As filed with the Securities and Exchange Commission on November 25, 2020.
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
908 Devices Inc.
(Exact name of registrant as specified in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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3829
(Primary Standard Industrial
Classification Code Number)
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45-4524096
(I.R.S. Employer
Identification Number)
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645 Summer Street
Boston, MA 02210
(857) 254-1500
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Kevin J. Knopp
Chief Executive Officer
645 Summer Street
Boston, MA 02210
(857) 254-1500
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies of all communications, including communications sent to agent for service, should be sent to:
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Mark J. Macenka
Michael J. Minahan
Goodwin Procter LLP
100 Northern Ave.
Boston, MA 02210
(617) 570-1000
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Eric Blanchard
Darren DeStefano
Brent Siler
Cooley LLP
55 Hudson Yards
New York, NY 10001
(212) 479-6000
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Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.
If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, as amended, check the following box. ☐
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large Accelerated Filer
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Accelerated Filer
☐
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Non-Accelerated Filer
☒
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Smaller Reporting Company
☒
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Emerging Growth Company
☒
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided to Section 7(a)(2)(B) of the Securities Act. ☐
CALCULATION OF REGISTRATION FEE
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Title of each Class of Securities
to be Registered
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Proposed
Maximum Aggregate
Offering Price(1)(2)
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Amount of
Registration Fee(3)
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Common Stock, par value $0.001 per share
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$
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75,000,000
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$
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8,183
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(1)
Estimated solely for the purpose of calculating the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.
(2)
Includes the offering price of shares that the underwriters may purchase pursuant to an option to purchase additional shares.
(3)
Calculated pursuant to Rule 457(o) based on an estimate of the proposed maximum aggregate offering price.
The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment that specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, as amended, or until this registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
Subject to completion, dated November 25, 2020
PRELIMINARY PROSPECTUS
Shares
908 Devices Inc.
Common Stock
We are offering shares of our common stock. This is our initial public offering and no public market currently exists for our common stock. We anticipate that the initial public offering price will be between $ and $ per share.
Prior to this offering, there has been no public market for our common stock. We intend to apply to list our common stock on the Nasdaq Global Market under the symbol “MASS.”
Investing in our common stock involves risks. See “Risk Factors” beginning on page
13 of this prospectus.
We are an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and will be subject to reduced public company reporting requirements for this prospectus and future filings. See “Prospectus Summary—Implications of Being an Emerging Growth Company” on page 9 of this prospectus.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
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Per Share
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Total
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Initial Public Offering Price
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$
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$
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Underwriting Discounts and Commissions
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$
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$
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Proceeds, before expenses, to us
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$
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$
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We have granted the underwriters an option for a period of up to 30 days to purchase up to additional shares of our common stock.
Delivery of the shares of common stock is expected to be made on or about , 2020.
COWENSVB LEERINKWILLIAM BLAIRSTIFEL
The date of this prospectus is .
TABLE OF CONTENTS
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1
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13
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50
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51
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52
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53
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54
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56
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59
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61
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85
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112
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120
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131
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133
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137
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140
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145
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147
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151
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159
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159
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159
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F-1
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We and the underwriters have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared. We and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may provide you. We are offering to sell, and seeking offers to buy, shares of common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the common stock.
For investors outside the United States: Neither we nor the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction, other than the United States, where action for that purpose is required. Persons outside the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of common stock and the distribution of this prospectus outside the United States.
We own various trademark registrations and applications, and unregistered trademarks, including MX908, Rebel, ZipChip and 908 Devices and our corporate logo. All other trade names, trademarks and service marks of other companies appearing in this prospectus are the property of their respective holders. Solely for convenience, the trademarks and trade names in this prospectus may be referred to without the®,™ or RTM symbols, but such references should not be construed as any indicator that their respective owners will not assert, to the fullest extent under applicable law, their rights thereto. We do not intend to use or display other companies’ trademarks and trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. Before investing in our common stock, you should carefully read this entire prospectus, including the sections titled “Risk Factors”, “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, and “Business” and our financial statements and the related notes included elsewhere in this prospectus. As used in this prospectus, unless the context otherwise requires, references to the “company,” “we,” “us” and “our” refer to 908 Devices Inc.
Analysis for Life
We are leading a revolution in measurement devices for chemical and biochemical analysis. We are democratizing laboratory mass spectrometry instruments with our simple handheld and desktop devices, addressing critical-to-life applications. We are reimagining where Mass Spec technology can be used if it is sufficiently small in size, low in cost, and simple to operate.
Overview
We have developed an innovative suite of purpose-built handheld and desktop mass spectrometry, or Mass Spec, devices for the point-of-need. Leveraging our proprietary platform technology, we make the extraordinary analytical power of Mass Spec available in devices that are significantly smaller and more accessible than conventional laboratory instruments. Our Mass Spec devices are used at the point-of-need to interrogate unknown and invisible materials and provide quick, actionable answers to directly address some of the most critical problems in life sciences research, bioprocessing, industrial biotech, forensics and adjacent markets. As we democratize the extraordinary power of Mass Spec, we believe our technology platform can expand in future opportunities far beyond the current $8 billion market for Mass Spec and associated front-end separations. We estimate our total addressable market, or TAM, for our devices to be $4.8 billion in 2020 growing to an estimated $22 billion over the next five years.
We create simplified measurement devices that our customers can use as accurate tools where-and-when their work needs to be done, rather than overly complex and centralized analytical instrumentation. We believe the insights and answers our devices provide will accelerate workflows, reduce costs, and offer transformational opportunities for our end users.
Since the launch of our first device, we have sold more than 1,200 handheld and desktop devices to over 300 customers in 32 countries, including 18 of the top 20 pharmaceutical companies by 2019 revenue, as well as numerous domestic and foreign government agencies and leading academic institutions. We generated revenue of $9.6 million and $21.2 million in the nine months ended September 30, 2019 and 2020, respectively, representing 120% period-over-period growth, while incurring net losses of $12.9 million and $2.6 million in the nine months ended September 30, 2019 and 2020, respectively. Historically, we have derived a majority of our revenue from government customers. While we cannot provide any assurance as to our future results or the success of our sales efforts, we believe we will continue to derive a significant portion of our revenue from the government sector.
Our current products are available for both battery powered handheld and desktop applications, including our flagship devices—MX908 and Rebel.
Front-line workers rely upon our handheld devices to combat the opioid crisis and detect counterfeit pharmaceuticals and illicit materials in the air or on surfaces at levels 1,000 times below their lethal dose. Our desktop devices are accelerating development and production of biotherapeutics by identifying and quantifying extracellular species in bioprocessing critical to cell health and productivity. They sit alongside bioreactors and fermenters producing drug candidates, functional proteins, cell and gene therapies, and synthetic biology-derived products. We believe the insights and answers our devices provide accelerate workflows, reduce costs, and offer transformational opportunities for our end users.
Mass Spec is the gold-standard analytical technology for laboratory-based molecular analysis and can identify and quantify sample components via molecular weight measurements. Mass Spec is highly regarded for its ability to provide an extraordinarily detailed analysis of a wide variety of samples—from small molecules to large complex proteins. While Mass Spec is an extremely powerful analytical tool, conventional Mass Spec instruments are very large, expensive, and highly complex, which has profoundly bottlenecked market opportunities and relegated them to the equivalent of mainframe computers in central facilities. We are seeking to reimagine where Mass Spec technology can be used if it is sufficiently small in size, low in cost, and simple to operate.
Our proprietary Mass Spec platform relies on extreme miniaturization of the core of Mass Spec—the ion trap and its vacuum system. Using semiconductor microfabrication techniques, we design and produce components that are more than a thousand fold smaller in volume when compared with most laboratory Mass Spec instruments and costs only dollars to manufacture. The vacuum system alone in a typical laboratory instrument weighs hundreds of pounds and requires several hundred watts of power, 24 hours per day, 365 days per year. Our miniaturized vacuum system weighs less than a pound, and our Mass Spec in total requires less power than a 20-watt LED light bulb.
Sample preparation and separation can be a painfully slow hours-long process, and we have invested heavily in the development of microfluidic sample preparation and microscale separation technologies to reduce preparation and separation time from hours to minutes. The size of a business card, our microfluidic capillary-electrophoresis, or CE, chip has demonstrated world-class performance and speed in separating everything from small molecules such as metabolites and drugs, to biopharmaceutical proteins, antibodies, and oligonucleotides.
Lastly, it is imperative that a point-of-need solution is operable by the widest possible user base. We have industry-leading expertise in applying software automation and machine learning techniques to both control the hardware in our devices and interpret the incredibly rich and complex data streaming off of them. It is common for expert data interpretation from a laboratory Mass Spec instrument to take hours or days—we can provide answers immediately to maximize value to the customer in critical-to-life applications where minutes matter.
We fundamentally believe that the technology platform we have built and the investments we are making will allow people to answer chemical and biochemical questions in times and places that were previously inconceivable. Given the market opportunity, we expect to face substantial competition from large established manufacturers of laboratory-based Mass Spec instruments and from new entrants; however, our proprietary advances have enabled us to manufacture the first truly handheld Mass Spec devices and compact desktops and we believe we are well-positioned to face future competition.
We intend to continue to aggressively invest in the development of post-sale partnerships with our government and other customers and to drive broader adoption across the organization. In particular, government agencies, both in the U.S. and in other countries, generally evaluate our products for critical, strategic applications. As a result, the procurement processes for orders by government agencies may involve complex and time-consuming competitive bidding processes. It is our belief that investment pre- and post-sale with prospects can create the potential for enterprise adoption and the opportunity for our devices to become the organizational standard for our customers.
Our Strengths
The following competitive strengths provide us the ability to address point-of-need applications in forensics, life sciences research, bioprocessing, industrial biotech and synthetic biology, or synbio:
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Our proprietary microscale Mass Spec platform leverages well established, gold-standard technology.
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Point-of-need technologies disrupt Mass Spec and create new product categories.
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Highly attractive business model validated by rapidly growing installed base of devices.
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Talented team with significant domain expertise.
Our Industry Background
Conventional Mass Spec—The Mainframe Computer of the Analytical Laboratory
Mass Spec is the cornerstone of almost any chemical laboratory within academia, industry and government, serving an extremely wide range of applications for markets including forensics, healthcare, environmental, industrial, and more. To stimulate capital equipment replacement cycles, Mass Spec manufacturers have oriented their research and development towards sustained improvements in raw analytical performance metrics such as resolution, sensitivity, and range. As a result, conventional Mass Spec instruments:
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are extremely large and not readily mobile;
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are expensive (often ranging from $100,000 to $1 million);
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require a dedicated power source; and
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require onsite specialists to maintain and operate.
These significant limitations have profoundly bottlenecked market opportunities for conventional Mass Spec instruments.
The Democratization of Mass Spec—Handhelds and Desktops
Given the inherent limitations of conventional mainframe Mass Spec instruments, we believe there is a compelling opportunity for handheld and compact desktop Mass Spec devices. Analogous to the democratization of computer technologies, we strongly believe that the democratization of Mass Spec will open up new markets and applications as price, access and complexity are reduced, while user space opens and utilization increases.
Our Technology Platform and Approach
We have developed a technology platform designed to bring Mass Spec out of the confines of central laboratories and to the point-of-need. Our technology platform and approach democratizes the Mass Spec market with high fidelity handheld and desktop devices. We believe this democratization gives rise to:
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an expanded and more diverse set of users;
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more frequent measurements; and
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new use cases that were previously untenable.
The core elements of our technology platform and approach include High-Pressure Mass Spec, or HPMS, microfluidics and analytics and machine learning.
HPMS Approach Enables Mass Spec at the Point-of-Need
A key component of our technology is our proprietary microscale ion trap, which we estimate is more than 1,000 times smaller than those in conventional laboratory Mass Spec instruments. These microfabricated traps are able to operate at much closer to atmospheric pressures than conventional Mass Spec instruments. This HPMS approach results in devices with dramatically smaller size and lower cost-of-goods through a reduction of vacuum pump requirements, power consumption, and an overall simplification of the hardware topology. HPMS allows us to build ultracompact, high fidelity measurement devices that are purpose-built for specific applications and deployable at the point-of-need, while circumventing the complexities associated with the conventional and much larger, general-purpose, central laboratory Mass Spec instruments.
Microfluidics Enable Convenient Sample Preparation and Fast Separations
Today, most central laboratory Mass Spec instruments are paired with large, complex solid and liquid handling systems for sample preparation and separation. These systems are engineered for
general applications and require large quantities of solvents, high level of maintenance and expertly trained users, all of which lead to higher operating costs.
Our approach integrates proprietary microfluidic sample preparation, separation, and ionization technologies onto a single chip that can be produced efficiently in scale using semiconductor microfabrication techniques. These microfluidic chips can be paired with our microscale Mass Spec technology to create devices with extraordinary performance that are accessible and usable at the point-of-need by non-experts.
Our integrated microfluidic capillary-electrophoresis, or CE, technology can perform extremely high-performance separations of a wide range of molecular species from small molecule metabolites, amino acids, and vitamins, to intact antibodies and other proteins. Importantly for our platform, our microfluidic CE is electrically driven and requires no bulky liquid pumping and valving systems. The microfluidic device consumes 100-200 nanoliters (nL) of electrolyte per minute making it remarkably efficient with source and waste fluids. Microfluidic CE separations are also extremely rapid and can be an order of magnitude or faster than similar chromatography separations. This allows for highly complex separations with high resolution to be completed in minutes.
Analytics and Machine Learning Technology Provide Actionable Answers Versus Raw Data
The third crucial element of our technology platform and approach is holistic device design with embedded analytics and machine learning. Our development team designs devices for a specific purpose, rather than for a wide scope of often disparate needs. Conventional Mass Spec manufacturers focus their attention on canonical analytical specifications in the hopes of appealing to a wide range of laboratory specialist needs. Our devices are designed to do a job quickly and easily. Achieving that aim requires very sophisticated autonomous and adaptive control systems and the machine learning engine to interpret the data and produce a clear, accurate result. Our devices can manage themselves autonomously by adapting to various environmental factors, while also optimizing themselves for a diverse array of user-based analytical objectives. This ability to automatically control the system reduces or eliminates the user’s responsibility and opportunity for error in set up, optimization and troubleshooting. Also, our data team has a commercial track record of embedding a “scientist in the box” with highly customized statistical and machine learning methods for our platforms to complete the customer experience.
Our Products
We were founded on a vision to deliver high quality Mass Spec to a broad set of users at the point-of-need. We have handheld and desktop devices, each of which are capable of providing quick, high fidelity and actionable results. These aspects are important to our customers as previously they have had to choose between a slow and thorough analysis by Mass Spec in a laboratory versus a timely point-of-need result that provided only a partial measurement picture prone to false-positives. Our devices are changing this paradigm and providing rapid laboratory-level results at the point-of-need.
MX908®
Launched in June 2017, MX908 is a handheld, battery-powered, Mass Spec device designed for rapid analysis of gas, liquid and solid materials of unknown identity. It is an agile, multi-purpose device utilized by a wide spectrum of user segments for a variety of forensic field applications such as chemical, explosive, priority drug and HazMat operations, detecting materials at the trace level.
The MX908 detects trace quantities of more than 100 named dangerous materials, including fentanyl and its many derivatives, explosives, and hazardous chemical agents with sensitivity comparable to existing field-based technologies, but with much higher specificity. This allows users to conduct rapid field analysis for a broad range of unknown substances at trace levels that would typically lead to confusion and false positives in other instruments. The device is also able to identify a far greater number of substances than other trace technologies and with 1,000,000 times the dynamic range of those other handheld or mobile technologies. Compared to a leading transportable Mass Spec product, the MX908 is up to 15x faster, up to 10x smaller and up to 2x cheaper. The MX908 is able to start up in less than a minute, completing analysis of gas and vapor materials in less than ten seconds, and solids
and liquids in less than a minute. The MX908 was designed to operate in harsh outdoor environments such as pervasive rain and dust, and scorching to freezing temperatures in a nimble 4.3 kg handheld form factor.
More than 1,000 MX908s have been sold across five continents and in 32 countries. Numerous agencies in the U.S. federal government are adopters, and there is at least one MX908 in every U.S. state. More than 3,600 operators have been trained to optimize their use of the MX908.
RebelTM
The Rebel is a small desktop analyzer providing real-time information on the extracellular environment in bioprocesses. Compared to a traditional laboratory high-performance liquid chromatography, or HPLC, assay, Rebel’s price per sample is up to 10 times lower, at approximately one-third of the capital cost, and delivers answers up to 2,000 times faster. Rebel provides results within seven minutes, enabling critical on-the-spot decisions regarding bioprocess cell culture media optimization, accelerating process-development cycles and maximizing bioreactor efficiency. Customers are using Rebel in GxP environments to evaluate fresh media for conformity to standards, track the extracellular environment and metabolic flux during growth cycles, monitor performance during stress experiments, and characterize spent media.
A purpose-built at-line system, the Rebel is designed to be located within the same laboratory as a bioreactor, enabling more frequent monitoring of key cell culture media parameters. To run this analysis, the Rebel requires as little as one microliter of cell culture media with little sample preparation. This allows customers to run more tests while preserving precious cell culture media, which is extremely valuable for the small batches used in cell therapy and personalized medicine.
Since the launch of the Rebel in November 2019, we have sold 31 units and 13 of those units are with top-20 revenue biotech organizations. Four organizations have already purchased multiple units. Our focus has been on increasing U.S. placements, but we also have a meaningful international opportunity and have recently sold Rebel in China and Europe.
ZipChip
ZipChip is a plug-and-play, high-resolution separation platform that optimizes Mass Spec sample analysis. Our ZipChip platform consists of a ZipChip Interface, which is installed into a conventional Mass Spec instrument and consumable microfluidic chips, or ZipChips. We designed this technology to work both within our devices and to be compatible with third party Mass Spec instruments. Powered by our integrated microfluidic technology, the ZipChip Interface allows researchers to consolidate a host of time-consuming biotherapeutic, metabolomic, and proteomic applications typically run on multiple instruments or configurations onto a single platform. With ZipChip, researchers can switch applications in minutes instead of hours with an alternative such as liquid chromatography.
As an open-access discovery platform that can interface with more than 10,000 conventional Mass Spec instruments, ZipChip provides us the ability to leverage the growing list of newly established applications and publications from customers who have incorporated the device into their projects. By incorporating select assays investigated on the ZipChip by customers into our MX908 and Rebel devices, we have established a pipeline of new customer-driven, point-of-need Mass Spec applications. A number of the customer-driven assays have already been incorporated in our MX908 and Rebel devices and several more are under investigation for our future product pipeline. We expect that the scope of analytes our devices can detect and analyze will continue to expand.
Since launch of the ZipChip platform, we have sold more than 150 units and have established 17 multi-unit accounts in leading, global pharmaceutical organizations and academic institutions. Our ZipChip platform is currently compatible with market-leading conventional Mass Spec instruments installed in laboratories today and we intend to continue to expand the ZipChip platform to become compatible with any conventional Mass Spec instrument.
Market Opportunities
Our Initial Market—Field Forensics
We estimate that the market opportunity addressable by our handhelds is $1.5 billion per year in 2020 for trace detection of drugs, explosives, priority chemicals, and other hazards on surfaces and in
the air. Our accessible market expands to over $3 billion with use cases in good practice, or GxP, facilities for raw material inspection, counterfeit and adulteration inspection, contamination and cleaning validation, and other quality assurance and quality control assays. These use cases are accessed through release of additional software apps for our base hardware. Our estimates of our total addressable markets, or TAM, are based on potential customer research and development spending, addressable aspects of potential customers’ end product development process, and potential platform usage. We also utilize estimated penetration and placement rates for our platform with potential customers in our target markets and historical patterns for consumables usage.
Life Sciences
End market sales of biologics across mAbs, cell, and gene therapies are estimated at $150 billion in 2020, growing to approximately $250 billion by 2025 at a 11% compounded annual growth rate according to third party reports and analyst sources. While mAbs are forecasted to continue to dominate end product sales in 2025, it is estimated that the pipeline of cell and gene therapies will be nearly 6,000 assets, representing more than 50% of the total biologics pipeline. A massive expansion of global bioprocessing capacity is underway to accommodate the needed small batched production. We estimate Rebel’s TAM to be $260 million in 2020, representing more than 1,700 device placements and 1.6 million media tests to support process development, and is expected to expand to approximately $12 billion TAM by 2025 (third party reports and analyst sources) with the execution of our roadmap and the rapid growth of cell therapy.
Future Market Opportunities
The fastest and most convenient way to explore new applications incorporating our platform technology is through interfacing with a conventional general-purpose laboratory Mass Spec instrument. Our laboratory interface connects our proprietary microfluidic chip technology, ZipChip, in a simple and customer friendly manner to form an open-discovery platform. Our research customers incorporate ZipChip into their projects and prove-out new assays spanning a range of markets, including diagnostics, consumer health and beauty, agrochemical, oil and gas, and defense. They measure such things as novel therapeutics, metabolites, quality and process attributes, and explore complex proteomics. We estimate our ZipChip platform is able to address $3.0 billion in 2020 across the research chromatography market space, growing to more than $6.9 billion with further roadmap expansion into proteomics. The resulting pipeline and market multiplier for subsequent point-of-need products has not been considered and may be significant.
Our Growth Strategy
We are pursuing the democratization of the gold-standard molecular analysis laboratory technique, mass spectrometry. Akin to how mainframe computers transitioned to desktops, tablets, and mobile devices, we are pursuing a similar transformation of the Mass Spec market. Our growth strategy includes the following key elements:
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Increase measurement consumption through a continued focus on simplicity, speed, and convenience with reduced cost.
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Drive enterprise adoption in our seeded accounts.
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Grow the installed base through expansion of commercial channels.
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Deepen our footprint into the rapidly growing bioprocessing market.
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Expand our customer-driven pipeline of new point-of-need applications.
Risk Factors
Our business is subject to a number of risks that you should be aware of before making an investment decision. You should carefully consider all of the information set forth in this prospectus and, in particular, should evaluate the specific factors set forth in the section titled “Risk Factors” in deciding whether to invest in our common stock. Among these important risks are the following:
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We have a history of net losses and may not be able to achieve profitability for any period in the future or sustain cash flow from operating activities.
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Our operating results may fluctuate significantly from period-to-period and may fall below expectations in any particular period, which could adversely affect the market price of our common stock.
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Without giving effect to the net proceeds from this offering, there is substantial doubt about our ability to continue as a going concern in our audited financial statements included in this prospectus.
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We have experienced a period of significant growth in recent years, and our inability to manage this growth could have a material adverse effect on our business, the quality of our products and services and our ability to retain key personnel.
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We must develop new products, as well as enhancements to existing products, and adapt to rapid and significant technological change to remain competitive.
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We have limited experience in marketing and sales and are in the early stages of building our sales channels in the life science market and internationally.
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The recent global COVID-19 outbreak has significantly affected our business and operations.
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We face intense and growing competition from leading technology companies as well as from emerging companies. Our inability to compete effectively with any or all of these competitors could affect our ability to achieve our anticipated market penetration and achieve or sustain profitability.
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Currently, we derive the majority of our revenue from our handheld products and are actively growing the revenue we derive from our desktop products, focused today in the life science market. If we fail to maintain significant market acceptance in existing markets or fail to successfully increase our penetration in new and expanding markets, we will not generate expected revenue and our prospects may be harmed.
•
Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense, which contribute to the unpredictability and variability of our financial performance and may adversely affect our profitability.
•
Insiders will continue to own a significant portion of our outstanding common stock following this offering and will therefore have substantial control over us and will be able to influence corporate matters.
