materials accessing the eDAcard Web Site. Upon selection of both the LicensedMaterials and the Term of Use, the Fee shall be automatically calculated and debited from the remaining eDAcard Balance. Customer may continue toaccess the eDAcard Web Site for the purpose of selecting additional Licensed Materials until the eDAcard Balance is depleted. Customer shall forfeit anyremaining portion of the eDAcard Balance not utilized during the eDAcard Activation Period. The TBL price for Licensed Materials and/or the eDAcardrate table may be modified at any time by Cadence. Product Quotation eDAcard Platinum (SLMA) 3-22-10 2 5.General Terms: Customer is solely responsible for: (i) managing its Authorized Users; and (ii) maintaining the security of all passwords, user IDsand access keys made available by Cadence. Customer acknowledges and agrees that any person who enters an Authorized User ID will be presumedby Cadence to be an Authorized User and have the power and authority to bind Customer to the terms of this Attachment and the Agreement. Cadencewill not be under any obligation to verify the identity of any such person. Customer agrees that an order placed through the eDAcard Web Site is theequivalent of a signed purchase order. Customer shall have the right to change, add, or delete Authorized Users upon prior written notice to Cadence. Inno event are any licenses issued hereunder cancelable nor are any Fees payable hereunder refundable. Customer hereby waives any future challenge to thevalidity and enforceability of any order submitted via the eDAcard licensing model on the grounds that it was electronically transmitted and authorized.Customer is responsible for all costs and charges, including without limitation, phone charges and telecommunications equipment, incurred in order touse the eDAcard licensing model. B.MAINTENANCE SERVICESMaintenance Services are provided by Cadence during the Term of Use. C.PAYMENT SCHEDULECustomer shall remit payment for the Fees in accordance with the schedule set forth on page 1 of this Attachment. Notwithstanding the foregoing, in theevent that the eDAcard Balance is depleted and the Term of Use for all Licensed Materials ends prior to the Activation Period Expiry Date, anyremaining payments shall become due and payable immediately upon the expiration of the Term of Use for all Licensed Materials. Customerunderstands and agrees that the obligation to make payments hereunder is not contingent upon a purchase order being issued by Customer. If requiredby Cadence, the obligation to pay the Fees shall be additionally evidenced by an Installment Payment Agreement (“IPA”) executed by Customer. D.WIDE AREA NETWORKSubject to Section 13.2 (Export) of the Agreement and payment of any applicable Fees, Customer is granted the right to allow its employees to remotelyaccess the Licensed Materials through a wide area network (“WAN”). Customer may select the following options for WAN rights at the time ofacquiring the Licensed Materials under this Attachment: (I) “None” (no WAN rights permitted), (2) “Local” (WAN rights only permitted within thesame time zone as the Designated Equipment, or if outside the Americas, within the same country), (3) “Region” (WAN rights only permitted within thespecific Region selected with access through Designated Equipment in the Region). and (4) “Multi-Region” (WAN rights permitted in more than oneRegion as selected by Customer). Customer’s WAN selection will be determined at time of selection of the Licensed Materials. The available Regions forsuch Multi-Region WAN rights are: (1) the Americas, (2) Europe and Middle East, (3) India, and (4) Australia and Asia (excluding Japan).The parties hereby agree to the foregoing terms and conditions. CUSTOMER: INPHI CORPORATION CADENCE DESIGN SYSTEMS, INC.By: /s/ John S. Edmunds By: Name: John S. Edmunds Name: Gabrielle L. Walker Title: CFO Title: Associate General Counsel Date: 12/10/10 Date: Please return originals to:Cadence Design Systems, Inc.Attn: Gabrielle L. WalkerAssociate General Counsel2655 Seely AvenueSan Jose, CA 95134 Product Quotation eDAcard Platinum (SLMA) 3-22-10 3 CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.REDACTED MATERIAL IS MARKED WITH ASTERISKS (“***”).Addendum A To Attachment Bto the Software License and Maintenance Agreement SLMA-071NPHO629 3rd Party & Exception Product(s) Discount(s) 72010; RET MaskWeaver Base Level ***% 72011: RET Scatter Bar OPC ***% 72014; RET Model-based OPC ***% 72015; RET ModelTuner ***% 72017; RET MaskWeaver MultiThreading ***% 72018; RET MaskWeaver Distributed Processing ModelServer Pack ***% 72019; RET CPL Gate Mask Synthesis ***% 72020; Virtuoso Phase Designer ***% 72021; RET DDL Gate Mask Synthesis ***% 72023; Virtuoso RET Analyser (VRA) ***% 72024; RET MaskWeaver Hitachi 700 Fracture Option ***% 72025; RET MaskWeaver Hitachi HL-800 Fracture Option ***% 72026; RET MaskWeaver Hitachi HL-950 Fracture Option ***% 72027; RET MaskWeaver VSB1 1 Fracture Option ***% 72030; RET LithoCruiser with GUI Option ***% 72031; RET LithoCruiser without GUI Option ***% 72032; RET LithoCruiser AutoRuleOPC ***% 72034; Virtuoso RET Designer (VRD) ***% 72035; Virtuoso RET Designer -DP (VRD-DP) ***% 72036; Virtuoso RET Verifier ***% 72037; Virtuoso RET Verifier DP (VRV DP) ***% 72039; Virtuoso(R) RET Imager ***% CPS100; Cadence InCyte Chip Estimator L ***% CPS200; Cadence InCyte Chip Estimator XL ***% CPS200UG1; Upgrade from Cadence InCyte Chip Estimator L to XL ***% PA1220; Allegro(R) Design Publisher - XL ***% PA8210; Allegro FPGA System Planner - L ***% PA8215; Allegro FPGA System Planner Two FPGA Option - L ***% PA8610; Allegro FPGA System Planner - XL ***% PA8610UG1; Upgrade from PA8210 to PA8610 ***% PA8610UG2; Upgrade from PA8210 + PA8215 to PA8610 ***% PA8630; Allegro FPGA System Planner - GXL ***% PA8630UG1; Upgrade from PA8610 to PA8630 ***% Inphi Corporation Initials: JSE 1 of 1 CONFIDENTIAL MATERIAL REDACTED AND FILED SEPARATELY WITH THE COMMISSION.REDACTED MATERIAL IS MARKED WITH ASTERISKS (“***”).Product QuotationeDAcardAttachment C to the Software License and Maintenance AgreementSLMA-071NPH0629 (“Agreement”)eDAcard PLATINUM number: TBDQuotation number: INPH1_101111_DEWQuotation Expiration Date: 31-Dec-10 Inphi Corporation (“CUSTOMER”)Robb Johnson112 S. Lakeview Canyon Road. Suite 100Westlake Village, CA91362 Inphi CorporationShip-To Address: 79%112 S. Lakeview Canyon Road. Suite 100Westlake Village, CA91362 Inphi CorporationBill-To Address:112 S. Lakeview Canyon Road. Suite 100Westlake Village, CA91362 Cadence Design Systems, Inc.2655 Seely AvenueSan Jose, CA 94234Attachment Effective Date: 30-June-11Attachment Expiry Date: *** eDAcard PLATINUM eDAcard Activation Period: Activation Period Effective Date 30-Jun-11 Activation Period Expiry date: *** Termination Date: *** $5,000,000 eDAcard Balance: eDAcard Site(s): Distribution of eDAcard Balance: The following authorized users & specific site(s) will be issued eDAcard(s) as indicated below: Robb Johnson – Wesstlake Village, CA 91362 $5,000,000 rjohnson@inphi-corp.com Note: eDAcard WAN Premium ***% LOCAL:***% REGION, ***% MULTI-REGIONeDAcard Discount Rate: ***%The Licensed Materials may be drawn down at their respective list price less ***% discountexcept for the Licensed Materials listed in Addendum A.The Licensed Materials Listed in Addendum A may be drawn down at their respective listprice less the applicable discount set forth in Addendum A. eDAcard PLATINUM number TBD eDAcard Fees $5,000,000 Payment Terms Total Total Fees Due $5,000,000 Payment Schedule Payment Invoice Date Due Date Total Amount 1 *** *** $*** 2 *** *** $*** 3 *** *** $*** 4 *** *** $*** 5 *** *** $*** 6 *** *** $*** 7 *** *** $*** 8 *** *** $*** 9 *** *** $*** 10 *** *** $*** Total [USD] $*** Additional Ship-To addresses provided by CUSTOMER with estimated percentage expected Use:3945 Freedom Circle Suite 11D, Santa Clara, CA 95054 21% The parties hereby agree to the foregoing terms and conditionsIn addition to the terms and conditions attached hereto which are hereby incorporated by reference. Inphi CorporationInitials: JSE Cadence Design Systems Confidential Product Quotation 12/23/2010 9:17 AM Page 16 Product QuotationTerms and ConditionsFor Floating PooleDAcard License ModelThis Product Quotation Attachment (“Attachment”), which is appended to the Software License and Maintenance Agreement referenced on page 1 of thisAttachment (“Agreement”), contains the terms and conditions for Customer’s Use of Licensed Materials based upon Cadence’s eDAcard Platinumlicensing model. This Attachment is a Product Quotation as defined in the Agreement. All capitalized terms not otherwise defined herein shall have the samemeaning as ascribed to them in the Agreement. In the event of any conflict between the terms of the Agreement and the terms of this Attachment, the terms of theAgreement shall prevail. A.eDAcard LICENSING MODEL 1.Availability of Licensed Materials: Cadence’s eDAcard licensing model establishes a mechanism whereby Customer may access, select andUse Licensed Materials through Cadence’s web site (“eDAcard Web Site”) during the eDAcard activation period. The activation period is definedas beginning on the Activation Period Effective Date and ending on the Activation Period Expiry Date (“eDAcard Activation Period”) as set forthon page 1 of this Attachment. Use of the Licensed Materials will be pursuant to the terms and conditions of the Agreement and this Attachment. Alist of the available Licensed Materials can be viewed on the eDAcard Web Site. The Term of Use for licenses for the Licensed Materials, whichincludes Maintenance Services, can be selected for a pre-determined duration (i.e. weekly, monthly, quarterly, yearly or any combination thereof).In no event, however, shall the Term of Use for any Licensed Materials licensed during the eDAcard