•
A significant portion of our business depends on sales to the public sector, and our failure to receive and maintain government contracts or changes in the contracting or fiscal policies of the public sector could have a material adverse effect on our business.
•
U.S. government programs are limited by budgetary constraints and political considerations and are subject to uncertain future funding levels that could result in the termination of programs.
•
We rely on in-bound licenses granted to us from third parties. If we lose these rights, our business may be materially adversely affected, our ability to develop improvements to our existing products and to develop new products may be negatively and substantially impacted, and if disputes arise, we may be subjected to future litigation as well as the potential loss of or limitations on our ability to develop and commercialize products and technology covered by these license agreements.
Implications of Being an Emerging Growth Company
We qualify as an “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. As a result, we are permitted to rely on exemptions from certain disclosure requirements that are applicable to other companies that are not emerging growth companies. For so long as we are an emerging growth company, we will not be required to:
•
engage an independent registered public accounting firm to report on our internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;
•
comply with any requirement that may be adopted by the Public Company Accounting Oversight Board, or PCAOB, regarding mandatory audit firm rotation or a supplement to the independent registered public accounting firm’s report providing additional information about the audit and the financial statements (i.e., an auditor discussion and analysis);
•
submit certain executive compensation matters to stockholder advisory votes, such as “say-on-pay,” “say-on-frequency” and “say-on-golden parachutes”; or
•
disclose certain executive compensation related items such as the correlation between executive compensation and performance and comparisons of the chief executive officer’s compensation to median employee compensation.
We will remain an emerging growth company until the earliest to occur of:
•
our reporting of $1.0 billion or more in annual gross revenue;
•
our issuance, in any three-year period, of more than $1.0 billion in non-convertible debt;
•
our becoming a “large accelerated filer;” and
•
the end of the fiscal year that follows the fifth anniversary of the completion of this offering.
Section 107 of the JOBS Act also provides that an emerging growth company can take advantage of the extended transition period, provided in Section 13(a) of the Exchange Act, for complying with new or revised accounting standards. In other words, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements and the reported results of operations contained therein may not be directly comparable to those of other public companies.
Corporate Information
We were incorporated in Delaware in 2012 as 908 Devices Inc. Our offices are located at 645 Summer Street, Boston, Massachusetts 02210. Our telephone number is (857) 254-1500. Our corporate website is www.908devices.com. The information contained on or that can be accessed through our website is not incorporated by reference into this prospectus.
THE OFFERING
Common stock offered by us
shares
Common stock to be outstanding immediately after this offering
shares
Option to purchase additional shares offered
by us
The underwriters have an option for a period of 30 days to purchase up to additional shares of our common stock at the public offering price, less the underwriting discounts and commission
We estimate that we will receive net proceeds from the sale of shares of our common stock in this offering of approximately $ million, or $ million if the underwriters exercise their option to purchase additional shares in full, assuming an initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We intend to use the net proceeds from this offering, together with our existing cash, for general corporate purposes, including: (1) to expand our commercial operations to grow and support the installed base of our products among life sciences research customers in the United States and internationally; and (2) to fund our research and development efforts to advance the platform of technologies. For a more complete description of our intended use of the proceeds from this offering, see “Use of Proceeds.”
You should carefully read the “Risk Factors” section of this prospectus for a discussion of factors that you should consider before deciding to invest in our common stock.
Proposed Nasdaq Global Market symbol
“MASS”
At our request, the underwriters have reserved up to shares of our common stock for sale, at the initial public offering price, through a directed share program to our directors, officers, employees, business associates and other persons with whom we have a relationship. There can be no assurance that any of the reserved shares will be so purchased. The number of shares available for sale to the general public in the offering will be reduced to the extent the reserved shares are purchased in the directed share program. Any reserved shares of common stock not purchased through the directed share program will be offered to the general public on the same basis as the other common stock offered hereby. See “Underwriting” for more information.
The number of shares of our common stock to be outstanding after this offering is based on 32,055,175 shares of our common stock outstanding as of October 31, 2020, and gives effect to the conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 23,905,267 shares of our common stock upon the completion of this offering, and excludes:
•
251,610 shares of common stock issuable upon the exercise of warrants to purchase shares of redeemable convertible preferred stock that will become warrants to purchase common stock outstanding as of October 31, 2020, with a weighted-average exercise price of $4.87 per share;
•
5,311,085 shares of common stock issuable upon the exercise of stock options outstanding as of October 31, 2020 under our 2012 Stock Option and Grant Plan, or our 2012 Plan, with a weighted-average exercise price of $1.05 per share;
•
358,759 shares of common stock reserved for future issuance as of October 31, 2020 under our 2012 Plan which will become available for issuance under our 2020 Stock Option and Incentive Plan, or our 2020 Plan, upon the effectiveness of the 2020 Plan;
•
3,000,000 shares of our common stock that will become available for future issuance under our 2020 Plan upon the effectiveness of the registration statement of which this prospectus forms a part; and
•
470,000 shares of our common stock that will become available for future issuance under our Employee Stock Purchase Plan, or our ESPP, upon the effectiveness of the registration statement of which this prospectus forms a part.
Unless otherwise indicated, all information in this prospectus reflects or assumes the following:
•
the filing of our sixth amended and restated certificate of incorporation and the effectiveness of our amended and restated by-laws in connection with the completion of this offering;
•
the conversion of all outstanding shares of redeemable convertible preferred stock into an aggregate of 23,905,267 shares of common stock upon the completion of this offering;
•
the outstanding warrants to purchase our redeemable convertible preferred stock becoming warrants to purchase an aggregate of 251,610 shares of our common stock upon the closing of this offering;
•
no exercise of outstanding options or warrants after October 31, 2020;
•
a one-for- reverse split of our common stock effected on , 2020;
•
no exercise by the underwriters of their option to purchase up to additional shares of common stock in this offering; and
•
no purchase of shares of our common stock by directors, officers, employees or existing stockholders through our directed share program.
Summary Financial Data
The following tables present the summary financial and other data for the periods and as of the dates indicated. The statement of operations data for the years ended December 31, 2018 and 2019 have been derived from our audited financial statements included elsewhere in this prospectus. The statement of operations data for the nine months ended September 30, 2019 and 2020 and the balance sheet data as of September 30, 2020 have been derived from our unaudited financial statements included elsewhere in this prospectus and have been prepared on the same basis as the audited financial statements. Our historical results are not necessarily indicative of the results that may be expected in the future. You should read the following summary financial data together with the sections titled “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus. Our unaudited interim financial statements were prepared on the same basis as our audited financial statements and include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, that are necessary for the fair presentation of the financial information set forth in those financial statements.
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
(in thousands, except per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service revenue
|
|
|
|
$
|
13,738
|
|
|
|
|
$
|
15,344
|
|
|
|
|
$
|
8,292
|
|
|
|
|
$
|
18,844
|
|
|
|
License and contract revenue
|
|
|
|
|
8,316
|
|
|
|
|
|
2,628
|
|
|
|
|
|
1,332
|
|
|
|
|
|
2,333
|
|
|
|
Total revenue
|
|
|
|
|
22,054
|
|
|
|
|
|
17,972
|
|
|
|
|
|
9,624
|
|
|
|
|
|
21,177
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service cost of revenue
|
|
|
|
|
9,002
|
|
|
|
|
|
9,098
|
|
|
|
|
|
5,397
|
|
|
|
|
|
8,121
|
|
|
|
License and contract cost of revenue
|
|
|
|
|
659
|
|
|
|
|
|
731
|
|
|
|
|
|
418
|
|
|
|
|
|
712
|
|
|
|
Total cost of revenue
|
|
|
|
|
9,661
|
|
|
|
|
|
9,829
|
|
|
|
|
|
5,815
|
|
|
|
|
|
8,833
|
|
|
|
Gross profit
|
|
|
|
|
12,393
|
|
|
|
|
|
8,143
|
|
|
|
|
|
3,809
|
|
|
|
|
|
12,344
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
|
9,528
|
|
|
|
|
|
8,993
|
|
|
|
|
|
7,020
|
|
|
|
|
|
5,953
|
|
|
|
Selling, general and administrative
|
|
|
|
|
9,304
|
|
|
|
|
|
11,294
|
|
|
|
|
|
8,624
|
|
|
|
|
|
8,320
|
|
|
|
Total operating expenses
|
|
|
|
|
18,832
|
|
|
|
|
|
20,287
|
|
|
|
|
|
15,644
|
|
|
|
|
|
14,273
|
|
|
|
Loss from operations
|
|
|
|
|
(6,439)
|
|
|
|
|
|
(12,144)
|
|
|
|
|
|
(11,835)
|
|
|
|
|
|
(1,929)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
(1,147)
|
|
|
|
|
|
(1,530)
|
|
|
|
|
|
(1,276)
|
|
|
|
|
|
(732)
|
|
|
|
Other income (expense), net
|
|
|
|
|
50
|
|
|
|
|
|
301
|
|
|
|
|
|
227
|
|
|
|
|
|
68
|
|
|
|
Total other expense, net
|
|
|
|
|
(1,097)
|
|
|
|
|
|
(1,229)
|
|
|
|
|
|
(1,049)
|
|
|
|
|
|
(664)
|
|
|
|
Net loss and comprehensive loss
|
|
|
|
|
(7,536)
|
|
|
|
|
|
(13,373)
|
|
|
|
|
|
(12,884)
|
|
|
|
|
|
(2,593)
|
|
|
|
Accretion of redeemable convertible
preferred stock to redemption value
|
|
|
|
|
(76)
|
|
|
|
|
|
(109)
|
|
|
|
|
|
(79)
|
|
|
|
|
|
(74)
|
|
|
|
Net loss attributable to common stockholders(1)
|
|
|
|
$
|
(7,612)
|
|
|
|
|
$
|
(13,482)
|
|
|
|
|
$
|
(12,963)
|
|
|
|
|
$
|
(2,667)
|
|
|
|
Net loss per share attributable to common
stockholders, basic and diluted(1)
|
|
|
|
$
|
(0.95)
|
|
|
|
|
$
|
(1.66)
|
|
|
|
|
$
|
(1.60)
|
|
|
|
|
$
|
(0.33)
|
|
|
|
Weighted average common shares outstanding,
basic and diluted(1)
|
|
|
|
|
7,984
|
|
|
|
|
|
8,120
|
|
|
|
|
|
8,120
|
|
|
|
|
|
8,129
|
|
|
|
Pro forma net loss per share attributable to
common stockholders, basic and diluted
(unaudited)(1)
|
|
|
|
|
|
|
|
|
|
$
|
(0.43)
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.08)
|
|
|
|
Pro forma weighted average common shares
outstanding, basic and diluted (unaudited)(1)
|
|
|
|
|
|
|
|
|
|
|
30,887
|
|
|
|
|
|
|
|
|
|
|
|
32,034
|
|
|
|
|
(1)
See Note 13 to our financial statements included elsewhere in this prospectus for details on the calculation of basic and diluted net loss per share attributable to common stockholders and unaudited basic and diluted pro forma net loss per share attributable to common stockholders.
|
|
|
|
As of September 30, 2020
|
|
|
|
|
|
Actual
|
|
|
Pro Forma(2)
|
|
|
Pro Forma As
Adjusted(3)
|
|
|
|
|
|
(in thousands)
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
|
$
|
19,712
|
|
|
|
|
$
|
19,712
|
|
|
|
|
$
|
|
|
|
|
Working capital(1)
|
|
|
|
|
22,071
|
|
|
|
|
|
22,071
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
|
|
|
43,404
|
|
|
|
|
|
43,404
|
|
|
|
|
|
|
|
|
|
Long-term debt, net of discount, including current portion
|
|
|
|
|
14,817
|
|
|
|
|
|
14,817
|
|
|
|
|
|
|
|
|
|
Deferred revenue, including current portion
|
|
|
|
|
9,256
|
|
|
|
|
|
9,256
|
|
|
|
|
|
|
|
|
|
Commercial services agreement liability – related party
|
|
|
|
|
375
|
|
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
Preferred stock warrant liability
|
|
|
|
|
754
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock
|
|
|
|
|
71,091
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity (deficit)
|
|
|
|
|
(65,608)
|
|
|
|
|
|
6,237
|
|
|
|
|
|
|
|
|
(1)
We define working capital as current assets less current liabilities.
(2)
The pro forma balance sheet data give effect to (i) the conversion of all outstanding shares of redeemable convertible preferred stock of into an aggregate of 23,905,267 shares of common stock and (ii) all outstanding warrants to purchase shares of redeemable convertible preferred stock becoming warrants to purchase shares of common stock.
(3)
The pro forma as adjusted balance sheet data give further effect to our issuance and sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The pro forma as adjusted information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, working capital, total assets and total stockholders’ equity by $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, working capital, total assets and total stockholders’ equity by $ million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks described below, as well as the other information in this prospectus, including our financial statements and the related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before deciding whether to invest in our common stock. The occurrence of any of the events or developments described below could harm our business, financial condition, results of operations, and prospects. In such an event, the market price of our common stock could decline and you may lose all or part of your investment. Additional risks and uncertainties not presently known to us or that we currently deem immaterial also may impair our business operations.
Risks related to our business and industry
We have a history of net losses and may not be able to achieve profitability for any period in the future or sustain cash flow from operating activities.
We have had a history of net losses since our inception in 2012, including net losses of $7.5 million and $13.4 million for the fiscal years ended December 31, 2018 and 2019, respectively, and $12.9 million and $2.6 million for the nine months ended September 30, 2019 and 2020, respectively, and we may never achieve or maintain profitability. As of September 30, 2020, our accumulated deficit was $68.2 million. We cannot make any assurances that we will be able to increase our revenue to sustain cash flow from operating activities or reach profitability.
As we continue to expand and develop our business, we expect to incur significant additional expenditures in the areas of sales, marketing, research and development, and customer service and support. Additionally, as a public company, we expect our legal, accounting and other expenses to be substantially higher than the expenses we incurred as a private company. Furthermore, we may encounter unforeseen issues that require us to incur additional costs. We will have to generate and sustain increased revenue to achieve profitability and positive cash flow as a result of these increased expenditures. Accordingly, if we are not able to achieve or maintain profitability and we incur significant losses in the future, the market price of our common stock may decline, and you could lose part or all of your investment.
Our operating results may fluctuate significantly from period-to-period and may fall below expectations in any particular period, which could adversely affect the market price of our common stock.
Our quarterly results of operations may fluctuate significantly from period-to-period. Accordingly, the results of any one quarter should not be relied upon as an indication of future performance. If our revenue or operating results fall below the expectations of investors or any securities analysts that follow our company in any period, the price of our common stock would likely decline. Each of the risks described in this section, as well as other factors, may affect our operating results. For example, factors that may cause our operating results to fluctuate include:
•
our dependence on a limited number of large orders from U.S. government agencies for a substantial portion of our revenue in any quarterly period, whereby the loss of or delay in a customer order, or any delay in our fulfillment of deliverables under a customer order, could significantly reduce our revenue for that quarter;
•
the addition of new customers or the loss of existing customers;
•
the rates at which customers purchase additional products or consumables from us;
•
our ability to enhance our products with new and better functionality that meets customer requirements;
•
the length and unpredictability of our product sales cycle;
•
the productivity and growth of our sales force and customer service team;
•
the effectiveness of our distributors in securing new orders and fulfilling existing orders;
•
service interruptions with any of our single source suppliers or subassembly manufacturers;
•
unexpected costs or delays related to the COVID-19 pandemic;
•
our ability to attain and maintain production volumes and quality levels for our products, and to accurately forecast customer demand for our products and consumables;
•
the timing of our product releases or upgrades or related announcements by us or our competitors;
•
the possibility of seasonality in demand for our products;
•
changes in pricing by us or our competitors;
•
the timing of investments in research and development related to new product releases or upgrades;
•
our ability to control costs, including operating expenses and the costs of the components used in our products;
•
future accounting pronouncements and changes in accounting policies;
•
costs related to the acquisition and integration of companies, assets, or technologies; and
•
general economic conditions.
Our operating expenses are heavily based on our anticipated product revenue growth, especially as we continue to invest significant resources in building out our sales and marketing channels and the development of future products. As a result, any shortfall in product revenue in relation to our expectations could cause significant changes in our operating results from period-to-period and could result in negative cash flow from operations and a decrease in the price of our common stock.
Without giving effect to the net proceeds from this offering, there is substantial doubt about our ability to continue as a going concern in our audited financial statements included in this prospectus.
Our recurring losses from operations raise substantial doubt about our ability to continue as a going concern. As a result, our independent registered public accounting firm included an explanatory paragraph in its report on our financial statements for the year ended December 31, 2019 with respect to this uncertainty. Our ability to continue as a going concern will require us to obtain additional funding. We believe that the net proceeds from this offering, together with our existing cash, will enable us to fund our operating expenses, capital expenditure requirements and debt service payments for at least the next months. Without giving effect to the net proceeds from this offering, we expect that our existing cash as of December 31, 2019 will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments into the third quarter of 2021. We have based these estimates on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. If we are unable to raise capital when needed or on acceptable terms, we would be forced to delay or discontinue the further development and commercialization efforts of one or more of our products or we may be forced to reduce or terminate our operations.
We have experienced a period of significant growth in recent years, and our inability to manage this growth could have a material adverse effect on our business, the quality of our products and services and our ability to retain key personnel.
We have experienced a period of significant growth in recent years. Our growth has placed increased demands on our management and other resources and will continue to do so in the future. We may not be able to maintain or accelerate our current growth rate, manage our expanding operations effectively or achieve planned growth on a timely or profitable basis. Managing our growth effectively will involve, among other things:
•
continuing to retain, motivate, and manage our existing employees and attract and integrate new employees, particularly qualified sales personnel;
•
continuing to provide a high level of service to an increasing number of customers;
•
maintaining the quality of product and services offerings while controlling our expenses;
•
growing our direct sales force and channel partners; and
•
developing, implementing, and improving our operational, financial, accounting, and other internal systems and controls on a timely basis.
If demand for our products increases rapidly, we will need to expand internal production capacity or implement additional outsourcing of components and/or our assembled products. Success in
developing, manufacturing and supporting products manufactured in small volumes does not guarantee comparable success in operations conducted on a larger scale. Modifying and reconfiguring our facility to increase production capacity may delay delivery of our products. In addition, component costs as well as additional production, financial, and management control costs may rise. If we are unable to meet the demand of our customers and deliver products quickly and cost effectively, customers may turn to our competitors. The costs associated with implementing new manufacturing technologies, methods and processes, including the purchase of new equipment, and any resulting delays, inefficiencies, and loss of sales, could harm our results of operations.
As we grow, we will also need to make corresponding improvements to other operational functions, such as our customer service and billing systems, compliance programs and our internal quality assurance programs. We will also need additional equipment, manufacturing and warehouse space and trained personnel to process higher volumes of products. We cannot assure you that any increases in scale, related improvements and quality assurance will be successfully implemented or that equipment, manufacturing and warehouse space and appropriate personnel will be available. As we develop additional products, we may need to bring new equipment on-line, implement new systems, technology, controls and procedures and hire personnel with different qualifications.
If we are unable to manage our growth effectively, there could be a material adverse effect on our ability to maintain or increase revenue and profitability, the quality of our products and services and our ability to retain key personnel. These factors could adversely affect our reputation in the market and our ability to generate future sales from new or existing customers.
We must develop new products, as well as enhancements to existing products, and adapt to rapid and significant technological change to remain competitive.
We sell our products in industries that are characterized by significant enhancements and evolving industry standards. As a result, our customers’ needs are rapidly evolving. If we do not appropriately innovate and invest in new technologies, our offerings may become less desirable in the markets we serve, and our customers could move to new technologies offered by our competitors or make products themselves. To achieve market acceptance for our products, we must effectively anticipate customer requirements, and we must offer products that meet changing customer demands in a timely manner. Customers may require product features and capabilities that our current products do not have. Any of the current plans we have for future developments or enhancements are strategic in nature and not commitments to develop such capabilities for our customers. If we fail to develop products that satisfy customer requirements, our ability to create or increase demand for our products will be harmed.
Without the timely introduction of new products, services and enhancements, our offerings will likely become less competitive over time, in which case our competitive position and operating results could suffer. Accordingly, we focus significant efforts and resources on the development and identification of new technologies, products and markets to further broaden our offerings. In addition, the development cycle for our products and technologies can take multiple years and require significant investment, including substantial research and development, development of different engineering and manufacturing workflows, and adjustments to our data and analytics infrastructure. Even if these efforts are successful, the product or enhancement may not perform as expected. The ultimate success of our new products depends, in large part, on the accuracy of our assessments of the long-term needs of the industries and markets we serve, and it is difficult to quickly change the design or function of a planned new product if the market need does not develop as anticipated. As a result, to the extent we fail to accurately forecast the needs of our customers and timely introduce new and innovative products or services, or fail to obtain desired levels of market acceptance, our business may suffer and our operating results could be adversely affected. The challenge of identifying market trends and customer needs is even more demanding for markets that we have recently entered, such as the bioprocessing market, or that we intend to enter in the future, such as the GxP quality assurance market. There is no certainty that we will effectively identify these trends and needs or introduce products that are successful.
We have limited experience in marketing and sales and are in the early stages of building our sales channels in the life science market and internationally.
We may not be able to market, sell or distribute our current and future products effectively enough to support our planned growth. Currently, we sell our products through a combination of direct sales
efforts and partnerships with distributors across all of our key markets. During 2019, two of our distributors each accounted for greater than 10% of our total revenue, 28% in the aggregate. We are in the process of broadening and diversifying our sales channels across all markets. In the future, if we fail to maintain good relationships with, or fail to successfully motivate any of our large distributors, our revenue may decline. If we do not diversify our sales channels and effectively utilize our direct sales force, we will continue to be susceptible to risks associated with having a large percentage of revenue concentrated with a limited number of distributors.
As of the date of this prospectus, we have a direct sales force of more than 15 employees and we intend to increase the size and reach of our sales team in the future, particularly those focused on the life sciences market. Competition for employees capable of selling expensive instruments within the pharmaceutical and biotechnology industries is intense. We may not be able to attract and retain personnel or be able to build an efficient and effective sales organization, which could negatively impact sales and market acceptance of our products and limit our revenue growth and potential profitability. In addition, the time and cost of establishing a specialized sales, marketing and customer service force for a particular product or service may be difficult to justify in light of the revenue projected to be generated by such additional personnel and resources. We also intend to add additional distribution partners in the life science market, and if we are unable to do so successfully, it will adversely impact our ability to increase the revenue from our Rebel and ZipChip Interface.
We rely on distributors for the sale of our products in certain countries outside of the United States. We intend to continue to grow our business internationally and to do so we must attract additional distributors and retain existing distributors to maximize the commercial opportunity for our products. We exert limited control over existing distributors under our agreements with them, and if their sales and marketing efforts for our products in their particular region are not successful, our business would be materially and adversely affected. Locating, qualifying and engaging additional distribution partners with local industry experience and knowledge will be necessary in at least the short to mid-term to effectively market and sell our platform in certain countries outside the United States. We may not be successful in finding, attracting and retaining distribution partners, or we may not be able to enter into such arrangements on favorable terms.
Most of our distribution relationships are non-exclusive and permit such distributors to distribute competing products. As such, our distributors may not commit the necessary resources to market our products to the level of our expectations or may choose to favor marketing the products of our competitors. If current or future distributors do not perform adequately or we are unable to enter into effective arrangements with distributors in particular geographic areas, we may not realize long-term international revenue growth.
The recent global COVID-19 outbreak has significantly affected our business and operations.
The COVID-19 pandemic and efforts to control its spread have significantly curtailed the movement of people, goods and services worldwide. In light of the uncertain and rapidly evolving situation relating to the spread of COVID-19, we have taken precautionary measures intended to minimize the risk of the virus to our employees, our customers and the communities in which we operate. These measures include temporarily closing our offices to visitors and limiting the number of employees in our offices to those that are deemed essential for manufacturing and research purposes, as well as virtualizing, postponing or canceling customer, employee and industry events.
The COVID-19 pandemic has also created many negative headwinds that present risks to our business and results of operations. For example, it has generally disrupted the operations of our customers and prospective customers, and may continue to disrupt their operations, including as a result of travel restrictions and/or business shutdowns, uncertainty in the financial markets or other harm to their business and financial results. These disruptions have caused reduced capital spend by our existing customers and potential new customers, which has have negatively impacted our ZipChip Interface and consumables sales, resulting in a decrease in ZipChip Interface sales from the nine months ended September 30, 2019 compared to the nine months ended September 30, 2020. While this decrease did not significantly impact our total revenue in the nine months ended September 30, 2020, the impact could be more significant in the future. These disruptions could result in further reductions to capital expenditure budgets, delayed purchasing decisions, longer sales cycles, extended payment
terms or missed payments, and postponed or canceled projects, any of which would negatively impact our business and operating results, including sales and cash flows. We do not yet know the net impact that the COVID-19 pandemic may have on our business and cannot guarantee that it will not be materially negative. Although we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available, the ongoing effects of the COVID-19 pandemic and/or the precautionary measures that we have adopted may create operational and other challenges, any of which could harm our business and results of operations.
Historically, a significant portion of our field sales, customer training events and other application services have been conducted in person, and the rollout of our new products has historically been supported by our participation at industry conferences. Currently, as a result of the work and travel restrictions related to the COVID-19 pandemic, and the precautionary measures that we have adopted, substantially all of our field sales and professional services activities are being conducted remotely, which has resulted in a decrease in our travel expenditures. However, we expect our travel expenditures to increase in the future, which could negatively impact our financial condition and results of operations. As of the date of this prospectus, we do not yet know the extent of the negative impact of such restrictions and precautionary measures on our ability to attract new customers or retain and expand our relationships with existing customers over the near and long term.
In addition, many of our suppliers are experiencing operational challenges as a result of COVID-19, which in turn may destabilize our supply chain or otherwise have an adverse effect on our ability to provide products to our customers. For example, global demand for ventilators and other respiratory care products has reached previously unseen levels as a result of the COVID-19 outbreak. This has, in turn, resulted in shortages and longer lead times for certain of our critical components. Our suppliers may have to temporarily close a facility for disinfecting after employees tested positive for COVID-19, face staffing shortages from employees who are sick or apprehensive about coming to work or be overwhelmed by unexpected demand. Currently, the difficulties experienced by our suppliers have had minimal impact on our ability to ship products to our customers; however, if the COVID-19 pandemic continues, it may negatively affect our inventory and delay delivery to our customers, which in turn will adversely affect our revenue and results of operations. If our suppliers are unable to deliver the components and subassemblies we require on a timely basis, we cannot guarantee that we will be able to locate alternative sources of supply for our products on acceptable terms, or at all. If we are unable to adequately purchase appropriate amounts of inventory, our business and results of operations may be materially and adversely affected.
Additionally, the COVID-19 pandemic has impacted, and may continue to impact, our headquarters, which is our primary corporate office, sales and marketing center and manufacturing location, including through the effects of facility closures, reductions in operating hours and other social distancing efforts. For example, if even a small number of our employees who work in clusters relating to critical functions such as manufacturing, procurement, supply chain, and research and development, test positive for COVID-19, the entire business function could be temporarily shut down to ensure the safety of our employees and the effectiveness of business would be severely impacted. Additionally, we cannot predict whether these conditions and concerns will continue or whether we will experience more significant or frequent disruptions in the future, including the complete closure of one or more of our facilities. Furthermore, as a result of the COVID-19 pandemic, we have required all employees who are able to do so to work remotely on a full-time or partial basis. It is possible that widespread remote work arrangements may have a negative impact on our operations, the execution of our business plans, the productivity and availability of key personnel and other employees necessary to conduct our business, and on third party service providers who perform critical services for us, or otherwise cause operational failures due to changes in our normal business practices necessitated by the outbreak and related governmental actions. If a natural disaster, power outage, connectivity issue or other event occurred that impacted our employees’ ability to work remotely, it may be difficult or, in certain cases, impossible, for us to continue our business for a substantial period of time. The increase in remote working may also result in increased consumer privacy, data security and fraud risks, and our understanding of applicable legal and regulatory requirements, as well as the latest guidance from regulatory authorities in connection with the COVID-19 pandemic, may be subject to legal or regulatory challenge, particularly as regulatory guidance evolves in response to future developments.
More generally, the COVID-19 pandemic has had, and is expected to continue to have, an adverse effect on economies and financial markets globally, leading to a continued economic downturn, which is expected to decrease technology spending generally and could adversely affect demand for our platforms and services. It is not possible at this time to estimate the full impact that COVID-19 will have on our business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted.
To the extent the COVID-19 pandemic adversely affects our business, financial condition and results of operations, it may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including but not limited to, those related to our ability to increase sales to existing and new customers, continue to perform on existing contracts, develop and deploy new technologies, expand our marketing capabilities and sales organization, generate sufficient cash flow to service our indebtedness, and comply with the covenants in the agreements that govern our indebtedness.
We face intense and growing competition from leading technology companies as well as from emerging companies. Our inability to compete effectively with any or all of these competitors could affect our ability to achieve our anticipated market penetration and achieve or sustain profitability.
The markets we serve are highly competitive, and we expect competition to intensify in the future. This competition may make it more difficult for us to sell our products, and may result in increased pricing pressure, reduced profit margins, increased sales and marketing expenses and failure to increase, or the loss of, market share, any of which would likely seriously harm our business, operating results and financial condition.
We face substantial competition from very large and experienced enterprises, both public and privately held, including Agilent Technologies, Bruker Corporation, Danaher Corporation, Inficon, Flir Systems, PerkinElmer, Shimadzu Corporation, Thermo Fisher Scientific, and Waters Corp. Our competitors also include many smaller companies, including companies established to pursue new and emerging technologies. We also expect additional competition in the future from new and existing companies with whom we do not currently compete directly. As our industry evolves, our current and potential competitors may establish cooperative relationships among themselves or with third parties, including companies with whom we have partnerships and whose products interoperate with our own, that could acquire significant market share, which could adversely affect our business. Any of these competitive threats, alone or in combination with others, could seriously harm our business, operating results and financial condition.
Many of our competitors have greater market presence, longer operating histories, stronger name recognition, larger customer bases and significantly greater financial, technical, sales and marketing, manufacturing, distribution and other resources than we have. In addition, many of our competitors have broader product offerings than we do. These companies may attempt to use their greater resources to better position themselves in the market, including by pricing their products at a discount or bundling them with other products and services in an attempt to rapidly gain market share. Moreover, many of our competitors have more extensive customer and partner relationships than we do, and may therefore be in a better position to identify and respond to market developments or changes in customer demands, including successfully developing technologies that outperform our technologies. Potential customers may also prefer to purchase from their existing suppliers rather than a new supplier regardless of product performance or features. Our larger competitors may be able to better manage large or complex contracts and maintain a broader geographic presence. Our smaller competitors typically focus on one or a few products, and they are often well entrenched in their chosen markets. Any of these competitors may respond more quickly to new technology, market developments or pursue new sales opportunities more effectively than we can. We cannot assure you that we will be able to compete successfully against existing or new competitors. Accordingly, our business may not grow as expected and our business may suffer.
Currently, we derive the majority of our revenue from our handheld products and are actively growing the revenue we derive from our desktop products, focused today in the life science market. If we fail to maintain significant market acceptance in existing markets or fail to successfully increase our penetration in new and expanding markets, we will not generate expected revenue and our prospects may be harmed.
In 2019, approximately 69% of our product and service revenue was derived from sales of our handheld products, mainly the MX908. Today, this market consists primarily of first responders, firefighters, local, state and federal law enforcement, as well as military, customs and homeland security customers. Continued market acceptance of the products we sell to these organizations is critical to our future success, and the adoption of our products by these organizations worldwide is a key part of our growth strategy. If market demand for our MX908 product declines, if our products fail to maintain or achieve greater market acceptance, or if we fail to execute on our sales and customer service efforts in the field forensics market, we will not be able to grow our revenue sufficiently to achieve or maintain profitability.
We also derive a significant and growing portion of our revenue from our desktop devices, primarily in the life science market, specifically the antibody therapeutics, cell and gene therapy and synbio markets. In 2019, approximately 29% of our product and service revenue came from biopharmaceutical companies and research institutions, collectively. We recently introduced our Rebel product line and our future success will partially depend on our ability to successfully commercialize this product line. The life sciences scientific community is comprised of a small number of early adopters and key opinion leaders who significantly influence the rest of the community. The success of life sciences products is due, in large part, to acceptance by the scientific community and their adoption of certain products as best practice in the applicable field of research.
The sizes of the markets for our solutions may be smaller than estimated and new market opportunities may not develop as quickly as we expect, or at all, limiting our ability to successfully sell our products.
The markets for our products are rapidly evolving, making it difficult to predict with any accuracy the sizes of the markets for our current and future solutions. Our estimates of the annual total addressable market for our current and future solutions are based on a number of internal and third party estimates and assumptions. In addition, our growth strategy involves launching new solutions and expanding sales of existing solutions into new markets in which we have limited or no experience. Sales of new or existing solutions into new market opportunities may take several years to develop and mature, and we cannot be certain that these market opportunities will develop as we expect. For example, new life sciences technology is often not adopted by the relevant market until a sufficient amount of research conducted using such technology has been published in peer-reviewed publications. While we believe our assumptions and the data underlying our estimates of the total annual addressable market for our solutions are reasonable, these assumptions and estimates may not be correct and the conditions supporting our assumptions or estimates, or those underlying the third party data we have used, may change at any time, thereby reducing the accuracy of our estimates. As a result, our estimates of the annual total addressable market for our solutions may be incorrect.
We rely on assumptions and estimates and data to calculate certain of our key metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.
In addition to our financial results, our management regularly reviews a number of operating and financial metrics, including a breakdown of product and service revenue into device sales and consumables and service revenue (recurring revenue), product placements, cumulative product placements, revenue by customer market (government, pharmaceutical/biotechnology and academia), and status of pipeline opportunities that represent customers in test, trials, pilots and full deployments, to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions. As both the industry in which we operate and our businesses continue to evolve, so too might the metrics by which we evaluate our businesses and the company. In addition, while the calculation of the metrics we use is based on what we believe to be reasonable estimates, our internal tools are not independently verified by a third party and have a number of limitations and, furthermore, our methodologies for tracking these metrics may change over
time, for example, the industry breakdown of our customer revenue by government, pharma/bio and academia sales. Accordingly, investors should not place undue reliance on these metrics.
Our sales cycles can be long and unpredictable, and our sales efforts require considerable time and expense, which contribute to the unpredictability and variability of our financial performance and may adversely affect our profitability.
The timing of our revenue is difficult to predict as we experience extended sales cycles, due in part to our need to educate our customers about our products, the significant purchase price of our products, the desire of some of our customers to do extended product testing and evaluations, including pilot studies, and our customers’ willingness to replace their existing solutions and supplier relationships. Product purchases by our customers are often subject to a variety of other considerations that may extend the length of our sales cycle, including timing of their budget cycles and approval processes, budget constraints, extended negotiations, user surveys, administrative processing and other delays. In particular, government departments and agencies, both in the U.S. and in other countries, generally evaluate our products for critical, strategic applications. As a result, the piloting, testing and evaluation process can be extensive, and orders are often dependent on the availability of sufficient budgeted funds. The procurement processes for orders by government agencies may involve complex and time-consuming competitive bidding processes. Bid specifications and contract awards are subject to challenge by competitors, which can further extend the sales cycle. Furthermore, U.S. state and local hazardous material, emergency management and police organizations must often apply for grants to obtain the funds needed to procure our products, a process which is lengthy and unpredictable, particularly as to when and whether a grant will be awarded. As a result, our sales cycle ranges from several months to over a year, and it is difficult to predict when or if a sale to a potential customer will occur. All of these factors can contribute to fluctuations in our quarterly financial performance and increase the likelihood that our operating results in a particular quarter will fall below investor expectations. If we are unsuccessful in closing sales after expending significant resources, or if we experience delays for any of the reasons discussed above, our future revenue and operating expenses may be materially adversely affected.
Due to the significant resources required to enable access in new markets, we must make strategic and operational decisions to prioritize certain markets, technology offerings or partnerships and there can be no assurance that we will expend our resources in a way that results in meaningful revenue or capitalizes on potential new markets.
We believe our platform has potential applications across a wide range of markets and we have targeted certain markets in which we believe we have a higher probability of success or revenue opportunity or for which the path to commercialize products and realizing or achieving revenue is shorter. For example, in 2018 we entered into agreements regarding a specific government program opportunity to develop an aerosol vapor detector, and more recently we entered into several engagements related to the evaluation of our products within the cell therapy and gene therapy markets. We seek to continue to prioritize opportunities and allocate our resources among our programs to maintain a balance between advancing near-term opportunities and exploring additional markets for our technology. However, due to the significant resources required for the development of workflows for new markets, we must make decisions regarding which markets to pursue and the amount of resources to allocate to each. Our decisions concerning the allocation of research, development, collaboration, management and financial resources toward particular markets or workflows may not lead to the development of any viable product and may divert resources away from better opportunities. Similarly, our potential decisions to delay, terminate or collaborate with third parties in respect of certain markets may subsequently also prove to be suboptimal and could cause us to miss valuable opportunities. In particular, if we are unable to develop additional relevant products and applications for markets such as antibody therapeutics, cell therapy or the synbio market, it could slow or stop our business growth and negatively impact our business, financial condition, results of operations, and prospects.
If we market our products for clinical or diagnostic purposes, our products could become subject to onerous regulation by the U.S. Food and Drug Administration, or FDA, or other regulatory agencies in the future, which could increase our costs and delay or prevent commercialization of our products, thereby materially and adversely affecting our business, financial condition, results of operations, and prospects.
We make our platform and devices, including our MX908, Rebel, and ZipChip Interface, available to customers as research-use-only, or RUO, products. Products that are labeled as RUO are exempt
from compliance with most FDA requirements, including premarket clearance or approval, manufacturing requirements, and others. A product labeled RUO but which is actually intended for clinical diagnostic use may be viewed by the FDA as adulterated and misbranded under the Federal Food, Drug, and Cosmetic Act, or FDCA, and subject to FDA enforcement action. The FDA has indicated that when determining the intended use of a product labeled RUO, the FDA will consider the totality of the circumstances surrounding distribution and use of the product, including how the product is marketed and to whom. The FDA could disagree with our assessment that our products are properly marketed as RUOs, or could conclude that products labeled as RUO are actually intended for clinical diagnostic use, and could take enforcement action against us, including requiring us to stop distribution of our products until we are in compliance with applicable regulations, which would reduce our revenue, increase our costs and adversely affect our business, prospects, results of operations and financial condition. In the event that the FDA requires us to obtain marketing authorization of our RUO products in the future, there can be no assurance that the FDA will grant any clearance or approval requested by us in a timely manner, or at all. Furthermore, although we currently market our products as RUO, we may in the future make the decision to market them for clinical or diagnostic purposes, or may develop other different products intended for clinical or diagnostic purposes, which would result in the application of a more onerous set of regulatory requirements.
We depend on our key personnel and other highly qualified personnel, and if we are unable to recruit, train and retain our personnel, we may not achieve our goals.
Our future success depends on our ability to recruit, train, retain and motivate key personnel, including our senior management, research and development, manufacturing and sales, customer service and marketing personnel. In particular, Dr. Knopp, our Chief Executive Officer and one of our co-founders, and Dr. Brown, our Chief Technology Officer and one of our co-founders, are critical to our vision, strategic direction, culture and products. Each of our employees may terminate his or her relationship with us at any time and the loss of the services of such persons could have an adverse effect on our business. We rely on our senior management to manage our existing business operations and to identify and pursue new growth opportunities. The loss of any member of senior management could significantly delay or prevent the achievement of our business objectives and their replacement would likely involve significant time and expense.
As we continue to scale our business, we may find that certain of our products, certain customers or certain markets, including the biopharmaceutical market, may require a dedicated sales force or sales personnel with different experience than those whom we currently employ. Our continued growth will depend, in part, on attracting, retaining and motivating highly-trained sales personnel with the necessary scientific background and technical ability to understand our systems and effectively identify and sell to potential new customers. Identifying, recruiting and training additional qualified personnel will require significant time, expense and attention. In addition, the continued development of complementary software tools, such as our analysis tools and visualization software, requires us to compete for highly trained software engineers in the Boston area and for highly trained customer service personnel globally.
We do not have fixed term employment contracts with any of our employees. As a result, our employees could leave our company with little or no prior notice and would be free to work for a competitor, subject to the terms of their confidentiality, non-solicitation and intellectual property assignment agreements. Because of the complex and technical nature of our products and the dynamic market in which we compete, any failure to attract, train, retain and motivate qualified personnel could materially harm our operating results and growth prospects.
We may be unable to consistently manufacture our devices and consumables to the necessary specifications or in quantities necessary to meet demand at an acceptable cost or at an acceptable performance level.
Our products are integrated solutions with many different components that work together. As such, a quality defect in a single component can compromise the performance of the entire solution. As we continue to grow and introduce new products, and as our products incorporate increasingly sophisticated technology, it will be increasingly difficult to ensure our products are produced in the necessary quantities without sacrificing quality. There is no assurance that we or our third party manufacturers will be able to continue to manufacture our products so that they consistently achieve the product specifications and quality that our customers expect. Any future design issues, unforeseen manufacturing
problems, such as contamination of our or such third party facilities, equipment malfunctions, aging components, quality issues with components and materials sourced from third party suppliers, or failures to strictly follow procedures or meet specifications, may have a material adverse effect on our brand, business, financial condition and operating results and could result in us or our third party manufacturers losing International Organization for Standardization, or ISO, quality management certifications. If we or our third party manufacturers fail to maintain ISO quality management certifications, our customers might choose not to purchase products from us. Furthermore, we or our third party manufacturers may not be able to increase manufacturing to meet anticipated demand or may experience downtime.
In order to meet our customers’ needs, we attempt to forecast demand for our products and components used for the manufacture of our products. If we fail to accurately forecast this demand, we could incur additional costs or experience manufacturing delays and may experience lost sales or significant inventory carrying costs.
The risk of manufacturing defects or quality control issues is generally higher for new products, whether produced by us or a third party manufacturer, products that are transitioned from one manufacturer to another, particularly if manufacturing is transitioned or initiated with a manufacturer we have not worked with in the past, and products that are transferred from one manufacturing facility to another. We cannot assure investors that we and our third party manufacturers will be able to launch new products on time, transition manufacturing of existing products to new manufacturers, transition our manufacturing capabilities to a new location or transition manufacturing of any additional consumables in-house without manufacturing defects. An inability to manufacture products and components that consistently meet specifications, in necessary quantities and at commercially acceptable costs will have a negative impact and may have a material adverse effect on our business, financial condition and results of operations.
We depend on a continued supply of components and raw materials for our products from third party suppliers, and if shortages of these components or raw materials arise, we may not be able to secure enough components to build new products to meet customer demand or we may be forced to pay higher prices for these components.
We rely on a limited number of suppliers for several key components utilized in the assembly of our products, and in some cases, such as the glass in our microfluidic chips, swab samplers, and sensors within our products, we rely on a single supplier for a particular component, subassembly or consumable. Although in many cases we use standard components for our products, in some cases, components may only be purchased from a limited number of suppliers. In particular, we are dependent on single suppliers for our Rebel autosampler subassemblies and our MX908 consumables. If, for any reason, our access to these swab samplers is limited or delayed, we would need to quickly identify and qualify an alternate source of swab samplers. Identifying and qualifying an alternate source may take time and involve additional expense, and there is no guarantee that the alternate source will perform as expected. If our customers experienced a shortage or delay in consumables, such as swab samplers, microfluidic chips, or assay kits, or if these consumables do not perform at the levels our customers expect, our business could be materially and adversely impacted.
In addition, we maintain relatively low inventory and acquire components based upon anticipated annual demand. Neither we nor our contract manufacturers enter into long-term supply contracts for these components, and none of our third party suppliers is obligated to supply products to us for any specific period or in any specific quantities, except as may be provided in a particular purchase order. We are not a major customer of many of our suppliers, and these suppliers may therefore give other customers’ needs higher priority than ours. Our industry has experienced component shortages and delivery delays in the past, and we may experience shortages or delays of critical components in the future as a result of strong demand in the industry or other factors. Many of the other components required to build our systems are also occasionally in short supply. Therefore, if shortages or delays arise, we may not be able to secure enough components at reasonable prices or of acceptable quality to build new products, resulting in an inability to meet customer demand or our own operating goals, which could adversely affect our customer relationships, business, operating results and financial condition.
Additionally, damage to a manufacturing facility or other property of any of our suppliers, due to fire, flood or other natural disaster or casualty event may have a material adverse effect on our business, financial condition and results of operations.
Our current research and development efforts may not produce significant revenue for several years, if at all.
Developing our products is expensive, and the investment in product development may involve a long payback cycle. Our investment in research and development may not result in marketable products or may result in products that take longer to generate revenue, or generate less revenue, than we anticipate. For the year ended December 31, 2019 and the nine months ended September 30, 2020, our research and development expenses were $9.0 million, or 50% of our total revenue, and $6.0 million, or 28% of our total revenue, respectively. Our future plans include significant investments in research and development of product opportunities for expansion of our handheld products and new application areas for our desktop products. We believe that we must continue to dedicate a significant amount of resources to our research and development efforts to maintain our competitive position. However, we may not receive significant revenue from these investments for several years, if at all.
Undetected errors or defects in our products, or errors made by the end users of our products, could harm our reputation and decrease market acceptance of our products.
Our devices and consumables, as well as the software that accompanies them, may contain undetected errors or defects when first introduced or as new versions are released. Disruptions or other performance problems with our products or software may adversely impact our customers’ research or business, harm our reputation and result in reduced revenue or increased costs associated with product repairs or replacements. Further, in the event that an end user makes an error or fails to analyze a particular substance correctly, our product may be associated with a failure to identify a substance that ultimately turns out to be harmful, or, conversely, be associated with a false alarm raised over a substance that turns out to be benign. We also provide customer support services, such as in connection with our “Reachback” program described in the “Business” section of this prospectus. It is possible that incorrect or inaccurate information may be delivered to a customer in the context of one or more support consultations. If any such errors or mistakes occur, we may also incur significant costs, the attention of our key personnel could be diverted or other significant customer relations problems may arise. We may also be subject to unwanted media attention, warranty claims or breach of contract for damages related to errors or defects in our products and solutions.
If we experience a significant disruption in our information technology systems or breaches of data security, our business could be adversely affected.