Activation Period extend beyond theAttachment Expiry Date. 2.Licensed Materials: Customer shall only Use Licensed Materials available through the eDAcard Web Site. 3.Accessibility of Licensed Materials: Within the later of five (5) days after: (i) the Activation Period Effective Date or, (ii) execution of thisAttachment by Cadence, Cadence shall activate and forward an eDAcard number (“eDAcard number”) to those Customer employees who will beallowed to access the eDAcard Web Site (“Authorized Users”). Upon account activation, the Authorized Users will be issued individual loginnames and passwords (“Authorized User ID”) to be used in conjunction with the eDAcard Number. The Authorized User ID will allow theAuthorized Users access to the Licensed Materials on the eDAcard Web Site. Following the Authorized Users selection of Licensed Materials overthe eDAcard Web Site, the applicable Fees will be deducted from the eDAcard Balance set forth on page 1 of this Attachment. Customer shall beprovided with instructions on how to obtain an authorization key for the Licensed Materials. The ability of the Authorized Users to access theeDAcard Web Site for the purpose of selecting additional Licensed Materials shall terminate on the earlier of: (i) the depletion of the eDAcardBalance; (ii) the Activation Period Expiry Date set forth on page 1 of this Attachment; or (iii) termination of the Agreement pursuant to Section 5(Term and Termination) thereof. 4.eDAcard Balance: The Fee structure for Use of the Licensed Materials implementing the eDAcard licensing model is set forth on the CadenceeDAcard Datasheet available on the eDAcard Web Site. The Fees are based upon the one year time-based license (“TBL”) reference price, TheLicensed Materials price is then adjusted per the eDAcard rate table set forth in the eDAcard Datasheet based upon: (1) the type of LicensedMaterials licensed plus any applicable regional list price adjustments, and (2) the Term of Use. Finally, the applicable Customer discount isapplied to arrive at the final Fee for the applicable Licensed Materials. The dollar value as set forth in the eDAcard Balance on page 1 of thisAttachment represents the amount the Customer has allocated for selecting and Using Licensed Materials accessing the eDAcard Web Site. Uponselection of both the Licensed Materials and the Term of Use, the Fee shall be automatically calculated and debited from the remaining eDAcardBalance. Customer may continue to access the eDAcard Web Site for the purpose of selecting additional Licensed Materials until the eDAcardBalance is depleted. Customer shall forfeit any remaining portion of the eDAcard Balance not utilized during the eDAcard Activation Period. TheTBL price for Licensed Materials and/or the eDAcard rate table may be modified at any time by Cadence. 5.General Terms: Customer is solely responsible for: (i) managing its Authorized Users; and (ii) maintaining the security of all passwords, userIDs and access keys made available by Cadence. Customer acknowledges and Product Quotation eDAcard Platinum (SLMA) 3-22-10-MA 17 agrees that any person who enters an Authorized User ID will be presumed by Cadence to be an Authorized User and have the power and authorityto bind Customer to the terms of this Attachment and the Agreement. Cadence will not be under any obligation to verify the identity of any suchperson. Customer agrees that an order placed through the eDAcard Web Site is the equivalent of a signed purchase order. Customer shall have theright to change, add, or delete Authorized Users upon prior written notice to Cadence. In no event are any licenses issued hereunder cancelable norare any Fees payable hereunder refundable. Customer hereby waives any future challenge to the validity and enforceability of any order submittedvia the eDAcard licensing model on the grounds that it was electronically transmitted and authorized. Customer is responsible for all costs andcharges, including without limitation, phone charges and telecommunications equipment, incurred in order to use the eDAcard licensing model. B.MAINTENANCE SERVICESMaintenance Services are provided by Cadence during the Term of Use. C.PAYMENT SCHEDULECustomer shall remit payment for the Fees in accordance with the schedule set forth on page 1 of this Attachment. Notwithstanding the foregoing, inthe event that the eDAcard Balance is depleted and the Term of Use for all Licensed Materials ends prior to the Activation Period Expiry Date, anyremaining payments shall become due and payable immediately upon the expiration of the Term of Use for all licensed Materials. Customerunderstands and agrees that the obligation to make payments hereunder is not contingent upon a purchase order being issued by Customer. Ifrequired by Cadence, the obligation to pay the Fees shall be additionally evidenced by an Installment Payment Agreement (“IPA”) executed byCustomer. D.WIDE AREA NETWORKSubject