We rely on information technology systems to keep financial records, facilitate our research and development initiatives, manage our manufacturing operations, maintain quality control, fulfill customer orders, maintain corporate records, communicate with staff and external parties and operate other critical functions. Our information technology systems are potentially vulnerable to disruption due to breakdown, malicious intrusion and computer viruses or other disruptive events including, but not limited, to natural disasters and catastrophes. Cyberattacks and other malicious internet-based activity continue to increase and cloud-based platform providers of services have been and are expected to continue to be targeted. In addition to traditional computer hackers, malicious code (such as viruses and worms), employee theft or misuse, denial-of-service attacks and sophisticated nation-state and nation-state supported actors now engage in attacks (including advanced persistent threat intrusions). Despite significant efforts to create security barriers to such threats, it is virtually impossible for us to entirely mitigate these risks. If our security measures are compromised as a result of third party action, employee or customer error, malfeasance, stolen or fraudulently obtained log-in credentials or otherwise, our reputation could be damaged, our business may be harmed and we could incur significant liability. If we were to experience a prolonged system disruption in our information technology systems or those of certain of our vendors, it could negatively impact our ability to serve our customers, which could adversely impact our business. If operations at our facilities were disrupted, it may cause a material disruption in our business if we are not capable of restoring functionality on an acceptable timeframe. In addition, our information technology systems (and those of our vendors and partners) are potentially vulnerable to data security breaches, whether by internal bad actors (e.g., employees) or external bad actors (attacks of which are becoming increasingly sophisticated, including social
engineering and phishing scams), which could lead to the exposure of personal data, sensitive data and confidential information to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property, or could lead to the exposure of personal information (including sensitive personal information) of our employees, customers and others, any of which could have a material adverse effect on our business, reputation, financial condition and results of operations.
In addition, any such access, disclosure or other loss or unauthorized use of information or data could result in legal claims or proceedings, regulatory investigations or actions, and other types of liability under laws that protect the privacy and security of personal information, including federal, state and foreign data protection and privacy regulations, violations of which could result in significant penalties and fines. In addition, although we seek to detect and investigate all data security incidents, security breaches and other incidents of unauthorized access to our information technology systems and data can be difficult to detect and any delay in identifying such breaches or incidents may lead to increased harm and legal exposure of the type described above.
The cost of investigating, mitigating and responding to potential data security breaches and complying with applicable breach notification obligations to individuals, regulators, partners and others can be significant. Our insurance policies may not be adequate to compensate us for the potential costs and other losses arising from such disruptions, failures or security breaches. In addition, such insurance may not be available to us in the future on economically reasonable terms, or at all. Further, defending a suit, regardless of its merit, could be costly, divert management attention and harm our reputation.
Our international operations may raise additional risks, which could have an adverse effect on our operating results.
For the year ended December 31, 2019 and the nine-month period ended September 30, 2020, international revenue accounted for 24% and 14%, respectively, of our total revenue. We expect our international revenue and operations will continue to expand in the future. Our international operations are subject to a variety of risks that we do not face in the United States, including:
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the difficulty of increased travel, infrastructure and legal compliance costs associated with developing international revenue;
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difficulties in enforcing contracts, collecting accounts receivable and longer payment cycles, especially in emerging markets;
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many, if not most, foreign governments are investing less in safety and security and in technology to detect dangerous chemicals than the U.S. government;
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general economic conditions in the countries in which we operate;
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additional withholding taxes or other taxes on our foreign income, and tariffs or other restrictions on foreign trade or investment;
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compliance with privacy and data security requirements in foreign jurisdictions in which we operate;
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imposition of, or unexpected adverse changes in, foreign laws or regulatory requirements, many of which differ from those in the United States;
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costs and delays associated with developing products or technology in multiple languages, such as the software embedded in our products and the products’ built-in library of chemical substances;
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compliance with foreign technical standards;
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increased length of time for shipping and acceptance of our products;
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increased exposure to foreign currency exchange rate risk;
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reduced protection for intellectual property rights in some countries; and
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political unrest, war, incidents of terrorism, or responses to such events.
As we continue to expand our business globally, our success will depend, in large part, on our ability to anticipate and effectively manage these and other risks associated with our international operations.
Our overall success in international markets depends, in part, on our ability to succeed in differing legal, regulatory, economic, social and political conditions. We may not be successful in developing and implementing policies and strategies that will be effective in managing these risks in each country where we do business. Our failure to manage these risks successfully could harm our international operations, reduce our international sales and increase our costs, thus adversely affecting our business, operating results and financial condition.
Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could subject us to significant fines and penalties, which may have a material adverse effect on our business, financial condition or results of operations.
The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Internationally, laws, regulations and standards in many jurisdictions apply broadly to the collection, use, retention, security, disclosure, transfer and other processing of personal information. For example, the European General Data Protection Regulation, or the GDPR, which took effect across all member states of the European Economic Area, or the EEA, in May 2018, greatly increased the European Commission’s jurisdictional reach of its laws and adds a broad array of requirements for handling personal data. The GDPR, together with national legislation, regulations and guidelines of the EEA member states and the United Kingdom governing the processing of personal data, impose strict obligations and restrictions on the ability to collect, use, retain, protect, disclose, transfer and otherwise process personal data. In particular, the GDPR includes obligations and restrictions concerning the consent and rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area or the United Kingdom, security breach notifications and the security and confidentiality of personal data. The GDPR authorizes fines for certain violations of up to 4% of global annual revenue or €20 million, whichever is greater.
All of these evolving compliance and operational requirements may require us to modify our data processing practices and policies, which in turn could distract management or divert resources from other initiatives and projects. Any failure or perceived failure by us to comply with any applicable laws and regulations relating to data privacy and security could result in damage to our reputation, as well as proceedings or litigation by governmental agencies or other third parties, including class action privacy litigation in certain jurisdictions, which would subject us to significant fines, sanctions, awards, penalties or judgments, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
Our loan and security agreement contains covenants, which restrict our operating activities, and we may be required to repay the outstanding indebtedness in an event of default, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
On August 29, 2019, we entered into a loan and security agreement, which was subsequently amended, with Signature Bank, pursuant to which the Signature Bank agreed to provide us a $15.0 million term loan facility with a maturity date of August 1, 2023. The full amount of the loan was funded on August 29, 2019. Until we have repaid such indebtedness, the loan and security agreement subjects us to various customary covenants, including requirements as to financial reporting, financial covenants (including unrestricted minimum cash levels) and insurance and restrictions on our ability to dispose of our business or property, to change our line of business, to liquidate or dissolve, to enter into any change in control transaction, to merge or consolidate with any other entity or to acquire all or substantially all the capital stock or property of another entity, to incur additional indebtedness, to incur liens on our property, to pay any dividends or make other distributions on capital stock other than dividends payable solely in capital stock, to redeem capital stock, to enter into in-bound licensing agreements, to engage in transactions with affiliates, and to encumber our intellectual property. Our business may be adversely affected by these restrictions on our ability to operate our business.
We are permitted to make interest-only payments on the loan facility through February 2021, at which time principal amortization begins. However, we may be required to repay the outstanding indebtedness under the loan facility if an event of default occurs under the loan and security agreement. An event of default will occur if, among other things, we fail to make required payments under the loan
and security agreement; we breach any of our covenants under the loan and security agreement, subject to specified cure periods with respect to certain breaches; the lender determines that a material adverse change (as defined in the loan and security agreement) has occurred; we or our assets become subject to certain legal proceedings, such as bankruptcy proceedings; we are unable to pay our debts as they become due; or we default on contracts with third parties which would permit the third party to accelerate the maturity of such indebtedness or that could have a material adverse change on us. We may not have enough available cash or be able to raise additional funds through equity or debt financings to repay such indebtedness at the time any such event of default occurs. In such a case, we may be required to delay, limit, reduce or terminate our product development or operations or grant to others rights to develop and market products that we would otherwise prefer to develop and market ourselves. The lender could also exercise its rights as secured lender to take possession of and to dispose of the collateral securing the term loan, which collateral includes substantially all of our property (excluding intellectual property, which is subject to a negative pledge). Our business, financial condition, results of operations, and prospects could be materially adversely affected as a result of any of these events.
The majority of our operations are currently conducted at a single location and any disruption at our facility could negatively impact our operations and increase our expenses.
Our headquarters in Boston, Massachusetts contains nearly all of our corporate and administrative functions, the majority of our research, and all of our in-house manufacturing. A natural or other disaster, such as a fire or flood, could cause substantial delays in our operations, damage or destroy our manufacturing equipment or inventory, and cause us to incur additional expenses. The insurance we maintain against fires, floods and other natural disasters may not be adequate to cover our losses in any particular case. With or without insurance, damage to our manufacturing facility or our other property, or to any of our suppliers, due to fire, flood or other natural disaster or casualty event may have a material adverse effect on our business, financial condition and results of operations.
Risks related to sales of products to the U.S. Government
For the year ended December 31, 2019 and the nine months ended September 30, 2020, revenue from government customers accounted for 67% and 77%, respectively, of our product and service revenue. The majority of these product and service revenue were generated from agencies and departments of the U.S. government. In addition, substantially all of our revenue from license and contracts revenue are derived from contracts or sub-contracts related to the U.S. government. We expect significant revenue from U.S. government contracts for the foreseeable future. There is considerable risk associated with deriving a material portion of our revenue from sales to the U.S. government, including the risks described below.
A significant portion of our business depends on sales to the public sector, and our failure to receive and maintain government contracts or changes in the contracting or fiscal policies of the public sector could have a material adverse effect on our business.
We derive a significant portion of our revenue from contracts that we have, either directly or through distribution partners, with federal, state, local and foreign governments and government agencies, and we believe that the success and growth of our business will continue to depend on our successful procurement of government contracts. For example, we have historically derived, and expect to continue to derive, a significant portion of our revenue from sales to agencies of the U.S. federal government, either directly by us or through other distribution partners.
Sales to such government agencies are subject to a number of challenges and risks. Selling to government agencies can be highly competitive, expensive and time-consuming, often requiring significant upfront time and expense, without any assurance that these efforts will generate a sale. We also must comply with laws and regulations relating to the formation, administration and performance of contracts, which provide public sector customers certain rights that are not typically found in commercial contracts.
Accordingly, our business, financial condition, results of operations, and prospects may be adversely affected by certain events or activities, including, but not limited to:
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changes in fiscal or contracting policies or decrease in available government funding;
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changes in government programs or applicable requirements;
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changes in the political environment, including before or after a change to the leadership within the government administration, and any resulting uncertainty or changes in policy or priorities and resultant funding;
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appeals, disputes or litigation relating to government procurement, including but not limited to bid protests by unsuccessful bidders on potential or actual awards of contracts to us or our partners by the government;
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the adoption of new laws or regulations or changes to existing laws or regulations;
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budgetary constraints, including automatic reductions as a result of “sequestration” or similar measures and constraints imposed by lapses in appropriations for the federal government or certain of its departments and agencies;
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influence by, or competition from, third parties with respect to pending, new or existing contracts with government customers;
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potential delays or changes in the government appropriations or procurement processes, including as a result of events such as war, incidents of terrorism, natural disasters, and public health concerns or epidemics, such as the recent COVID-19 outbreak; and
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increased or unexpected costs or unanticipated delays caused by other factors outside of our control, such as performance failures of our partners and subcontractors.
Any such event or activity, among others, could cause governments and governmental agencies to delay or refrain from purchasing our products and services in the future, reduce the size or payment amounts of purchases from existing or new government customers, or otherwise have an adverse effect on our business, results of operations, financial condition and prospects.
U.S. government programs are limited by budgetary constraints and political considerations and are subject to uncertain future funding levels that could result in the termination of programs.
U.S. government agency and department purchases are often strategic in nature and large in size. Therefore, reductions in federal funding levels that impact our customers could negatively affect the size of our customers’ orders or lead to cancellation of orders. Government contracts are often subject to more extensive scrutiny and publicity than commercial contracts. The number and terms of new government contracts signed can be affected significantly by political and economic factors, such as pending elections and revisions to government tax policies. Negative publicity related to our government contracts, regardless of its accuracy, may damage our business by affecting our ability to compete for new contracts. A decline in security-related government spending for any reason, or a shift away from programs that we address, could hurt our sales, put pressure on our prices and reduce our revenue and margins.
A multi-year U.S. government program may be implemented through the award of many different individual contracts, grants, cooperative agreements and subcontracts or other subawards. For U.S. government programs, program funding is subject to Congressional appropriations. Congress generally appropriates funds on a fiscal year basis even though a program may continue for several years. Government programs are often only partially funded initially, and additional funds are committed only as Congress makes further appropriations. The termination of a program or failure to commit funds to a program would result in a loss of anticipated future revenue attributable to that program, which could materially harm our business.
Our contracts with the U.S. government may impose requirements that may be unfavorable to us and that may have a material adverse effect on our growth prospects and operating results.
There are inherent risks in contracting with the U.S. government. The U.S. government can typically terminate, reduce orders under or otherwise modify any of its contracts with us for its convenience (i.e., without cause) whether or not we have failed to perform under the terms of the applicable contract. In such case, the government would not be required to pay us for the lost profits for the unperformed work. A termination arising out of our default could expose us to liability and harm our ability to compete for future contracts and orders. In addition to unfavorable termination provisions, our U.S. government contracts and related regulations contain provisions that allow the U.S. government to unilaterally suspend us from receiving new contracts pending resolution of alleged
violations of procurement laws or regulations, reduce the value of existing contracts, issue modifications to a contract and potentially restrict exports of our products, services and associated materials.
Our contracts with government agencies may subject us to other risks and give the government additional rights and remedies not typically found in commercial contracts, including rights that allow the government to, for example:
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obtain detailed cost or pricing information;
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receive “most favored customer” pricing;
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perform routine audits;
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impose equal employment and hiring standards;
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require products to be manufactured in specified countries;
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restrict non-U.S. ownership or investment in our company; and/or
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pursue administrative, civil or criminal remedies for contractual violations.
These rights and remedies have the potential to limit our sales to, and increase our costs of, doing business with both government and commercial customers, which could materially adversely affect our growth prospects and operating results.
We are subject to audits by the U.S. government which could adversely affect our business.
U.S. government agencies routinely audit and investigate government contractors to monitor performance, cost allocations, cost accounting and compliance with applicable laws, regulations and standards. Since some of our contracts provide for cost reimbursement, the U.S. government has the right to audit our costs even after job completion and after we have billed and recognized the corresponding revenue. The U.S. government also may review the adequacy of, and a contractor’s compliance with, its internal control systems and policies, including the contractor’s purchasing, property, estimating, compensation and management information systems. Any costs found to be improperly allowed or improperly allocated to a specific contract will not be reimbursed, and any such costs that have already been reimbursed must be refunded, which would affect associated revenue that had already been recognized. While we intend to implement uniform procurement and compliance programs for all of our business, we may be subject to more risks from these audits until we are able to implement such a program effectively.
Responding to governmental audits, inquiries or investigations may involve significant expense and divert the attention of our management. If a government review or investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, damages, fines and suspension or debarment from doing business with U.S. government agencies. In addition, our reputation could be seriously harmed by allegations of impropriety, even if unfounded. Our internal controls may not prevent or detect all improper or illegal activities.
Our business is subject to laws and regulations that are more restrictive because we are a contractor and subcontractor to the U.S. government.
As a contractor and subcontractor to the U.S. government, we are subject to various laws and regulations that are more restrictive than those applicable to non-government contractors, including the Federal Acquisition Regulations and its supplements, which comprehensively regulate the formation, administration and performance of U.S. government contracts, and the Truth in Negotiations Act and various other laws, which require certain certifications and disclosures. These laws and regulations, among other things:
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require that we obtain and maintain material governmental authorizations and approvals to conduct our business as it is currently conducted;
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require certification and disclosure of cost and pricing data in connection with certain contract negotiations;
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impose rules that define allowable and unallowable costs and otherwise govern our right to reimbursement under certain cost-based U.S. government contracts;
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restrict the use and dissemination of information classified for national security purposes and the export of certain products and technical data; and
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impose requirements relating to ethics and business practices, which carry penalties for noncompliance ranging from monetary fines and damages to loss of the ability to do business with the U.S. government as a prime contractor or subcontractor.
In addition, we may be subject to industrial security regulations of the U.S. Department of Defense and other federal agencies that are designed to safeguard against unauthorized access by foreigners and others to classified and other sensitive U.S. government information. If we were to come under foreign ownership, control or influence, our U.S. government customers could terminate, or decide not to renew, our contracts, or we may be subjected to burdensome industrial security compliance measures. Such a situation could impair our ability to obtain new contracts and subcontracts. The government may also change its procurement practices or adopt new contracting rules and regulations that could be costly to satisfy or that could impair our ability to obtain new contracts.
Risks related to litigation and our intellectual property
We rely on in-bound licenses granted to us from third parties. If we lose these rights, our business may be materially adversely affected, our ability to develop improvements to our existing products and to develop new products may be negatively and substantially impacted, and if disputes arise, we may be subjected to future litigation as well as the potential loss of or limitations on our ability to develop and commercialize products and technology covered by these license agreements.
We are party to royalty-bearing license agreements and we may need to obtain additional licenses from others to advance our research, development and commercialization activities. Our current license agreements impose, and we expect that any future exclusive in-bound license agreements will impose, various development, diligence, commercialization and other obligations on us. We have also entered into engagements in the past, and may enter into engagements in the future, with other partners and customers under which we obtain certain intellectual property rights relating to our platform and technology. These engagements take the form of exclusive licenses, non-exclusive licenses, or assignment of actual ownership of intellectual property rights or technology from third parties. Our rights to use the technology we license are subject to the continuation of and compliance with the terms of those agreements. In some cases, we may not control the prosecution, maintenance or filing of the patents and patent applications to which we hold licenses, or the enforcement of those patents against third parties.
Moreover, disputes may arise with respect to our licensing or other upstream agreements, including:
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the scope of rights granted under the agreements and other interpretation-related issues;
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the extent to which our systems and consumables, technology and processes infringe on intellectual property rights of the licensor that are not licensed under the licensing agreement;
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the sublicensing of patent and other rights under our collaborative development relationships;
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our diligence obligations under the license agreements and what activities satisfy those diligence obligations;
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the inventorship and ownership of inventions and know-how resulting from the joint creation or use of intellectual property by our licensors and us and our partners; and
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the priority of invention of patented technology.
In spite of our efforts to comply with our obligations under our in-bound license agreements, our licensors might conclude that we have materially breached our obligations under our license agreements and might therefore, including in connection with any aforementioned disputes, terminate the relevant license agreement, thereby removing or limiting our ability to develop and commercialize products and technology covered by these license agreements. If any such in-bound license is terminated, or if the licensed patents fail to provide the scope of exclusivity expected, competitors or other third parties might have the freedom to market, develop, or commercialize products similar to ours. In addition, absent the rights granted to us under such license agreements, we may infringe the intellectual property rights that are the subject of those agreements, we may be subject to litigation by the licensor, and if such litigation by the licensor is successful we may be required to pay damages to our licensor, or we may be required to cease our development and commercialization activities which are deemed infringing,
and in such event we may ultimately need to modify our activities or products to design around such infringement, which may be time- and resource-consuming, and which may not be ultimately successful. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations, and prospects.
In addition, our rights to certain technologies are licensed to us on a non-exclusive basis. The owners of these non-exclusively licensed technologies are therefore free to license them to third parties, including our competitors, on terms that may be superior to those offered to us, which could place us at a competitive disadvantage. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights. In addition, certain of our agreements with third parties may provide that intellectual property arising under these agreements, such as data that could be valuable to our business, will be owned by the counterparty, in which case, we may not have adequate rights to use such data or have exclusivity with respect to the use of such data, which could result in third parties, including our competitors, being able to use such data to compete with us.
Patent terms may be inadequate to protect our competitive position on our products for an adequate amount of time.
Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our products are obtained, once the patent life has expired, we may be open to competition from competitive products. If one of our products requires extended development, testing, regulatory review and/or examination by a patent granting authority, patents protecting such products might expire before or shortly after such products are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to ours.
Obtaining and maintaining our patent protection depends on compliance with various required procedures, document submissions, fee payments and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for non-compliance with these requirements.
Periodic maintenance fees, renewal fees, annuity fees and various other governmental fees on patents and/or applications will be due to be paid to the U.S. Patent and Trademark Office, or the USPTO, and various governmental patent agencies outside of the United States at several stages over the lifetime of the patents and/or applications. We have systems in place to remind us to pay these fees, and we engage an outside service and rely on our outside counsel to pay these fees due to non-U.S. patent agencies. The USPTO and various non-U.S. governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process. We employ reputable law firms and other professionals to help us comply, and in some cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are situations in which non-compliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, our competitors may be able to enter the market without infringing our patents and this circumstance may have a material adverse effect on our business.
Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our products.
Changes in either the patent laws or in interpretations of patent laws in the United States or other countries or regions may diminish the value of our intellectual property. We cannot predict the breadth of claims that may be allowed or enforced in our patents or in third party patents. We may not develop additional proprietary products, methods and technologies that are patentable.
Assuming that other requirements for patentability are met, prior to March 16, 2013, in the United States, the first to invent the claimed invention was entitled to the patent, while outside the United States, the first to file a patent application was entitled to the patent. On or after March 16, 2013, under the Leahy-Smith America Invents Act, or the America Invents Act, enacted in September 16, 2011, the United
States transitioned to a first inventor to file system in which, assuming that other requirements for patentability are met, the first inventor to file a patent application will be entitled to the patent on an invention regardless of whether a third party was the first to invent the claimed invention. A third party that files a patent application in the USPTO on or after March 16, 2013, but before us could therefore be awarded a patent covering an invention of ours, even if we had made the invention before it was made by such third party. This requires us to be cognizant of the time from invention to filing of a patent application. Since patent applications in the United States and most other countries are confidential for a period of time after filing or until issuance, we cannot be certain that we or our licensors were the first to either (i) file any patent application related to our products or (ii) invent any of the inventions claimed in our or our licensor’s patents or patent applications.
The America Invents Act also includes a number of significant changes that affect the way patent applications are prosecuted and also affects patent litigation. These include allowing third party submission of prior art to the USPTO during patent prosecution and additional procedures to attack the validity of a patent by USPTO administered post-grant proceedings, including post-grant review, inter partes review and derivation proceedings. Because of a lower evidentiary standard in USPTO proceedings compared to the evidentiary standard in United States federal courts necessary to invalidate a patent claim, a third party could potentially provide evidence in a USPTO proceeding sufficient for the USPTO to hold a claim invalid, even though the same evidence would be insufficient to invalidate the claim if first presented in a district court action. Accordingly, a third party may attempt to use the USPTO procedures to invalidate our patent claims that would not have been invalidated if first challenged by the third party as a defendant in a district court action. Therefore, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our owned or in-bound licensed patent applications and the enforcement or defense of our owned or in-bound licensed issued patents, all of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
In addition, the patent position of companies in the biotechnology field is particularly uncertain. Various courts, including the United States Supreme Court have rendered decisions that affect the scope of patentability of certain inventions or discoveries relating to biotechnology. These decisions state, among other things, that a patent claim that recites an abstract idea, natural phenomenon or law of nature are not themselves patentable. Precisely what constitutes a law of nature or abstract idea is uncertain, and it is possible that certain aspects of our technology could be considered natural laws. Accordingly, the evolving case law in the United States may adversely affect our ability to obtain patents and may facilitate third party challenges to any owned or licensed patents.
Our ability to compete and the success of our business could be jeopardized if we are unable to protect our intellectual property adequately.
Our success depends to a degree upon the protection of our proprietary technology and obtaining, maintaining and enforcing our intellectual property and other proprietary rights. We rely on a combination of trade secrets, patents, copyrights, trademarks and contractual provisions with employees, contract manufacturers, consultants, customers and other third parties to establish and protect our intellectual property rights, all of which offer only limited protection. Other parties may not comply with the terms of their agreements with us, and we may not be able to enforce our rights adequately against these parties.
Although we enter into confidentiality, assignments of proprietary rights and license agreements, as appropriate, with our employees and third parties, including our contract manufacturers, contract engineering firms, and generally control access to and distribution of our technologies, documentation and other proprietary information, we cannot be certain that the steps we take to prevent unauthorized use of our intellectual property rights are sufficient to prevent their misappropriation, particularly in foreign countries where laws or law enforcement practices may not protect our intellectual property rights as fully as in the United States. In addition, we rely on trade secrets to protect certain of our technologies, especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect. Although we use reasonable efforts to protect our trade secrets, our employees and third parties to whom our trade secrets are disclosed may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third-party entity illegally obtained
and is using any of our trade secrets is expensive and time-consuming, and the outcome is unpredictable. In addition, courts outside the U.S. are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge, methods and know-how.
If competitors are able to use our technology, our ability to compete effectively could be harmed. For example, if a competitor were to gain use of certain of our proprietary technology, it might be able to develop and manufacture similarly designed solutions at a reduced cost, which would result in a decrease in demand for our products.
Furthermore, we have adopted a strategy of seeking limited patent protection both in the United States and in foreign countries with respect to the technologies used in or relating to our products. We do not know whether any of our pending patent applications will result in the issuance of patents or whether the examination process will require us to narrow our claims, and even if patents are issued, they may be contested, circumvented or invalidated over the course of our business. Moreover, the rights granted under any issued patents may not provide us with proprietary protection or competitive advantages, and, as with any technology, competitors may be able to develop and obtain patents for technologies that are similar to or superior to our technologies. If that happens, we may need to license these technologies and we may not be able to obtain licenses on reasonable terms, if at all, thereby causing great harm to our business. Additionally, the determination that a patent application or patent claim meets all of the requirements for patentability is a subjective determination based on the application of law and jurisprudence. The ultimate determination by the USPTO or by a court or other trier of fact in the U.S., or corresponding foreign national patent offices or courts, on whether a claim meets all requirements of patentability cannot be assured. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in our patents or patent applications, in our licensed patents or patent applications or in third-party patents.
Even in those instances where we have determined that another party is breaching our intellectual property and other proprietary rights, enforcing our legal rights with respect to such breach may be expensive and difficult. We may need to engage in litigation to enforce or defend our intellectual property and other proprietary rights, which could result in substantial costs and diversion of management resources. Further, many of our current and potential competitors are substantially larger than we are and have the ability to dedicate substantially greater resources to defending any claims by us that they have breached our intellectual property rights.
Failure to protect our intellectual property could affect our ability to secure additional contracts or preserve market advantages when we commercialize our products.
We may not be able to protect our intellectual property rights throughout the world.
Filing, prosecuting and defending patents on our products in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as the laws of the United States, and we may encounter difficulties in protecting and defending such rights in foreign jurisdictions. Consequently, we may not be able to prevent third parties from practicing our inventions in some or all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and may also export infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These products may compete with our products. Our patents or other intellectual property rights may not be effective or sufficient to prevent them from competing. In addition, certain countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to other parties. Furthermore, many countries limit the enforceability of patents against other parties, including government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of any patents.
Many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. The legal systems of many other countries do not favor the enforcement of patents and other intellectual property protection, particularly those relating to
biotechnology, which could make it difficult for us to stop the misappropriation or other violations of our intellectual property rights including infringement of our patents in such countries. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business, could put our patents at risk of being invalidated or interpreted narrowly and our patent applications at risk of not issuing, and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, or that are initiated against us, and the damages or other remedies awarded, if any, may not be commercially meaningful. In addition, changes in the law and legal decisions by courts in the United States and foreign countries may affect our ability to obtain adequate protection for our products, services and other technologies and the enforcement of intellectual property. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
We may be obligated to disclose our proprietary technology to our customers, which may limit our ability to protect our intellectual property.
Certain customer agreements contain provisions permitting the customer to become a party to, or a beneficiary of, a technology escrow agreement under which we place proprietary know-how and source code for our products in escrow with a third party. Under these escrow agreements, the know-how and source code to the applicable product may be released to the customer, typically for its use to further develop, maintain, modify and enhance the product, upon the occurrence of specified events, such as our filing for bankruptcy and breaching our representations, warranties or covenants of our agreements with our customers. Disclosing this know-how and source code may limit the intellectual property protection we can obtain or maintain for that know-how or source code or the products embodying or containing that know-how or source code, and may facilitate intellectual property infringement claims against us. Each of these could harm our business, results of operations and financial condition.
Issued patents covering our products could be found invalid or unenforceable if challenged.
Although patents granted by the USPTO or other patent granting authority are generally entitled to a presumption of validity and enforceability, a granted patent’s scope, validity or enforceability can still be challenged. Some of our patents or patent applications (including in-bound licensed patents) have been or may be challenged at a future point in time in opposition, derivation, reexamination, inter partes review, post-grant review or interference. Any successful third party challenge to our patents in this or any other proceeding could result in the unenforceability or invalidity of such patents, which may lead to increased competition to our business, which could harm our business. In addition, in patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on certain aspects of our platform technologies. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, regardless of the outcome, it could dissuade companies from collaborating with us to license, develop, or commercialize current or future products.
We may not be aware of all third party intellectual property rights potentially relating to our products. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the United States and other jurisdictions are typically not published until approximately 18 months after filing or, in some cases, not until such patent applications issue as patents. Moreover, we may not search for or identify all relevant third party patents or we may incorrectly interpret the relevance, scope or expiration of a third-party patent of which we are aware. We might not have been the first to make the inventions covered by each of our pending patent applications and we might not have been the first to file patent applications for these inventions. To determine the priority of these inventions, we may have to participate in interference proceedings, derivation proceedings or other post-grant proceedings declared by the USPTO that could result in substantial cost to us. The outcome of such proceedings is uncertain. No assurance can be given that other patent applications will not have priority over our patent applications. In addition, changes to the patent laws of the United States allow for various post-grant opposition proceedings that have not been extensively tested, and their outcome is therefore uncertain. Furthermore, if third parties bring these proceedings against our patents, we could experience significant costs and management distraction.
Claims by other parties that we infringe or misuse their proprietary technology could subject us to significant liability and could force us to redesign our products or to incur significant costs.
Our competitors protect their intellectual property rights by means such as trade secrets, patents, copyrights and trademarks. Although we have not been involved in any litigation related to intellectual property rights of others, from time to time we receive letters from other parties alleging, or inquiring about, breaches of their intellectual property rights. Any party asserting that our products infringe their proprietary rights would force us to defend ourselves, and possibly our customers, against the alleged infringement. These claims and any resulting lawsuit, if successful, could subject us to significant liability for damages and invalidation of our proprietary rights. The risk of such a lawsuit will likely increase as our size and the number and scope of our products increase, as our geographic presence and market share expand and as the number of competitors in our market increases. Any such claims or litigation could:
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be time-consuming and expensive to defend, whether meritorious or not;
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require us to stop selling, incorporating or using our products that use the other party’s intellectual property;
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divert the attention of our technical and managerial resources;
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require us to enter into royalty or licensing agreements with third parties, which may not be available on terms that we deem acceptable, if at all;
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prevent us from operating all or a portion of our business or force us to redesign our products, which could be difficult and expensive and may degrade performance of our products, or withdraw one or more of our products altogether;
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subject us to significant liability for damages or result in significant settlement payments;
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require us to indemnify our customers, distribution partners or suppliers; and
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refund deposits and other amounts received for allegedly infringing technology or products.
Intellectual property litigation can be costly. Even if we prevail, the cost of such litigation could deplete our financial resources. Litigation is also time-consuming and could divert management’s attention and resources away from our business. Furthermore, during the course of litigation, confidential information may be disclosed in the form of documents or testimony in connection with discovery requests, depositions or trial testimony. Disclosure of our confidential information and our involvement in intellectual property litigation could materially adversely affect our business. Some of our competitors may be able to sustain the costs of complex intellectual property litigation more effectively than we can because they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could significantly limit our ability to continue our operations. Any of the foregoing could disrupt our business and have a material adverse effect on our operating results and financial condition.
In the future we may be involved in litigation related to intellectual property, which could be time-intensive and costly and may adversely affect our business, financial condition, results of operations, and prospects.
In recent years, there has been significant litigation in the United States involving intellectual property rights. We may in the future be, involved with litigation or actions at the USPTO or a foreign patent office with various third parties that claim we or our partners or customers using our solutions and services have misappropriated or misused other parties’ intellectual property rights. We expect that the number of such claims may increase as the number of our systems, workflows, consumables and kits, and the level of competition in our industry segments, grow. Any infringement claim, regardless of its validity, could harm our business by, among other things, resulting in time-consuming and costly litigation, diverting management’s time and attention from the development of the business, requiring the payment of monetary damages (including treble damages, attorneys’ fees, costs and expenses) or royalty payments, or result in potential or existing customers delaying purchases of our products or entering into engagements with us pending resolution of the dispute.
As we move into new markets and applications for our products, incumbent participants in such markets may assert their patents and other proprietary rights against us as a means of slowing our entry into such markets or as a means to extract substantial license and royalty payments from us. Our competitors and others may now and in the future have significantly larger and more mature patent
portfolios than we currently have. In addition, future litigation may involve patent holding companies or other adverse patent owners who have no relevant product or service revenue and against whom our own patents may provide little or no deterrence or protection. Therefore, our commercial success may depend in part on our non-infringement of the patents or proprietary rights of third parties, or the invalidity of such patents or proprietary rights.
Our research, development and commercialization activities may in the future be subject to claims that we infringe or otherwise violate patents or other intellectual property rights owned or controlled by third parties. There is a substantial amount of litigation and other patent challenges, both within and outside the United States, involving patent and other intellectual property rights in the biotechnology industry, including patent infringement lawsuits, interferences, oppositions and inter partes review proceedings before the USPTO, and corresponding foreign patent offices. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields in which we are developing products. As the biotechnology industry expands and more patents are issued, the risk increases that our products may be subject to claims of infringement of the patent rights of third parties. Numerous significant intellectual property issues have been litigated, are being litigated and will likely continue to be litigated, between existing and new participants in our existing and targeted markets, and one or more third parties may assert that our products or services infringe their intellectual property rights as part of a business strategy to impede our successful entry into or growth in those markets.
There can be no assurance that we will prevail in any suit initiated against us by third parties, successfully settle or otherwise resolve patent infringement claims. Third parties making claims against us may be able to obtain injunctive or other relief, which could block our ability to develop, commercialize and sell products or services, and could result in the award of substantial damages against us, including treble damages, attorneys’ fees, costs and expenses if we are found to have willfully infringed. In the event of a successful claim of infringement against us, we may be required to pay damages and ongoing royalties, and obtain one or more licenses from third parties, or be prohibited from selling certain products or services. We may not be able to obtain these licenses on acceptable or commercially reasonable terms, if at all, or these licenses may be non-exclusive, which could result in our competitors gaining access to the same intellectual property. In addition, we could encounter delays and incur significant costs, in product or service introductions while we attempt to develop alternative products or services, or redesign our products or services, to avoid infringing third party patents or proprietary rights. Defense of any lawsuit or failure to obtain any of these licenses or to develop a workaround could prevent us from commercializing products or services, and the prohibition of sale or the threat of the prohibition of sale of any of our products or services could materially affect our business and our ability to gain market acceptance for our products or services.
In addition, our agreements with some of our customers, suppliers or other entities with whom we do business require us to defend or indemnify these parties to the extent they become involved in infringement claims, including the types of claims described above. We could also voluntarily agree to defend or indemnify third parties in instances where we are not obligated to do so if we determine it would be important to our business relationships. If we are required or agree to defend or indemnify third parties in connection with any infringement claims, we could incur significant costs and expenses that could adversely affect our business, financial condition, results of operations, and prospects.
Our use of open source software could compromise our ability to offer our services and subject us to possible litigation.
We use open source software in connection with our products and services. Companies that incorporate open source software into their products have, from time to time, faced claims challenging their use of open source software and compliance with open source license terms. As a result, we could be subject to lawsuits and other allegations by parties claiming ownership of what we believe to be open source software or claiming noncompliance with open source licensing terms. Some open source software licenses require users who distribute software containing open source software to publicly disclose all or part of the source code to the licensee’s software that incorporates, links or uses such open source software, and make available to third parties for no cost, any derivative works of the open source code created by the licensee, which could include the licensee’s own valuable proprietary
code. While we monitor our use of open source software and try to ensure that none is used in a manner that would require us to disclose our proprietary source code or that would otherwise breach the terms of an open source agreement, such use could inadvertently occur, or could be claimed to have occurred, in part because open source license terms can be ambiguous. Legal precedent in this area is not well established and any actual or claimed requirement to disclose our proprietary source code or pay damages for breach of contract could harm our business and could help third parties, including our competitors, develop products and services that are similar to or better than ours. Any of the foregoing could harm our business, financial condition, results of operations, and prospects.
General risks related to our business
If we fail to offer high quality customer service, our business and reputation could suffer.
We differentiate ourselves from our competition through our commitment to an exceptional customer experience. Accordingly, high quality customer service is important for the growth of our business and any failure to maintain such standards of customer service, or a related market perception, could affect our ability to sell products to existing and prospective customers. The number of our customers has grown significantly and such growth, as well as any future growth, will put additional pressure on our customer service organization. We may be unable to hire qualified staff quickly enough or to the extent necessary to accommodate increases in demand. Providing an exceptional customer experience requires significant time and resources from our customer service team. Therefore, failure to scale our customer service organization adequately may adversely impact our business results and financial condition.
Customers utilize our service teams and online content for help with a variety of topics, including how to use our products efficiently, how to integrate our products into existing workflows, and how to resolve technical, analysis, and operational issues if and when they arise. While we have developed significant resources for remote training, including an extensive library of online videos, we may need to rely more on these resources for future customer training, or we may experience increased expenses to enhance our online and remote solutions. If our customers do not adopt these resources, we may be required to increase the staffing of our customer service team, which would increase our costs. Also, as our business scales, we may need to engage third party customer service providers, which could increase our costs and negatively impact the quality of the customer experience if such third parties are unable to provide service levels equivalent to ours.
In addition, as we continue to grow our operations and reach a global customer base, we need to be able to provide efficient customer service that meets our customers’ needs globally at scale. In geographies where we sell through distributors, we rely on those distributors to provide customer service. If these third party distributors do not provide a high quality customer experience, our business operations and reputation may suffer.
If we were to be sued for product liability, we could face substantial liabilities that exceed our resources.
The marketing, sale and use of our products could lead to the filing of product liability claims were someone to allege that our products identified inaccurate or incomplete information regarding the cells analyzed or otherwise failed to perform as designed. We may also be subject to liability for errors in, a misunderstanding of or inappropriate reliance upon, the information we provide in the ordinary course of our business activities. A product liability claim could result in substantial damages and be costly and time-consuming for us to defend. We maintain product liability insurance, but this insurance may not fully protect us from the financial impact of defending against product liability claims. Any product liability claim brought against us, with or without merit, could increase our insurance rates or prevent us from securing insurance coverage in the future. Additionally, any product liability lawsuit could damage our reputation, or cause current customers to terminate existing agreements and potential clinical partners to seek other partners, any of which could impact our business, financial condition, results of operations, and prospects.
Repair or replacement costs due to warranties we provide on our products and consumables could have a material adverse effect on our business, financial condition, and results of operations.
We provide a one-year assurance-type warranty on our products and consumables. Existing and future warranties place us at the risk of incurring future repair and/or replacement costs. At the time
revenue is recognized, we establish an accrual for estimated warranty expenses based on historical data and trends. We exercise judgment in estimating the expected product warranty costs, using data such as the actual and projected product failure rates, estimated repair costs, freight, material, labor and overhead costs. While we believe that historical experience provides a reliable basis for estimating such warranty costs, unforeseen quality issues or component failure rates could result in future costs in excess of such estimates, or alternatively, improved quality and reliability in our products and consumables could result in actual expenses that are below those currently estimated. As of September 30, 2020, we had accrued expenses of $1.2 million relating to product warranty accruals. Substantial amounts of warranty claims could have a material adverse effect on our business, financial condition, and results of operations.
Our business has inherent operational risks that cannot be adequately covered by insurance or indemnity.
We may face unanticipated risks of legal liability for damages caused by the actual or alleged failure of our products. Our products may be deployed in response to an emergency or terrorist attack, which may increase our exposure to third party claims. While we have attempted to secure business liability insurance coverage at appropriate cost, it is impossible to insure against all risks inherent in our industry, nor can we assure you that our insurers will pay a particular claim, or that we will be able to maintain coverage at reasonable rates in the future. Our insurance policies also contain deductibles, limitations and exclusions, which increase our costs in the event of a claim. Substantial claims resulting from an accident in excess of or not otherwise covered by indemnity or insurance could harm our financial condition and operating results.
We may be subject to governmental export controls that could impair our ability to compete in international markets.
We are subject to governmental export controls that could impair our ability to compete in international markets.
Our products are or may be subject to U.S. export controls, including the International Traffic in Arms Regulations, or ITAR, the Export Administration Regulations, or EAR, the Office of Foreign Assets Control, or OFAC, and other similar laws and regulations of our products and associated technology. Obtaining export licenses can be a costly and time-consuming process, often three to six months in duration. In addition, in some cases, a license might not be granted for shipment to a particular customer in a particular country. Further, ascertaining the proper export classifications for our products is time-consuming and may lead to unpredictable results. A product’s export classification may be very broad with export licenses required for only a small number of countries or very restrictive with licenses required for many countries. It is also possible that a competitor may obtain a less restrictive classification than we do for a competitive product, giving them a significant competitive advantage in international markets. Changes in our products or changes in export regulations may require reclassification and create delays in the introduction and sale of our products in international markets, prevent our customers with international operations from deploying our products throughout their global systems or, in some cases, constrain in some way the export of our products to additional countries. Any change in export regulations or related legislation, shift in approach to the enforcement or scope of existing regulations or change in the countries, persons or technologies targeted by these regulations 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 with international operations.
We may also be required to obtain licenses from the U.S. government before we can work with foreign entities on the development of our products.
Export control laws may also inhibit the free interchange of technical discussions among our employees. Absent license authorization from the appropriate agency, some technical information related to our products and technologies cannot be discussed with or otherwise disclosed to our foreign national employees, or with our foreign distributors. Export licensing requirements may delay product development and other engineering activities.
Violations of export control requirements are subject to criminal, civil and administrative penalties. Export control agencies are authorized to impose monetary penalties or even to suspend export
privileges. While such actions have not been taken against our company to date, such risks exist in this highly regulated field, and we cannot entirely eliminate the possibility that such agency action may occur in the future.
We could be adversely affected by violations of the Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, and the anti-bribery and anti-corruption laws of the United States or other countries.
We are subject to the FCPA, which among other things prohibits companies and their intermediaries from making payments in violation of law to non-U.S. government officials for the purpose of obtaining or retaining business or securing any other improper advantage. We have engaged independent distributors in the past and currently use independent distributors to sell our products outside of the United States. Our reliance on independent distributors to sell our products internationally demands a high degree of vigilance in maintaining our policy against participation in corrupt activity, because these distributors could be deemed to be our agents and we could be held responsible for their actions. Other U.S. companies in our markets have faced criminal penalties under the FCPA for allowing their agents to deviate from appropriate practices in doing business with these individuals. We are also subject to similar anti-bribery laws in the jurisdictions in which we operate, including the United Kingdom’s Bribery Act of 2010, which also prohibits commercial bribery and makes it a crime for companies to fail to prevent bribery, and the People’s Republic of China anti-bribery laws, including the PRC Anti-Unfair Competition Law amended in 2017 and the PRC Criminal Law amended in 2017. These laws are complex and far-reaching in nature, and, as a result, we cannot assure you that we would not be required in the future to alter one or more of our practices to be in compliance with these laws or any changes in these laws or the interpretation thereof. Any violations of these laws, or allegations of such violations, could disrupt our operations, involve significant management distraction, involve significant costs and expenses, including legal fees, and could result in a material adverse effect on our business, financial condition, results of operations, and prospects. We could also suffer severe penalties, including criminal and civil penalties, disgorgement, and other remedial measures.
Our employees, consultants, distributors and commercial partners may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, and insider trading.
We are exposed to the risk of fraud or other misconduct by our employees, consultants, distributors, and commercial partners. Misconduct by these parties could include intentional failures to comply with the applicable laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, and other business arrangements. Such misconduct could result in legal or regulatory sanctions and cause serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and any other precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses, or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to comply with these laws or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant civil, criminal and administrative penalties, which could have a significant impact on our business. Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees, and divert the attention of management in defending ourselves against any of these claims or investigations.
Our business is subject to environmental regulation and regulations relating to the protection of health and safety matters that could result in compliance costs. Any violation or liability under environmental laws or health and safety regulations could harm our business.
We are subject to environmental and safety laws and regulations governing the use, storage and disposal of hazardous substances or wastes and imposing liability for the cleanup of contamination from these substances. We handle hazardous substances in our manufacturing processes and in the compilation of our chemical library, and we could be liable for any improper use, storage, or disposal of such substances. We cannot completely eliminate the risk of contamination or injury from hazardous substances or wastes, and, in the event of such an incident, we could be held liable for any damages that result. In addition, we may be required to incur significant additional costs to comply with environmental laws and regulations in the future.
The Occupational Safety and Health Act of 1970, or OSHA, establishes certain employer responsibilities, including maintenance of a workplace free of recognized hazards likely to cause death or serious injury, compliance with standards promulgated by the Occupational Safety and Health Administration and various record keeping, disclosure and procedural requirements. Various OSHA standards may apply to our operations. We have incurred, and will continue to incur, capital and operating expenditures and other costs in the ordinary course of our business in complying with OSHA and other state and local laws and regulations.
The failure to comply with these regulations could result in fines by government authorities and payment of damages to private litigants, which could harm our business.
If we fail to maintain effective internal control over financial reporting and effective disclosure controls and procedures, we may not be able to accurately report our financial results in a timely manner or prevent fraud, which may adversely affect investor confidence in our company.
We are not currently required to comply with the rules of the SEC implementing Section 404 of the Sarbanes-Oxley Act and, therefore, we are not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. Upon becoming a public company, we will be required to comply with the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of controls over financial reporting. Although we will be required to disclose changes made in our internal controls and procedures on a quarterly basis, we are not required to make our first annual assessment of our internal control over financial reporting pursuant to Section 404 until the year following our first annual report required to be filed with the SEC. As an emerging growth company, our independent registered public accounting firm will not be required to formally attest to the effectiveness of our internal control over financial reporting pursuant to Section 404 until the later of the year following our first annual report required to be filed with the SEC or the date we are no longer an emerging growth company. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating.
To comply with the requirements of being a public company, we may need to undertake actions, such as implementing new internal controls and procedures and hiring additional accounting or internal audit staff. Testing and maintaining internal control can divert our management’s attention from other matters that are important to the operation of our business. In addition, when evaluating our internal control over financial reporting, we may identify material weaknesses that we may not be able to remediate in time to meet the applicable deadline imposed upon us for compliance with the requirements of Section 404. If we identify any material weaknesses in our internal controls over financial reporting or we are unable to comply with the requirements of Section 404 in a timely manner or assert that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting once we are no longer an emerging growth company, investors may lose confidence in the accuracy and completeness of our financial reports. As a result, the market price of our common stock could be materially adversely affected.
We may need additional capital in the future, which may not be available to us, and if it is available, may dilute your ownership of our common stock and have a material adverse effect on our business, operating results and financial condition.
We may need to raise additional funds in the future, through public or private debt or equity financings, if we are presented with unforeseen circumstances or opportunities in order to, among other things:
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develop or enhance our products;
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support additional capital expenditures;
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respond to competitive pressures;
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fund operating losses in future periods; or
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take advantage of acquisition or expansion opportunities.
Any required additional financing may not be available on terms acceptable to us, or at all. A failure to obtain additional funding could prevent us from making expenditures that may be required to grow or maintain our operations.