to Section 13.2 (Export) of the Agreement and payment of any applicable Fees, Customer is granted the right to allow its employees toremotely access the Licensed Materials through a wide area network (“WAN”). Customer may select the following options for WAN rights at thetime of acquiring the Licensed Materials under this Attachment: (1) “None” (no WAN rights permitted), (2) “Local” (WAN rights only permittedwithin the same time zone as the Designated Equipment, or if outside the Americas, within the same country), (3) “Region” (WAN rights onlypermitted within the specific Region selected with access through Designated Equipment in the Region), and (4) “Multi-Region” (WAN rightspermitted in more than one Region as selected by Customer). Customer’s WAN selection will be determined at time of selection of the LicensedMaterials. The available Regions for such Multi-Region WAN rights are: (1) the Americas, (2) Europe and Middle East, (3) India, and (4) Australiaand Asia (excluding Japan).The parties hereby agree to the foregoing terms and conditions. CUSTOMER: Inphi Corporation CADENCE DESIGN SYSTEMS, INC. By: /s/ John S. Edmunds By: Name: John S. Edmunds Name: Gabrielle L. Walker Title: CFO Title: Associate General Counsel Date: 12/22/10 Date: Product Quotation eDAcard Platinum (SLMA) 3-22-10-MA 18 Cadence Design Systems(Ireland) Ltd. Block P3, East PointBusiness Park, Fairview, Dublin 3, Ireland By: Name: Title: Date: Please return originals to:Cadence Design Systems, Inc.Attn: Gabrielle L. WalkerAssociate General Counsel2655 Seely AvenueSan Jose, CA 95134 Product Quotation eDAcard Platinum (SLMA) 3-22-10-MA 19 Exhibit 23.1CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMWe hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-170629) of Inphi Corporation of our report datedMarch 4, 2011 relating to the financial statements, which appears in this Form 10-K./s/ PricewaterhouseCoopers LLPLos Angeles, CaliforniaMarch 4, 2011 EXHIBIT 31.1CHIEF EXECUTIVE OFFICER CERTIFICATIONI, Young K. Sohn, certify that:1. I have reviewed this annual report on Form 10-K of Inphi Corporation;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant's most recentfiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: March 4, 2011 /s/ Young K. SohnYoung K. SohnPresident and Chief Executive Officer(Principal Executive Officer) EXHIBIT 31.2CHIEF FINANCIAL OFFICER CERTIFICATIONI, John Edmunds, certify that:1. I have reviewed this annual report on Form 10-K of Inphi Corporation;2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statementsmade, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financialcondition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) for the registrant and have: (a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, toensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within thoseentities, particularly during the period in which this report is being prepared; (c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about theeffectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; (d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recentfiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materiallyaffect, the registrant’s internal control over financial reporting; and5. The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): (a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and (b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal controlover financial reporting.Date: March 4, 2011 /s/ John EdmundsJohn EdmundsChief Financial Officer and Chief Accounting Officer(Principal Financial Officer) EXHIBIT 32.1SECTION 906 CERTIFICATION OF CHIEF EXECUTIVE OFFICERI, Young K. Sohn, the chief executive officer of Inphi Corporation (the “Company”), certify for the purposes of section 1350 of chapter 63 of title 18 of theUnited States Code that, to my knowledge: (i)The Annual Report of the Company on Form 10-K for the annual period ended December 31, 2010 (the “Report”) fully complies with the requirementsof section 13(a) of the Securities Exchange Act of 1934, and (ii)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 4, 2011 /s/ Young K. SohnYoung K. SohnPresident and Chief Executive Officer(Principal Executive Officer) EXHIBIT 32.2SECTION 906 CERTIFICATION OF CHIEF FINANCIAL OFFICERI, John Edmunds, the chief financial officer of Inphi Corporation (the “Company”), certify for the purposes of section 1350 of chapter 63 of title 18 of theUnited States Code that, to my knowledge: (i)The Annual Report of the Company on Form 10-K for the annual period ended December 31, 2010 (the “Report”) fully complies with the requirementsof section 13(a) of the Securities Exchange Act of 1934, and (ii)The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.Date: March 4, 2011 /s/ John EdmundsJohn EdmundsChief Financial Officer and Chief Accounting Officer(Principal Financial Officer)

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