If we raise additional funds by issuing equity securities, you may experience significant dilution of your ownership interest, and the newly-issued securities may have rights senior to those of the holders of our common stock. If we raise additional funds by obtaining loans from third parties, the terms of those financing arrangements may include negative covenants or other restrictions on our business that could impair our operational flexibility and would also require us to fund additional interest expense, which could harm our profitability. Holders of debt would also have rights, preferences or privileges senior to those of holders of our common stock.
We may engage in future acquisitions that could disrupt our business, cause dilution to our stockholders and harm our financial condition and operating results.
In the future, we may acquire companies, assets or technologies in an effort to complement our existing offerings or enhance our market position. We have not made any acquisitions to date and we currently have no plans, proposals or arrangements with respect to any acquisition. We may not be able to find suitable acquisition candidates and we may not be able to complete acquisitions on favorable terms, if at all. Any future acquisitions we make could subject us to a number of risks, including:
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the purchase price we pay could significantly deplete our cash reserves, impair our future operating flexibility or result in dilution to our existing stockholders;
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we may find that the acquired company, assets or technology does not further improve our financial and strategic position as planned;
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we may find that we overpaid for the company, asset or technology, or that the economic conditions underlying our acquisition have changed;
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we may have difficulty integrating the operations and personnel of the acquired company;
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we may have difficulty retaining the employees with the technical skills needed to enhance and provide services with respect to the acquired assets or technologies;
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the acquisition may be viewed negatively by customers, financial markets, or investors;
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we may have difficulty incorporating the acquired technologies or products with our existing products;
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we may encounter difficulty entering and competing in new product or geographic markets;
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we may encounter a competitive response, including price competition or intellectual property litigation;
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we may have product liability, customer liability or intellectual property liability associated with the sale of the acquired company’s products;
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we may be subject to litigation by terminated employees or third parties;
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we may incur debt and restructuring charges;
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we may acquire goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges;
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our ongoing business and management’s attention may be disrupted or diverted by transition or integration issues and the complexity of managing geographically or culturally diverse enterprises; and
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our due diligence process may fail to identify significant existing issues with the target company’s product quality, product architecture, financial disclosures, accounting practices, internal controls, legal contingencies, intellectual property and other matters.
Any acquisitions of businesses, technologies, products or services may not generate sufficient revenue to offset the associated costs of the acquisitions or may result in other adverse effects, which could have a material adverse effect on our business, operating results, and financial condition.
In addition, negotiations for acquisitions or investments that are not ultimately consummated could result in significant diversion of management time, as well as substantial out-of-pocket costs, any of which could have a material adverse effect on our business, operating results and financial condition.
We may face exposure to foreign currency exchange rate fluctuation.
Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, the GBP and the Chinese Yuan. We expect our non-U.S. operations to continue to grow in the near term and we are continually monitoring our foreign currency exposure to determine if we should consider a hedging program. Today, our non-U.S. contracts are denominated in either U.S. dollars or local currency, while our non-U.S. operating expenses are often denominated in local currencies. Additionally, as we expand our non-U.S. operations, a larger portion of our operating expenses may be denominated in local currencies. Therefore, increases in the value of the U.S. dollar and decreases in the value of foreign currencies could result in the dollar equivalent of our revenue being lower.
We generally recognize revenue from extended warranty and service contracts over the contract term, and changes in sales of such contracts may not be immediately reflected in our operating results.
We offer our customers the option to purchase extended warranty and service for regular system maintenance and system optimization on a fixed fee basis. We generally recognize revenue from our extended warranty and service plans ratably over the contract terms, which typically range from one additional year to four additional years and could in some cases be subject to an early termination right. A portion of the revenue we report in each quarter is derived from the recognition of deferred revenue relating to extended warranty and service contracts entered into during previous quarters. Consequently, a decline in new or renewed extended warranty and service contracts by our customers in any one quarter may not be immediately reflected in our revenue for that quarter. Such a decline, however, will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our services and potential changes in our rate of renewals may not be fully reflected in our operating results until future periods.
Our ability to use our net operating losses and certain other tax attributes may be limited.
Under legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, unused federal net operating losses, or NOLs, generated in tax years beginning after December 31, 2017, will not expire and may be carried forward indefinitely, and generally may not be carried back to prior taxable years, except that under the CARES Act, net operating losses generated in 2018, 2019 and 2020 may be carried back five taxable years. Additionally, the deductibility of such federal NOLs in tax years beginning after December 31, 2020, is limited to 80% of taxable income. It is uncertain if and to what extent various states will conform to the Tax Cuts and Jobs Act, or the CARES Act. In addition, under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an “ownership change,” generally defined as a cumulative change of more than 50 percentage points (by value) in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change NOL carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post-change income or taxes may be limited. We may experience ownership changes in the future as a result of shifts in our stock ownership (some of which may be outside our control), including in connection with this offering. As a result, if we earn net taxable income, our ability to use our pre-change NOL carryforwards to offset such taxable income may be subject to limitations. Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes. For example, California recently imposed limits on the usability of California state NOLs to offset taxable income in tax years beginning after 2019 and before 2023. As a result, even if we attain profitability, we may be unable to use a material portion of our NOL carryforwards and other tax attributes, which could adversely affect our future cash flows.
Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.
New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could affect the tax treatment of our domestic and foreign earnings. Any new taxes could adversely affect our domestic and international business operations and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the Tax Cuts and Jobs Act significantly revised the Code. Future guidance from the Internal Revenue Service and other tax
authorities with respect to the Tax Cuts and Jobs Act may affect us, and certain aspects of the Tax Cuts and Jobs Act could be repealed or modified in future legislation. For example, the CARES Act modified certain provisions of the Tax Cuts and Jobs Act. In addition, it is uncertain if and to what extent various states will conform to the Tax Cuts and Jobs Act, the CARES Act, or any newly enacted federal tax legislation. Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Cuts and Jobs Act or future tax reform legislation could have a material impact on the value of our deferred tax assets, could result in significant one-time charges, and could increase our future U.S. tax expense.
We are subject to risks related to taxation in the United States.
Significant judgments based on interpretations of existing tax laws or regulations are required in determining our provision for income taxes. Our effective income tax rate could be adversely affected by various factors, including, but not limited to, changes in the mix of earnings in tax jurisdictions with different statutory tax rates, changes in the valuation of deferred tax assets and liabilities, changes in existing tax policies, laws, regulations or rates, changes in the level of non-deductible expenses (including share-based compensation), changes in the location of our operations, changes in our future levels of research and development spending, mergers and acquisitions or the result of examinations by various tax authorities. Although we believe our tax estimates are reasonable, if the United States Internal Revenue Service or other taxing authority disagrees with the positions taken on our tax returns, we could have additional tax liability, including interest and penalties. If material, payment of such additional amounts upon final adjudication of any disputes could have a material impact on our results of operations and financial position.
Future interpretations of existing accounting standards could adversely affect our operating results.
Generally accepted accounting principles in the United States, or GAAP, are subject to interpretation by the Financial Accounting Standards Board, or FASB, the American Institute of Certified Public Accountants, or AICPA, the SEC and various other bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and they could affect the reporting of transactions completed before the announcement of a change.
Risks related to this offering and ownership of our common stock
An active trading market for our common stock may not develop, and you may not be able to sell your common stock at or above the initial public offering price.
Prior to this offering, there has been no public market for shares of our common stock. Although we have applied to have our common stock listed on the Nasdaq Global Market, an active trading market for shares of our common stock may never develop or be sustained following this offering. If no trading market develops, securities analysts may not initiate or maintain research coverage of our company, which could further depress the market for our common stock. As a result, you may not be able to sell your shares of our common stock at or above the initial public offering price or at all.
If securities or industry analysts do not publish research or reports about our business or if they issue unfavorable commentary or downgrade our common stock, the price of our common stock could decline.
The trading market for our common stock will rely in part on the research and reports that equity research analysts publish about us and our business. The price of our stock could decline if one or more equity analysts downgrade our stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business.
The trading market for our common stock will depend in part on any research reports that securities or industry analysts publish about us or our business. We do not control these analysts. After this offering, if no securities or industry analysts initiate coverage of our company, the trading price for our stock may be negatively affected. In the event securities or industry analysts cover our company and one or more of these analysts downgrade our stock or publish unfavorable reports about our business, our stock price would likely decline. In addition, if any securities or industry analysts cease coverage of our
company or fail to publish reports on us regularly, demand for our stock could decrease, which could cause our stock price to decline.
The market price of our common stock may be volatile, which could result in substantial losses for investors purchasing shares in this offering.
Our common stock has no prior trading history. The initial public offering price for our common stock will be determined through negotiations with the underwriters. The trading prices of the securities of newly-public companies have often been highly volatile and may vary significantly from the initial public offering price. In addition, the trading price of our common stock will be susceptible to fluctuations in the market due to numerous factors, many of which may be beyond our control, including:
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actual or anticipated fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;
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fluctuations in our revenue as a result of our revenue recognition policy, even during periods of significant sales activity;
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the financial guidance that we may provide to the public, any changes in such guidance, or our failure to meet such guidance;
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changes in financial estimates by securities analysts, our failure to meet such estimates, or failure of analysts to initiate or maintain coverage of our stock;
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the public’s response to our press releases or other public announcements by us, including our filings with the SEC;
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announcements by us or our competitors of significant technical innovations, products, contracts, acquisitions, strategic partnerships, joint ventures, or capital commitments;
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failure of any of our products to achieve or maintain market acceptance;
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introduction of technologies or product enhancements that reduce the need for our products;
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changes in our capital structure, such as future issuances of securities or the incurrence of debt;
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regulatory developments in the United States, foreign countries or both;
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litigation involving our company, our general industry or both;
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additions or departures of key personnel;
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changes in market valuations of similar companies in reaction to industry events, even if these events do not directly affect us;
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investors’ general perception of us;
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changes in general economic, industry and market conditions including those resulting from political unrest, war, incidents of terrorism, or responses to such events;
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the development and sustainability of an active trading market for our common stock; and
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future sales of our common stock by our officers or directors.
In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to class action lawsuits that, even if unsuccessful, could be costly to defend and divert management’s attention and resources.
Our actual operating results may differ significantly from any operating guidance we may provide.
From time to time, we may release guidance in our quarterly or annual earnings conference calls, quarterly or annual earnings releases, or otherwise, regarding our future performance that represents our management’s estimates as of the date of release. This guidance, which will include forward-looking statements, will be based on projections prepared by our management. These projections may not be prepared with a view toward compliance with published guidelines of the American Institute of Certified Public Accountants, or AICPA, and neither our independent registered public accounting firm nor any other independent expert or outside party compiles or examines the projections. Accordingly, no such person will express any opinion or any other form of assurance with respect to the projections.
Projections are based upon a number of assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions, some of which will change. The principal reason that we may release guidance is to provide a basis for our management to discuss our business outlook with analysts and investors. We do not accept any responsibility for any projections or reports published by any such third parties.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release. Actual results may vary from our guidance and the variations may be material. Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this “Risk Factors” section of this prospectus could result in actual operating results being different from our guidance, and the differences may be adverse and material.
Our management will have broad discretion as to the use of the net proceeds from this offering and might not apply the proceeds in ways that increase the value of your investment or in ways with which you agree.
We cannot specify with certainty the particular uses of the net proceeds we will receive from this offering. Our management will have broad discretion in the application of the net proceeds, including for any of the purposes described in the “Use of Proceeds” section of this prospectus. Accordingly, you will have to rely upon the judgment of our management with respect to the use of the proceeds, with only limited information concerning management’s specific intentions. While it is the intention of our management to use the net proceeds from the offering in the best interests of the company, our management might not apply the net proceeds from this offering in ways that increase the value of your investment or in ways with which you agree. In addition, the market price of our common stock may fall if the market does not view our use of the net proceeds from this offering favorably. Pending their use, we may invest the net proceeds from this offering in a manner that does not produce income or that loses value.
Insiders will continue to own a significant portion of our outstanding common stock following this offering and will therefore have substantial control over us and will be able to influence corporate matters.
Upon completion of this offering, our executive officers, directors and their affiliates will beneficially own, in the aggregate, approximately % of our outstanding common stock. As a result, these stockholders, if they act together, will be able to influence our management and affairs and all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. This concentration of ownership could limit your ability to influence corporate matters and may have the effect of delaying or preventing a change in control of our company and might affect the market price of our common stock.
Raising additional capital may cause dilution to our existing stockholders or restrict our operations.
We anticipate that we will seek additional capital through a combination of public and private equity offerings, debt financings, strategic partnerships and alliances and licensing arrangements in the future to fund our operations. We, and indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing, or nature of any future offerings. Our decision to issue debt or equity securities will also depend on contractual, legal, and other restrictions that may limit our ability to raise additional capital. For example, the terms of our Loan and Security Agreement prohibit, subject to certain exceptions, our ability to incur additional indebtedness. To the extent that we raise additional capital through the sale of equity or debt securities, your ownership interest will be diluted and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. The incurrence of indebtedness would result in increased fixed payment obligations and could involve restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license
intellectual property rights, and other operating restrictions that could adversely impact our ability to conduct our business. Certain of the foregoing transactions may require us to obtain stockholder approval, which we may not be able to obtain.
A significant portion of our total outstanding shares may be sold into the public market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.
Sales of a substantial number of shares of our common stock in the public market could occur at any time after the expiration of the lock-up agreements described in the “Underwriters” section of this prospectus. These sales, or the market perception that the holders of a large number of shares intend to sell shares, could reduce the market price of our common stock. After this offering, we will have shares of common stock outstanding based on the number of shares outstanding as of . This includes the shares that we are selling in this offering, which may be resold in the public market immediately. The remaining shares, or % of our outstanding shares after this offering, are currently restricted as a result of securities laws or lock-up agreements but will be able to be sold, subject to any applicable volume limitations under federal securities laws, in the near future as set forth below.
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Number of shares and % of total outstanding
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Date available for sale into public market
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shares, or %
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On the date of this prospectus
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shares, or %
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90 days after the date of this prospectus
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shares, or %
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180 days after the date of this prospectus, subject to extension in specified instances, due to lock-up agreements between the holders of these shares and the underwriters. However, Cowen & Company, LLC and SVB Leerink LLC can waive the provisions of these lock-up agreements and allow these stockholders to sell their shares at any time
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In addition, as of October 31, 2020, there were 251,610 shares subject to outstanding warrants, other than warrants assumed to be exercised upon the closing of this offering, and 5,311,085 shares subject to outstanding options that will become eligible for sale in the public market to the extent permitted by any applicable vesting requirements, the lock-up agreements and Rules 144 and 701 under the Securities Act of 1933. Moreover, after this offering, holders of an aggregate of approximately million shares of our common stock as of , will have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. We also intend to register all shares of common stock that we may issue under our equity incentive plans, including shares reserved for future issuance under our equity incentive plans. Once we register and issue these shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements.
As a new investor, you will experience immediate and substantial dilution as a result of this offering.
If you purchase common stock in this offering, you will incur immediate and substantial dilution of $ per share, representing the difference between the assumed initial public offering price of $ per share, the midpoint of the range listed on the cover page of this prospectus, and our pro forma as adjusted net tangible book value per share after the automatic conversion of all outstanding shares of our redeemable convertible preferred stock upon the closing of this offering. In addition, investors who purchase shares in this offering will contribute approximately % of the total amount of equity capital raised by us through the date of this offering, but such investors will only own approximately % of our outstanding shares. This dilution is due to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares of the company. Moreover, we issued options in the past to acquire common stock at prices significantly below the assumed initial public offering price. As of October 31, 2020, there were 251,610 shares subject to outstanding warrants with a weighted average exercise price of $4.87 per share and 5,311,085 shares
subject to outstanding options with a weighted average exercise price of $1.05 per share. To the extent that these warrants or outstanding options are ultimately exercised, you will incur further dilution.
We do not currently intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.
We have never declared or paid any cash dividends on our common stock and we do not currently expect to pay any cash dividends for the foreseeable future. Our loan agreements with our lenders contain provisions prohibiting us from paying any dividends during the term of the agreements without our lenders’ prior written consent. We intend to use our future earnings, if any, in the operation and expansion of our business. Accordingly, you are not likely to receive any dividends on your common stock for the foreseeable future, and your ability to achieve a return on your investment will, therefore, depend on appreciation in the price of our common stock.
We will incur significant increased costs to implement an effective system of internal controls and as a result of operating as a public company, and our management will be required to devote substantial time to public company compliance initiatives. If we are unable to absorb these increased costs or maintain management focus on development and sales of our product offerings and services, we may not be able to achieve our business plan.
As a public company, we will incur significant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and Nasdaq, impose a variety of corporate governance requirements on public companies. Our management and other personnel will need to devote a substantial amount of time to these compliance initiatives. Moreover, these rules and regulations will increase our legal and financial compliance costs and will make some activities more time-consuming and costly. For example, we expect these rules and regulations will make it more difficult and expensive for us to obtain director and officer liability insurance, and we will be required to incur substantial costs to maintain the same or similar coverage.
In addition, the Sarbanes-Oxley Act requires, among other things, that we maintain effective internal control over financial reporting and disclosure controls and procedures. In particular, commencing with respect to our year ending December 31, , we must perform system and process evaluation and testing of our internal control over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of our internal control over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, or Section 404. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal control over financial reporting that are deemed to be material weaknesses. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge. Moreover, if we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would require additional financial and management resources.
The increased costs associated with operating as a public company may decrease our net income or increase our net loss and may require us to reduce costs in other areas of our business or increase the prices of our products or services. Additionally, if these requirements divert our management’s attention from other business concerns, they could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We are an “emerging growth company” and the reduced disclosure requirements applicable to “emerging growth companies” may make our common stock less attractive to investors.
We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions and relief from various reporting requirements that are applicable to other public companies that are not “emerging growth companies.” In particular, while we are an “emerging growth
company,” we will not be required to comply with the auditor attestation requirements of Section 404(b) of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act; we will be exempt from any rules that could be adopted by the Public Company Accounting Oversight Board requiring mandatory audit firm rotations or a supplement to the auditor’s report on financial statements; we will be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements; and we will not be required to hold nonbinding advisory votes on executive compensation or stockholder approval of any golden parachute payments not previously approved.
In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
We may be an “emerging growth company” until the fiscal year-end following the fifth anniversary of the completion of this initial public offering, though we may cease to be an “emerging growth company” earlier under certain circumstances, including if (i) we have more than $1.07 billion in annual revenue in any fiscal year, (ii) the market value of our common stock that is held by non-affiliates exceeds $700 million as of any June 30 or (iii) we issue more than $1.0 billion of non-convertible debt over a three-year period.
The exact implications of the JOBS Act are subject to interpretation and guidance by the SEC and other regulatory agencies, and we cannot assure you that we will be able to take advantage of all of the benefits of the JOBS Act. In addition, investors may find our common stock less attractive to the extent we rely on the exemptions and relief granted by the JOBS Act. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may decline or become more volatile.
Provisions in our certificate of incorporation, our by-laws or Delaware law might discourage, delay or prevent a change in control of our company or changes in our management and, therefore, depress the trading price of our common stock.
Provisions of our certificate of incorporation, our by-laws or Delaware law may discourage, delay or prevent a merger, acquisition or other change in control that stockholders may consider favorable, including transactions in which you might otherwise receive a premium for your shares of our common stock. These provisions may also prevent or frustrate attempts by our stockholders to replace or remove our management. These provisions:
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establish a classified board of directors so that not all members of our board are elected at one time;
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place limitations on the removal of directors;
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eliminate the ability of our stockholders to call special meetings of stockholders;
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prohibit stockholder action by written consent, which has the effect of requiring all stockholder actions to be taken at a meeting of stockholders;
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establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at stockholder meetings; and
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enable our board of directors to designate the terms of and issue new series of preferred stock without stockholder approval, which could be used to institute a rights plan, or a poison pill, that would work to dilute the stock ownership of a potential hostile acquirer, likely preventing acquisitions that have not been approved by our board of directors.
In addition, Section 203 of the Delaware General Corporation Law may discourage, delay or prevent a change in control of our company by prohibiting stockholders owning in excess of 15% of our outstanding voting stock from merging or combining with us during a specified period unless certain approvals are obtained.
The existence of the foregoing provisions and anti-takeover measures could limit the price that investors might be willing to pay in the future for shares of our common stock. They could also deter potential acquirers of our company, thereby reducing the likelihood that you could receive a premium for your common stock in an acquisition.
Our sixth amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for certain disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our amended and restated certificate of incorporation that will become effective upon the closing of this offering specifies that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for most legal actions involving actions brought against us by stockholders; provided that, if and only if the Court of Chancery of the State of Delaware dismisses any such action for lack of subject matter jurisdiction, such action may be brought in another state or federal court sitting in the State of Delaware. Our amended and restated certificate of incorporation will also provide that the federal district courts of the United States will be the exclusive forum for the resolution of any complaint asserting a cause of action against us or any of our directors, officers, employees or agents and arising under the Securities Act. We believe these provisions may benefit us by providing increased consistency in the application of Delaware law and federal securities laws by chancellors and judges, as applicable, particularly experienced in resolving corporate disputes, efficient administration of cases on a more expedited schedule relative to other forums and protection against the burdens of multi-forum litigation. However, these provisions may have the effect of discouraging lawsuits against our directors and officers. The choice of forum provision requiring that the Court of Chancery of the State of Delaware be the exclusive forum for certain actions would not apply to suits brought to enforce any liability or duty created by the Exchange Act.
There is uncertainty as to whether a court would enforce such provisions, and the enforceability of similar choice of forum provisions in other companies’ charter documents has been challenged in legal proceedings. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions, and there can be no assurance that such provisions will be enforced by a court in those other jurisdictions. If a court were to find these types of provisions to be inapplicable or unenforceable, and if a court were to find the exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving the dispute in other jurisdictions, which could materially adversely affect our business.
Our fourth amended and restated bylaws designate specific courts in as the exclusive forum for certain litigation that may be initiated by the Company’s stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.
Pursuant to our fourth amended and restated bylaws, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for state law claims for (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, or other employees to us or our stockholders; (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law or our sixth amended and restated certificate of incorporation or fourth amended and restated bylaws; (4) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or bylaws; or (5) any action asserting a claim governed by the internal affairs doctrine, or the Delaware Forum Provision. The Delaware Forum Provision will not apply to any causes of action arising under the Securities Act or the Exchange Act. Our amended and restated bylaws further provide that unless we consent in writing to the selection of an alternative forum, the United States District Court for the District of Massachusetts shall be the sole and exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act, or the Federal Forum Provision, as our headquarters are located in Boston, Massachusetts. In addition, our amended and restated bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock is deemed to have notice of and consented to the Delaware
Forum Provision and the Federal Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our compliance with the U.S. federal securities laws and the rules and regulations thereunder.
The Delaware Forum Provision and the Federal Forum Provision in our bylaws may impose additional litigation costs on stockholders in pursuing any such claims. Additionally, these forum selection clauses may limit our stockholders’ ability to bring a claim in a judicial forum that they find favorable for disputes with us or our directors, officers or employees, which may discourage the filing of lawsuits against us and our directors, officers and employees, even though an action, if successful, might benefit our stockholders. In addition, while the Delaware Supreme Court ruled in March 2020 that federal forum selection provisions purporting to require claims under the Securities Act be brought in federal court are “facially valid” under Delaware law, there is uncertainty as to whether other courts will enforce our Federal Forum Provision. If the Federal Forum Provision is found to be unenforceable, we may incur additional costs associated with resolving such matters. The Federal Forum Provision may also impose additional litigation costs on stockholders who assert that the provision is not enforceable or invalid. The Court of Chancery of the State of Delaware and the United States District Court for the District of Massachusetts may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments may be more or less favorable to us than to our stockholders.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that are based on management’s beliefs and assumptions and on information currently available to management. Some of the statements in the section captioned “Prospectus Summary,” “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Business” and elsewhere in this prospectus contain forward-looking statements. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words.
These statements involve risks, uncertainties and other factors that may cause actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Forward-looking statements in this prospectus include, but are not limited to, statements about:
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estimates of our addressable market, market growth, future revenue, key performance indicators, expenses, capital requirements and our needs for additional financing;
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the implementation of our business model and strategic plans for our products, new applications, and technologies;
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our expectations regarding the rate and degree of market acceptance of our platform;
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our ability to hire and retain key personnel, including sales and marketing personnel, and to manage our future growth effectively;
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competitive companies and technologies and our industry;
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our ability to manage and grow our business by expanding our sales to existing customers or introducing our products and workflows to new customers;
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our ability to develop and commercialize new products and applications;
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our ability to establish and maintain intellectual property protection for our products and workflows or avoid or defend claims of infringement;
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the performance of third party distributors, suppliers and manufacturers;
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the potential effects of government regulation;
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the severity and impact of COVID-19 and actions to contain the outbreak or treat its impact;
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our ability to obtain additional financing in this or future offerings;
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the volatility of the trading price of our common stock;
•
our expectations regarding the period during which we qualify as an emerging growth company under the JOBS Act;
•
our expectations regarding use of proceeds from this offering; and
•
our expectations about market trends.
In addition, you should refer to the “Risk Factors” section of this prospectus for a discussion of other important factors that may cause actual results to differ materially from those expressed or implied by the forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this prospectus will prove to be accurate. Furthermore, if the forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. The forward-looking statements in this prospectus represent our views as of the date of this prospectus. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this prospectus.
INDUSTRY AND MARKET DATA
The market data and certain other statistical information used throughout this prospectus are based on independent industry publications, governmental publications, reports by market research firms or other independent sources that we believe to be reliable sources. Industry publications and third party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. We are responsible for all of the disclosure contained in this prospectus, and we believe these industry publications and third party research, surveys and studies are reliable. While we are not aware of any misstatements regarding any third party information presented in this prospectus, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties and are subject to change based on various factors, including those discussed under the section entitled “Risk Factors” and elsewhere in this prospectus. Some data are also based on our good faith estimates.
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of the shares of our common stock in this offering will be approximately $ million, or approximately $ million if the underwriters exercise their option to purchase additional shares in full, based upon an assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
Each $1.00 increase (decrease) in the assumed initial public offering price of $ per share, the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same. Similarly, an increase (decrease) of 1,000,000 in the number of shares offered by us would increase (decrease) the net proceeds to us from this offering by approximately $ million, assuming that the assumed initial public offering price remains the same.
We currently expect to use the net proceeds from this offering, together with our cash for working capital and general corporate purposes, including: (1) approximately $ to expand our commercial operations to grow and support the installed base of our products among life sciences research customers in the United States and internationally; and (2) approximately $ to fund our research and development efforts to expand the applications of our current devices and to create enhanced products with our platform of technologies. We may also use a portion of the remaining net proceeds, if any, to acquire complementary businesses, products, services or technologies, including scientific expertise. However, we do not have agreements or commitments for any acquisitions at this time.
We cannot specify with certainty all of the particular uses for the net proceeds to be received upon the completion of this offering. Due to uncertainties inherent in the development process, it is difficult to estimate the exact amounts of the net proceeds that will be used for any particular purpose. We may use our existing cash, cash equivalents and the future payments, if any, generated from any future collaboration agreements to fund our operations, any of which may alter the amount of net proceeds used for a particular purpose. In addition, the amount, allocation and timing of our actual expenditures will depend upon numerous factors, for example, the results of our research and development efforts. Accordingly, we will have broad discretion in using these proceeds.
Pending their uses, we plan to invest the net proceeds of this offering in short-term, interest-bearing, investment-grade instruments, certificates of deposit or direct or guaranteed obligations of the U.S. government.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our common stock or any other securities. We anticipate that we will retain all available funds and any future earnings, if any, for use in the operation of our business and do not anticipate paying cash dividends in the foreseeable future. Our ability to pay cash dividends is currently restricted by the terms of our loan and security agreement, dated August 29, 2019, with Signature Bank. In addition, the terms of any future debt instruments may also materially restrict our ability to pay dividends on our common stock. Payment of future cash dividends, if any, will be at the discretion of the board of directors after taking into account various factors, including our financial condition, operating results, current and anticipated cash needs, the requirements of current or then-existing debt instruments and other factors the board of directors deems relevant.
CAPITALIZATION
The following table sets forth our cash and our capitalization as of September 30, 2020:
•
on an actual basis;
•
on a pro forma basis to give effect to (i) the conversion of all outstanding shares of redeemable convertible preferred stock of into an aggregate of 23,905,267 shares of common stock (ii) all outstanding warrants to purchase shares of redeemable convertible preferred stock becoming warrants to purchase shares of common stock and (iii) the filing and effectiveness of our restated articles of organization; and
•
on a pro forma as adjusted basis to give further effect to our issuance and sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The pro forma as adjusted information below is illustrative only, and our capitalization following the closing of this offering will change based on the actual initial public offering price and other terms of this offering determined at pricing. You should read the information in this table together with our financial statements and the related notes included elsewhere in this prospectus and the “Selected Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” sections of this prospectus.
|
|
|
|
As of September 30, 2020
|
|
|
|
|
|
Actual
|
|
|
Pro Forma
|
|
|
Pro Forma
As Adjusted
|
|
|
|
|
|
(in thousands, except share and per share data)
|
|
|
Cash
|
|
|
|
$
|
19,712
|
|
|
|
|
$
|
19,712
|
|
|
|
|
$
|
|
|
|
|
Long-term debt, net of discount, including current portion
|
|
|
|
$
|
14,817
|
|
|
|
|
$
|
14,817
|
|
|
|
|
|
|
|
|
|
Commercial services agreement liability
|
|
|
|
|
375
|
|
|
|
|
|
375
|
|
|
|
|
|
|
|
|
|
Preferred stock warrant liability – related party
|
|
|
|
|
754
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock, $0.001 par value; 24,156,877 shares authorized, 23,905,267 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted
|
|
|
|
|
71,091
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Stockholders’ equity (deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock, $0.001 par value; no shares authorized, issued or outstanding, actual; 5,000,000 shares authorized and no shares issued or outstanding, pro forma and pro forma as adjusted
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 36,976,630 shares authorized, 8,137,669 shares issued and outstanding at September 30, 2020, actual; 100,000,000 shares authorized, 32,042,936 shares issued and outstanding, pro forma; shares authorized, shares issued and outstanding, pro forma as adjusted
|
|
|
|
|
8
|
|
|
|
|
|
32
|
|
|
|
|
|
|
|
|
|
Additional paid-in capital
|
|
|
|
|
2,626
|
|
|
|
|
|
74,447
|
|
|
|
|
|
|
|
|
|
Accumulated deficit
|
|
|
|
|
(68,242)
|
|
|
|
|
|
(68,242)
|
|
|
|
|
|
|
|
|
|
Total stockholders’ equity (deficit)
|
|
|
|
|
(65,608)
|
|
|
|
|
|
6,237
|
|
|
|
|
|
|
|
|
|
Total capitalization
|
|
|
|
$
|
21,429
|
|
|
|
|
$
|
21,429
|
|
|
|
|
$
|
|
|
|
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase
(decrease) the pro forma as adjusted amount of each of cash, additional paid-in capital, total stockholders’ equity and total capitalization by $ million, assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase (decrease) of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash, common stock, additional paid-in capital, total stockholders’ equity and total capitalization by $ million, assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The table above does not include:
•
251,610 shares of common stock issuable upon the exercise of warrants outstanding as of September 30, 2020 to purchase shares of redeemable convertible preferred stock that will become warrants to purchase shares of common stock at a weighted average exercise price of $4.87 per share;
•
5,323,585 shares of common stock issuable upon the exercise of stock options outstanding as of September 30, 2020 under our 2012 Stock Option and Grant Plan, or the 2012 Plan, at a weighted average exercise price of $1.05 per share;
•
358,498 shares of common stock available for future issuance as of September 30, 2020 under our 2012 Plan, which will become available for issuance under our 2020 Stock Option and Incentive Plan, or our 2020 Plan, upon effectiveness of the 2020 Plan;
•
3,000,000 shares of common stock that will become available for future issuance under our 2020 Plan; and
•
470,000 shares of our common stock that will become available for future issuance under our Employee Stock Purchase Plan upon the effectiveness of the registration statement of which this prospectus forms a part.
DILUTION
If you invest in our common stock in this offering, your ownership interest will be diluted immediately to the extent of the difference between the initial public offering price per share of our common stock and the pro forma as adjusted net tangible book value per share of our common stock after this offering.
Our historical net tangible book value (deficit) as of September 30, 2020 was $(66.5) million, or $(8.17) per share of common stock. Our historical net tangible book value (deficit) is the amount of our total tangible assets less our total liabilities and the carrying value of our redeemable convertible preferred stock, which is not included within stockholders’ equity (deficit). Historical net tangible book value (deficit) per share represents historical net tangible book value (deficit) divided by the 8,137,669 shares of common stock outstanding as of September 30, 2020.
Our pro forma net tangible book value as of September 30, 2020 was $5.4 million, or $0.17 per share of common stock. Pro forma net tangible book value represents the amount of our total tangible assets less our total liabilities, after giving effect to (i) the conversion of all outstanding shares of redeemable convertible preferred stock of into an aggregate of 23,905,267 shares of common stock and (ii) all outstanding warrants to purchase shares of redeemable convertible preferred stock becoming warrants to purchase shares of common stock. Pro forma net tangible book value per share represents pro forma net tangible book value divided by the total number of shares outstanding as of September 30, 2020, after giving effect to the pro forma adjustments described above.
After giving further effect to our issuance and sale of shares of our common stock in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of September 30, 2020 would have been $ million, or $ per share. This represents an immediate increase in pro forma as adjusted net tangible book value per share of $ to existing stockholders and immediate dilution of $ in pro forma as adjusted net tangible book value per share to new investors purchasing common stock in this offering. Dilution per share to new investors is determined by subtracting pro forma as adjusted net tangible book value per share after this offering from the assumed initial public offering price per share paid by new investors. The following table illustrates this dilution on a per share basis:
|
|
Assumed initial public offering price per share
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
|
|
Historical net tangible book value (deficit) per share as of September 30, 2020
|
|
|
|
$
|
(8.17)
|
|
|
|
|
|
|
|
|
|
|
Increase per share attributable to the pro forma adjustments described above
|
|
|
|
|
8.34
|
|
|
|
|
|
|
|
|
|
|
Pro forma net tangible book value per share as of September 30, 2020
|
|
|
|
|
0.17
|
|
|
|
|
|
|
|
|
|
|
Increase in pro forma as adjusted net tangible book value per share attributable to
new investors purchasing common stock in this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma as adjusted net tangible book value per share after this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilution per share to new investors purchasing common stock in this
offering
|
|
|
|
|
|
|
|
|
|
$
|
|
|
|
The dilution information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing. A $1.00 increase (decrease) in the assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, would increase (decrease) our pro forma as adjusted net tangible book value per share after this offering by $ and dilution per share to new investors purchasing common stock in this offering by $ , assuming that the number of shares offered by us, as set forth on the cover page of this prospectus, remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. An increase of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would increase our pro forma as adjusted net tangible book value per share after this offering by $ and decrease the dilution per share to new investors purchasing common stock
in this offering by $ , assuming no change in the assumed initial public offering price per share and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. A decrease of 1,000,000 shares in the number of shares offered by us, as set forth on the cover page of this prospectus, would decrease our pro forma as adjusted net tangible book value per share after this offering by $ and increase the dilution per share to new investors purchasing common stock in this offering by $ , assuming no change in the assumed initial public offering price and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
If the underwriters exercise their option to purchase additional shares in full, our pro forma as adjusted net tangible book value per share after this offering would be $ , representing an immediate increase in pro forma as adjusted net tangible book value per share of $ to existing stockholders and immediate dilution in pro forma as adjusted net tangible book value per share of $ to new investors purchasing common stock in this offering, assuming an initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, and after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us.
The following table summarizes, as of September 30, 2020, on the pro forma as adjusted basis described above, the total number of shares of common stock purchased from us on an as converted to common stock basis, the total consideration paid or to be paid and the average price per share paid or to be paid by existing stockholders and by new investors in this offering at an assumed initial public offering price of $ per share, which is the midpoint of the price range set forth on the cover page of this prospectus, before deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. As the table shows, new investors purchasing common stock in this offering will pay an average price per share substantially higher than our existing stockholders paid.
|
|
|
|
Shares Purchased
|
|
|
Total Consideration
|
|
|
Average
Price
Per Share
|
|
|
|
|
|
Number
|
|
|
Percent
|
|
|
Amount
|
|
|
Percentage
|
|
|
Existing stockholders
|
|
|
|
|
|
|
|
%
|
|
|
|
|
$
|
|
|
|
|
|
|
%
|
|
|
|
|
$
|
|
|
|
|
Investors participating in this offering
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
|
|
|
100.0%
|
|
|
|
|
|
|
|
|
The table above assumes no exercise of the underwriters’ option to purchase additional shares in this offering. If the underwriters’ option to purchase additional shares is exercised in full, the number of shares of our common stock held by existing stockholders would be reduced to % of the total number of shares of our common stock outstanding after this offering, and the number of shares of common stock held by new investors purchasing common stock in this offering would be increased to % of the total number of shares of our common stock outstanding after this offering.
The tables and discussion above are based on the number of shares of our common stock outstanding as of September 30, 2020, and exclude:
•
251,610 shares of common stock issuable upon the exercise of warrants outstanding as of September 30, 2020 to purchase shares of redeemable convertible preferred stock that will become warrants to purchase shares of common stock at a weighted average exercise price of $4.87 per share;
•
5,323,585 shares of common stock issuable upon the exercise of stock options outstanding as of September 30, 2020 under our 2012 Stock Option and Grant Plan, or the 2012 Plan, at a weighted average exercise price of $1.05 per share;
•
358,498 shares of common stock available for future issuance as of September 30, 2020 under our 2012 Plan, which will become available for issuance under our 2020 Stock Option and Incentive Plan, or our 2020 Plan, upon effectiveness of the 2020 Plan;
•
3,000,000 shares of common stock that will become available for future issuance under our 2020 Plan; and
•
470,000 shares of our common stock that will become available for future issuance under our Employee Stock Purchase Plan upon the effectiveness of the registration statement of which this prospectus forms a part.
To the extent that new stock options or warrants are issued, or we issue additional shares of common stock in the future, there will be further dilution to new investors. In addition, we may choose to raise additional capital because of market conditions or strategic considerations, even if we believe that we have sufficient funds for our current or future operating plans. If we raise additional capital through the sale of equity or convertible debt securities, the issuance of these securities could result in further dilution to our shareholders.
SELECTED FINANCIAL DATA
You should read the following selected financial data together with the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our financial statements and the related notes included elsewhere in this prospectus. The statement of operations data for the years ended December 31, 2018 and 2019 and the balance sheet data as of December 31, 2018 and 2019 have been derived from our audited financial statements included elsewhere in this prospectus. The selected statements of operations data for the nine months ended September 30, 2019 and 2020, and the selected balance sheet data as of September 30, 2020 are derived from our unaudited interim financial statements and related notes included elsewhere in this prospectus. Our unaudited interim financial statements were prepared on the same basis as our audited financial statements and include, in the opinion of management, all adjustments, consisting of normal recurring adjustments, that are necessary for the fair presentation of the financial information set forth in those financial statements. Our historical results are not necessarily indicative of our future results.
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
(in thousands, except per share data)
|
|
|
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service revenue
|
|
|
|
$
|
13,738
|
|
|
|
|
$
|
15,344
|
|
|
|
|
$
|
8,292
|
|
|
|
|
$
|
18,844
|
|
|
|
License and contract revenue
|
|
|
|
|
8,316
|
|
|
|
|
|
2,628
|
|
|
|
|
|
1,332
|
|
|
|
|
|
2,333
|
|
|
|
Total revenue
|
|
|
|
|
22,054
|
|
|
|
|
|
17,972
|
|
|
|
|
|
9,624
|
|
|
|
|
|
21,177
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service cost of revenue
|
|
|
|
|
9,002
|
|
|
|
|
|
9,098
|
|
|
|
|
|
5,397
|
|
|
|
|
|
8,121
|
|
|
|
License and contract cost of revenue
|
|
|
|
|
659
|
|
|
|
|
|
731
|
|
|
|
|
|
418
|
|
|
|
|
|
712
|
|
|
|
Total cost of revenue
|
|
|
|
|
9,661
|
|
|
|
|
|
9,829
|
|
|
|
|
|
5,815
|
|
|
|
|
|
8,833
|
|
|
|
Gross profit
|
|
|
|
|
12,393
|
|
|
|
|
|
8,143
|
|
|
|
|
|
3,809
|
|
|
|
|
|
12,344
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
|
9,528
|
|
|
|
|
|
8,993
|
|
|
|
|
|
7,020
|
|
|
|
|
|
5,953
|
|
|
|
Selling, general and administrative
|
|
|
|
|
9,304
|
|
|
|
|
|
11,294
|
|
|
|
|
|
8,624
|
|
|
|
|
|
8,320
|
|
|
|
Total operating expenses
|
|
|
|
|
18,832
|
|
|
|
|
|
20,287
|
|
|
|
|
|
15,644
|
|
|
|
|
|
14,273
|
|
|
|
Loss from operations
|
|
|
|
|
(6,439)
|
|
|
|
|
|
(12,144)
|
|
|
|
|
|
(11,835)
|
|
|
|
|
|
(1,929)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
(1,147)
|
|
|
|
|
|
(1,530)
|
|
|
|
|
|
(1,276)
|
|
|
|
|
|
(732)
|
|
|
|
Other income (expense), net
|
|
|
|
|
50
|
|
|
|
|
|
301
|
|
|
|
|
|
227
|
|
|
|
|
|
68
|
|
|
|
Total other expense, net
|
|
|
|
|
(1,097)
|
|
|
|
|
|
(1,229)
|
|
|
|
|
|
(1,049)
|
|
|
|
|
|
(664)
|
|
|
|
Net loss and comprehensive loss
|
|
|
|
|
(7,536)
|
|
|
|
|
|
(13,373)
|
|
|
|
|
|
(12,884)
|
|
|
|
|
|
(2,593)
|
|
|
|
Accretion of redeemable convertible preferred stock to redemption value
|
|
|
|
|
(76)
|
|
|
|
|
|
(109)
|
|
|
|
|
|
(79)
|
|
|
|
|
|
(74)
|
|
|
|
Net loss attributable to common stockholders(1)
|
|
|
|
$
|
(7,612)
|
|
|
|
|
$
|
(13,482)
|
|
|
|
|
$
|
(12,963)
|
|
|
|
|
$
|
(2,667)
|
|
|
|
Net loss per share attributable to common stockholders, basic and diluted(1)
|
|
|
|
$
|
(0.95)
|
|
|
|
|
$
|
(1.66)
|
|
|
|
|
$
|
(1.60)
|
|
|
|
|
$
|
(0.33)
|
|
|
|
Weighted average common shares outstanding, basic and
diluted(1)
|
|
|
|
|
7,984
|
|
|
|
|
|
8,120
|
|
|
|
|
|
8,120
|
|
|
|
|
|
8,129
|
|
|
|
Pro forma net loss per share attributable to common stockholders, basic and diluted (unaudited)(1)
|
|
|
|
|
|
|
|
|
|
$
|
(0.43)
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.08)
|
|
|
|
Pro forma weighted average common shares outstanding,
basic and diluted (unaudited)(1)
|
|
|
|
|
|
|
|
|
|
|
30,887
|
|
|
|
|
|
|
|
|
|
|
|
32,034
|
|
|
|
|
(1)
See Note 13 to our audited financial statements included elsewhere in this prospectus for details on the calculation of basic and diluted net loss per share attributable to common stockholders and unaudited basic and diluted pro forma net loss per share attributable to common stockholders.
|
|
|
|
As of December 31,
|
|
|
As of
September 30,
2020
|
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
|
|
|
|
(in thousands)
|
|
|
|
|
|
Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
7,072
|
|
|
|
|
$
|
17,913
|
|
|
|
|
$
|
19,712
|
|
|
|
|
Working capital(1)
|
|
|
|
|
12,444
|
|
|
|
|
|
22,526
|
|
|
|
|
|
22,071
|
|
|
|
|
Total assets
|
|
|
|
|
27,748
|
|
|
|
|
|
37,662
|
|
|
|
|
|
43,404
|
|
|
|
|
Deferred revenue, including current portion
|
|
|
|
|
1,313
|
|
|
|
|
|
2,061
|
|
|
|
|
|
9,256
|
|
|
|
|
Long-term debt, net of discount, including current portion
|
|
|
|
|
9,650
|
|
|
|
|
|
14,769
|
|
|
|
|
|
14,817
|
|
|
|
|
Commercial services agreement liability – related party
|
|
|
|
|
750
|
|
|
|
|
|
750
|
|
|
|
|
|
375
|
|
|
|
|
Preferred stock warrant liability
|
|
|
|
|
1,341
|
|
|
|
|
|
728
|
|
|
|
|
|
754
|
|
|
|
|
Redeemable convertible preferred stock
|
|
|
|
|
53,089
|
|
|
|
|
|
71,017
|
|
|
|
|
|
71,091
|
|
|
|
|
Total stockholders’ deficit
|
|
|
|
|
(50,176)
|
|
|
|
|
|
(63,168)
|
|
|
|
|
|
(65,608)
|
|
|
|
(1)
We define working capital as current assets less current liabilities.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with the “Selected Financial Data” section of this prospectus and our financial statements and related notes appearing elsewhere in this prospectus. Some of the information contained in this discussion and analysis or set forth elsewhere in this prospectus, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of this prospectus, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We have developed an innovative suite of purpose-built handheld and desktop mass spectrometry, or Mass Spec, devices for the point-of-need. Leveraging our proprietary platform technology, we make the extraordinary analytical power of Mass Spec available in devices that are significantly smaller and more accessible than conventional laboratory instruments. Our Mass Spec devices are used at the point-of-need to interrogate unknown and invisible materials and provide quick, actionable answers to directly address some of the most critical problems in life sciences research, bioprocessing, industrial biotech, forensics and adjacent markets.
We create simplified measurement devices that our customers can use as accurate tools where and when their work needs to be done, rather than overly complex and centralized analytical instrumentation. We believe the insights and answers our devices provide will accelerate workflows, reduce costs, and offer transformational opportunities for our end users.
Front-line workers rely upon our handheld devices to combat the opioid crisis and detect counterfeit pharmaceuticals and illicit materials in the air or on surfaces at levels 1,000 times below their lethal dose. Our desktop devices are accelerating development and production of biotherapeutics by identifying and quantifying extracellular species in bioprocessing critical to cell health and productivity. They sit alongside bioreactors and fermenters producing drug candidates, functional proteins, cell and gene therapies, and synthetic biology, or synbio, derived products. We believe the insights and answers our devices provide accelerate workflows, reduce costs, and offer transformational opportunities for our end users. The term “products” as used in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” refers to the MX908, Rebel and ZipChip Interface.
Since inception, we have focused substantially all of our resources on designing, developing and building our proprietary Mass Spec platform and associated technologies, supporting software improvements and data analysis, organizing and staffing our company, planning our business, raising capital, and providing general and administrative support for these operations. To date, we have funded our operations primarily with proceeds from sales of preferred stock and borrowings under loan agreements.
Since our inception, we have incurred significant operating losses. Our ability to generate revenue sufficient to achieve profitability will depend on the successful further development and commercialization of our products. We generated revenue of $22.1 million and $18.0 million for the years ended December 31, 2018 and 2019, respectively, and incurred net losses of $7.5 million and $13.4 million for those same years. We generated revenue of $21.2 million and incurred a net loss of $2.6 million for the nine months ended September 30, 2020. As of September 30, 2020, we had an accumulated deficit of $68.2 million. We expect to continue to incur net losses as we focus on growing commercial sales of our products in both the United States and international markets, including growing our sales teams, scaling our manufacturing operations, continuing research and development efforts to develop new products and further enhance our existing products. Further, following the closing of this offering, we expect to incur additional costs associated with operating as a public company. As a result, we will need substantial additional funding for expenses related to our operating activities, including selling, general and administrative expenses and research and development expenses.
Because of the numerous risks and uncertainties associated with product development and commercialization, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve or maintain profitability. Until such time, if ever, as we can generate substantial revenue sufficient to achieve profitability, we expect to finance our operations through a combination of equity offerings, debt financings and strategic alliances. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we are unable to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or discontinue the further development and commercialization efforts of one or more of our products, or may be forced to reduce or terminate our operations.
We believe that the net proceeds from this offering, together with our existing cash, will enable us to fund our operating expenses, capital expenditure requirements and debt service payments through . We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “Liquidity and Capital Resources.”
COVID-19
In December 2019, a novel strain of coronavirus, or COVID-19, emerged in Wuhan, Hubei Province, China. Less than four months later, in March 2020, the World Health Organization declared COVID-19 a pandemic, and the virus has now spread to many other countries and regions and every state within the United States, including Massachusetts, where our primary offices and manufacturing facility are located. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world.
Impacts in 2020 to our business as a result of COVID-19 include disruptions to our manufacturing operations and supply chain caused by facility closures, reductions in operating hours, staggered shifts and other social distancing efforts, decreased productivity and unavailability of materials or components, limitations on our employees’ and customers’ ability to travel, and delays in product installations, trainings or shipments to and from affected countries and within the United States. In light of the uncertain and rapidly evolving situation relating to the spread of COVID-19, we have taken precautionary measures intended to minimize the risk of the virus to our employees, our customers and the communities in which we operate, including temporarily closing our offices to visitors and limiting the number of employees in our offices to those that are deemed essential for manufacturing and research purposes, as well as virtualizing, postponing or canceling customer, employee and industry events. In addition, we temporarily reduced the manufacturing and distribution of our products at our facility in Boston, Massachusetts.
Disruptions in our customers’ operations have impacted and may continue to impact our business. For example, laboratory shutdowns and reduced capital spend have negatively impacted our ZipChip Interface and consumables sales, resulting in a decrease in ZipChip Interface sales from the nine months ended September 30, 2019 compared to the nine months ended September 30, 2020. While this decrease did not significantly impact our total revenue in the nine months ended September 30, 2020, the impact could be more significant in the future. We are focused on navigating the challenges presented by COVID-19, with a primary focus on preserving our liquidity and managing our cash flows by taking preemptive action to enhance our ability to meet our short-term liquidity needs. To address actual and expected reductions in revenue and cash flows, we reduced our discretionary spending and reduced payroll costs through temporary employee furloughs and salary reductions. Starting in July 2020, we reinstated our furloughed employees and pay rates.
We do not yet know the net impact that the COVID-19 pandemic may have on our business and cannot guarantee that it will not be materially negative. Although we continue to monitor the situation and may adjust our current policies as more information and public health guidance become available, the ongoing effects of the COVID-19 pandemic and/or the precautionary measures that we have adopted may create operational and other challenges, any of which could harm our business and results of operations. While we maintain an inventory of finished products and raw materials used in our products, a prolonged pandemic could lead to shortages in the raw materials necessary to manufacture our products. If we experience a prolonged disruption in our manufacturing, supply chains or
commercial operations, or if demand for our products is significantly reduced as a result of the COVID-19 pandemic, we would expect to experience a material adverse impact on our business, financial condition, results of operations and prospects.
Historically, a significant portion of our field sales, customer training events and other application services have been conducted in person, and the rollout of our new products has historically been supported by our participation at industry conferences. Currently, as a result of the work and travel restrictions related to the COVID-19 pandemic, and the precautionary measures that we have adopted, substantially all of our field sales and professional services activities are being conducted remotely, which has resulted in a decrease in our travel expenditures. However, we expect our travel expenditures to increase in the future, which could negatively impact our financial condition and results of operations. As of the date of this prospectus, we do not yet know the extent of the negative impact of such restrictions and precautionary measures on our ability to attract new customers or retain and expand our relationships with existing customers over the near and long term.
Factors affecting our performance
We believe that our financial performance has been and in the foreseeable future will continue to be primarily driven by the following factors. While each of these factors presents significant opportunities for our business, they also pose important challenges that we must successfully address in order to sustain our growth and improve our results of operations. Our ability to successfully address the factors below is subject to various risks and uncertainties, including those described under the heading “Risk Factors.”
Device sales
Our financial performance has largely been driven by, and in the future will continue to be impacted by, the rate of sales of our handheld and desktop devices. Management focuses on device sales as an indicator of current business success and a leading indicator of likely future recurring revenue from consumables and services. We expect our device sales to continue to grow as we increase penetration in our existing markets and expand into, or offer new features and solutions that appeal to, new markets.
We plan to grow our device sales in the coming years through multiple strategies including expanding our sales efforts domestically and globally and continuing to enhance the underlying technology and applications for life sciences research related to our Rebel and ZipChip Interface. As part of this strategy and in an effort to increase the rate of sales of our devices, we increased our sales force by 60% from January 1, 2019 through September 30, 2020, with 16 commissionable sales representatives as of September 30, 2020. We regularly solicit feedback from our customers and focus our research and development efforts on enhancing our devices and enabling our customers to use additional applications that address their needs, which we believe in turn helps to drive additional sales of our devices and consumables.
Our sales process varies considerably depending upon the type of customer to whom we are selling. Historically, our handheld devices have been used by state, federal and foreign governments and governmental agencies. Our sales process with government customers is often long and involves multiple levels of approvals, testing and, in some cases, trials. Device orders from a government customer are typically large orders and can be impacted by the timing of their capital budgets. As a result, the revenue for our handheld devices can vary significantly from period-to-period and has been and may continue to be concentrated in a small number of customers in any given period.
Our desktop devices are typically used by the pharmaceutical, biotechnology and academia markets. Our sales cycles within these markets tend to vary based on the size of the customer and the number of devices they purchase. Our shortest sales cycles are typically for small laboratories and individual researchers where, in some cases, we receive purchase orders from these customers within three months. Our sales process with other institutions can be longer with most customers submitting purchase orders within six to twelve months. Given the variability of our sales cycle, we have in the past experienced, and likely will in the future experience, fluctuations in our desktop device sales on a period-to-period basis. Additionally, we have experienced and may continue to experience the impact of laboratory shutdowns related to COVID-19 on device and consumable sales to these markets.
Recurring revenue
We regularly assess trends relating to recurring revenue which includes consumables and services based on our product offerings, our customer base and our understanding of how our customers use our products. Consumables and service revenue was 12% and 15% of total product and service revenue for the years ended December 31, 2018 and 2019, respectively, and 18% and 11% of total product and service revenue for the nine months ended September 30, 2019 and 2020, respectively. Our recurring revenue as a percentage of total product and service revenue will vary based upon new device placements in the period. As our device installed base expands, recurring revenue on an absolute basis is expected to increase and over time and should be an increasingly important contributor to our revenue.
Revenue from the sales of consumables will vary by type of device. We expect that consumables and service revenue as a percentage of the original device price to be higher for our desktop devices (Rebel and ZipChip Interface) than for our handheld device (MX908). While we sell single-use swab samplers for MX908 to be used in liquid and solid materials analysis, there are a number of other applications that the MX908 can be used for that do not require consumables. Rebel and ZipChip Interface require consumables kits for all areas of operations. Currently, Rebel customers are consuming on average one 200-sample kit per month; however, Rebel is a new product and purchasing patterns related to our consumables kits are evolving. We expect that the number of kits sold per month will vary over the short term. In time, we expect Rebel consumables kits sales to become more consistent as our installed base grows and our customers establish usage patterns. At maximum potential capacity, with continuous operation, the Rebel can consume approximately one 200-sample kit per day.
Revenue mix and gross margin
Our revenue is derived from sales of our devices, consumables and services. There will be fluctuations in mix between devices and consumables from period-to-period. Over time, as our device installed base grows and we see adoption of Rebel, we expect consumables revenue to constitute a larger percentage of product and service revenue. However, the percentage will be subject to fluctuation based upon our handheld sales in a period. In addition, our selling price and, consequently, our margins, are higher for those devices and consumables that we sell directly to customers as compared to those that we sell through distributors. While we expect the mix of direct sales as compared to sales through distributors to remain relatively constant in the near term, we are currently evaluating increasing our direct sales capabilities in certain geographies.
Future device and consumable selling prices and gross margins may fluctuate due to a variety of factors, including the introduction by others of competing products and solutions. We aim to mitigate downward pressure on our average selling prices by increasing the value proposition offered by our devices and consumables, primarily by expanding the applications for our devices and increasing the quantity and quality of data that can be obtained using our consumables.
Product adoption
We monitor our customers’ stage of adoption of our products to provide insight into the timing of future potential sales and to help us formulate financial projections. Typical stages of adoption include testing, trials, pilot and deployment as follows:
•
Testing—a customer is actively engaged with internal or external testing of our products. This may include an onsite or virtual demonstration with a salesperson, a customer submitting samples for testing in one of our facilities or testing by a third party.
•
Trials—a customer has committed to a trial of one of our products, which may include a defined period to assess functionality of the device in their operational environment (in the field or onsite within the customer’s facility).
•
Pilot—a customer commits to the purchase of an initial quantity of devices to deploy in their operational environment to assess a broader opportunity that may grow to tens or hundreds of devices.
•
Deployment—a customer has completed testing, a trial, and/or a pilot and intends to roll out the technology across their enterprise (either at a site or throughout the entire organization).
Key Business Metrics
We regularly review the number of product placements and cumulative product placement as key metrics to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections, and make strategic decisions. We believe that these metrics are representative of our current business; however, we anticipate these will change or may be substituted for additional or different metrics as our business grows.
During the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020, our product placements (units recognized as revenue) by device type were as follows:
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
Product Placements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MX908
|
|
|
|
|
187
|
|
|
|
|
|
192
|
|
|
|
|
|
100
|
|
|
|
|
|
280
|
|
|
|
Rebel
|
|
|
|
|
—
|
|
|
|
|
|
13
|
|
|
|
|
|
—
|
|
|
|
|
|
18
|
|
|
|
ZipChip Interface
|
|
|
|
|
29
|
|
|
|
|
|
43
|
|
|
|
|
|
25
|
|
|
|
|
|
21
|
|
|
|
Total placements
|
|
|
|
|
216
|
|
|
|
|
|
248
|
|
|
|
|
|
125
|
|
|
|
|
|
319
|
|
|
The number of product placements vary considerably from period-to-period due to the type and size of our customers and concentrations among larger government customers as described above. We also have been impacted by laboratory shutdowns related to COVID-19. We expect continued fluctuations in our period-to-period number of product placements.
As of December 31, 2018 and 2019 and September 30, 2020, our cumulative product placements consisted of the following number of devices:
|
|
|
|
As of December 31,
|
|
|
As of
September 30,
2020
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
Cumulative Product Placements:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
MX908
|
|
|
|
|
635
|
|
|
|
|
|
827
|
|
|
|
|
|
1,107
|
|
|
|
Rebel
|
|
|
|
|
—
|
|
|
|
|
|
13
|
|
|
|
|
|
31
|
|
|
|
ZipChip Interface
|
|
|
|
|
88
|
|
|
|
|
|
131
|
|
|
|
|
|
152
|
|
|
|
Cumulative product placements
|
|
|
|
|
723
|
|
|
|
|
|
971
|
|
|
|
|
|
1,290
|
|
|
Components of Our Results of Operations
Revenue
Product and Service Revenue
We generate product and service revenue from the sale of our devices and recurring revenue from the sale of consumables and services. Device sales accounted for 88% and 85% of our product and service revenue for the years ended December 31, 2018 and 2019, respectively. Consumables and service revenue accounted for 12% and 15% of our product and service revenue for the years ended December 31, 2018 and 2019, respectively. Device sales accounted for 82% and 89% of our product and service revenue for the nine months ended September 30, 2019 and 2020, respectively. Consumables and service revenue accounted for 18% and 11% of our product and service revenue for the nine months ended September 30, 2019 and 2020, respectively.
Our current device offerings include:
•
Handheld devices—MX908; and
•
Desktop devices—Rebel and ZipChip Interface.
We sell our devices directly to customers and through distributors. Each of our device sales drives various streams of recurring revenue comprised of consumable product sales and service revenue. Our consumables consist of:
•
MX908—accessories and swabs;
•
Rebel—consumables kit with a microfluidic chip and standards; and
•
ZipChip Interface—microfluidic chip, reagent and assay kits.
Rebel and ZipChip Interface consumables can only be used with our devices and there are no alternative after-market options that can be used as a substitute. Each chip is used for a defined number of samples (or runs). We recognize revenue from the sale of consumables as the consumable products are shipped.
We also offer our customers extended warranty and service plans. Our extended warranty and service plans are offered for periods beyond the standard one-year warranty that all of our customers receive. These extended warranty and service plans generally have fixed fees and terms ranging from one additional year to four additional years. We recognize revenue from the sale of extended warranty and service plans over the respective coverage period, which approximates the service effort provided by us.
We expect consumables and service revenue to increase in future periods as our installed base grows and we are able to generate recurring sales.
Licenses and contract revenue
License and contract agreements are arrangements whereby we provide engineering services for the development of our technology platform for specific programs or new and expanding applications of our technologies for future commercial endeavors. Our license and contract agreements are with the U.S. government and commercial entities (who may be contracting with the government). Contracts typically include compensation for labor effort and materials incurred related to the deliverables under the contract. Our license and contract revenue was primarily related to one customer during the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020.
During the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020, our revenue was comprised of revenue from the following sources:
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
(in thousands)
|
|
|
Product and service revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Device sales revenue
|
|
|
|
$
|
12,094
|
|
|
|
|
$
|
13,038
|
|
|
|
|
$
|
6,819
|
|
|
|
|
$
|
16,766
|
|
|
|
Consumables and service revenue
|
|
|
|
|
1,644
|
|
|
|
|
|
2,306
|
|
|
|
|
|
1,473
|
|
|
|
|
|
2,078
|
|
|
|
Total product and service revenue
|
|
|
|
|
13,738
|
|
|
|
|
|
15,344
|
|
|
|
|
|
8,292
|
|
|
|
|
|
18,844
|
|
|
|
License and contract revenue
|
|
|
|
|
8,316
|
|
|
|
|
|
2,628
|
|
|
|
|
|
1,332
|
|
|
|
|
|
2,333
|
|
|
|
Total revenue
|
|
|
|
$
|
22,054
|
|
|
|
|
$
|
17,972
|
|
|
|
|
$
|
9,624
|
|
|
|
|
$
|
21,177
|
|
|
Our product and service revenue is comprised of sales of our handheld and desktop devices and related consumables and service contracts to end-users in the government, pharmaceuticals/biotechnology and academia markets as follows:
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
(in thousands)
|
|
|
Product and Service Revenue by Device:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Handheld
|
|
|
|
$
|
11,582
|
|
|
|
|
$
|
10,518
|
|
|
|
|
$
|
6,141
|
|
|
|
|
$
|
14,491
|
|
|
|
Desktop
|
|
|
|
|
2,156
|
|
|
|
|
|
4,826
|
|
|
|
|
|
2,151
|
|
|
|
|
|
4,353
|
|
|
|
Total product and service revenue
|
|
|
|
$
|
13,738
|
|
|
|
|
$
|
15,344
|
|
|
|
|
$
|
8,292
|
|
|
|
|
$
|
18,844
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
(in thousands)
|
|
|
Product and Service Revenue by Market:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Government
|
|
|
|
$
|
11,443
|
|
|
|
|
$
|
10,324
|
|
|
|
|
$
|
6,226
|
|
|
|
|
$
|
14,475
|
|
|
|
Pharmaceutical/Biotechnology
|
|
|
|
|
2,266
|
|
|
|
|
|
4,474
|
|
|
|
|
|
1,717
|
|
|
|
|
|
4,100
|
|
|
|
Academia
|
|
|
|
|
29
|
|
|
|
|
|
546
|
|
|
|
|
|
349
|
|
|
|
|
|
269
|
|
|
|
Total product and service revenue
|
|
|
|
$
|
13,738
|
|
|
|
|
$
|
15,344
|
|
|
|
|
$
|
8,292
|
|
|
|
|
$
|
18,844
|
|
|
We sell our products primarily in the United States; however, we are expanding our global sales efforts as we see traction in our products and assess market needs. The majority of our international sales are through a distribution channel.
Cost of Revenue, Gross Profit and Gross Margin
Product cost of revenue primarily consists of costs for raw material parts and associated freight, shipping and handling costs, royalties, contract manufacturer costs, salaries and other personnel costs, overhead and other direct costs related to those sales recognized as product revenue in the period. Cost of revenue for services primarily consists of salaries and other personnel costs, travel related to services provided, facility costs associated with training, warranties and other costs of servicing equipment on a return-to-factory basis and at customer sites. License and contract cost of revenue primarily consists of salaries and other personnel costs, materials, travel and other direct costs related to the revenue recognized in the period. The license and contract cost of revenue will vary based upon the type of contract, including whether it is primarily for development services or for both materials and development services.
We expect that our cost of revenue will increase or decrease to the extent that our revenue increases and decreases and depending on how many contracts we have ongoing at any given point in time and the stage of those contracts.
Gross profit is calculated as revenue less cost of revenue. Gross profit margin is gross profit expressed as a percentage of revenue. Our gross profit in future periods will depend on a variety of factors, including: market conditions that may impact our pricing, sales mix among devices, sales mix changes among consumables, excess and obsolete inventories, our cost structure for manufacturing operations relative to volume, and product warranty obligations. Our gross profit in future periods will vary based upon our channel mix and may decrease based upon our distribution channels and the potential to establish original equipment manufacturing channels for certain components of our technology platform which would have a lower gross margin.
We expect that our gross profit margin for product and service will increase over the long term as our sales and production volumes increase and our cost per unit decreases due to efficiencies of scale. We intend to use our design, engineering and manufacturing capabilities to further advance and improve the efficiency of our manufacturing, which we believe will reduce costs and increase our gross margin. We expect that our gross profit margin for license and contract will remain consistent for our contracts that are cost reimbursement contracts.
Operating Expenses
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, product development, hardware and software engineering and consultant services and other costs associated with our technology platform and products, which include:
•
employee-related expenses, including salaries, related benefits and stock-based compensation expense for employees engaged in research and hardware and software development functions;
•
the cost of maintaining and improving our product designs, including third-party development costs for new products and materials for prototypes;
•
research materials and supplies; and
•
facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities and insurance.
We believe that our continued investment in research and development is essential to our long-term competitive position and expect these expenses to increase in future periods.
Selling, general and administrative expenses
Selling, general and administrative expenses consist primarily of salaries and other personnel costs, and stock-based compensation for our sales and marketing, finance, legal, human resources and general management, as well as professional services, such as legal, audit and accounting services. We expect selling, general and administrative expenses to increase in future periods as the number of sales, sales application specialists and marketing and administrative personnel grows and we continue to introduce new products, invest in demonstration equipment, broaden our customer base and grow our business. We also anticipate that we will incur increased accounting, audit, legal, regulatory, compliance and director and officer insurance costs as well as investor and public relations expenses associated with operating as a public company.
Other Income (Expense)
Interest expense
Interest expense consists of interest expense associated with outstanding borrowings under our loan and security agreements and the amortization of deferred financing costs and debt discounts associated with such arrangements. In 2019, our interest expense also included our loss on debt extinguishment resulting from the early repayment of debt and end of term payment with proceeds from a new debt facility.
Other Income (Expense), Net
Other income (expense), net consists primarily of the change in fair value of our redeemable convertible preferred stock warrants. We classify warrants for the purchase of shares of our redeemable convertible preferred stock as a liability on our balance sheet as these warrants are freestanding financial instruments that may require us to transfer assets upon exercise. The warrant liability is initially recorded at fair value upon the date of issuance of each warrant and is subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant liability are recognized as a component of other income (expense), net in the statement of operations and comprehensive loss. Changes in the fair value of the preferred stock warrant liability will continue to be recognized until the warrants are exercised, expire or qualify for equity classification. Other income (expense), net also consists of miscellaneous other income and expense unrelated to our core operations.
Provision for Income Taxes
We have not recorded any U.S. federal or state income tax benefits for the net operating losses we have incurred in each year or for the research and development tax credits we generated in the United States, as we believe, based upon the weight of available evidence, that it is more likely than not that all of our net operating loss carryforwards and tax credits will not be realized. As of December 31, 2019, we had U.S. federal and state net operating loss carryforwards of $53.0 million and $31.7 million, respectively, which may be available to offset future taxable income and begin to expire in 2032 and 2025, respectively. As of December 31, 2019, we also had U.S. federal and state research and development tax credit carryforwards of $4.0 million and $2.1 million, respectively, which may be available to offset future tax liabilities and begin to expire in 2032 and 2029, respectively. We have recorded a full valuation allowance against our net deferred tax assets at each balance sheet date.
Results of Operations
The results of operations presented below should be reviewed in conjunction with the financial statements and notes included elsewhere in the prospectus. The following tables set forth our results of operations for the periods presented:
Comparison of the Nine Months Ended September 30, 2019 and 2020
|
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
2020
|
|
|
Change
|
|
|
|
|
|
(in thousands)
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service revenue
|
|
|
|
$
|
8,292
|
|
|
|
|
$
|
18,844
|
|
|
|
|
$
|
10,552
|
|
|
|
License and contract revenue
|
|
|
|
|
1,332
|
|
|
|
|
|
2,333
|
|
|
|
|
|
1,001
|
|
|
|
Total revenue
|
|
|
|
|
9,624
|
|
|
|
|
|
21,177
|
|
|
|
|
|
11,553
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service cost of revenue
|
|
|
|
|
5,397
|
|
|
|
|
|
8,121
|
|
|
|
|
|
2,724
|
|
|
|
License and contract cost of revenue
|
|
|
|
|
418
|
|
|
|
|
|
712
|
|
|
|
|
|
294
|
|
|
|
Total cost of revenue
|
|
|
|
|
5,815
|
|
|
|
|
|
8,833
|
|
|
|
|
|
3,018
|
|
|
|
Gross profit
|
|
|
|
|
3,809
|
|
|
|
|
|
12,344
|
|
|
|
|
|
8,535
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
|
7,020
|
|
|
|
|
|
5,953
|
|
|
|
|
|
(1,067)
|
|
|
|
Selling, general and administrative
|
|
|
|
|
8,624
|
|
|
|
|
|
8,320
|
|
|
|
|
|
(304)
|
|
|
|
Total operating expenses
|
|
|
|
|
15,644
|
|
|
|
|
|
14,273
|
|
|
|
|
|
(1,371)
|
|
|
|
Loss from operations
|
|
|
|
|
(11,835)
|
|
|
|
|
|
(1,929)
|
|
|
|
|
|
9,906
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
(1,276)
|
|
|
|
|
|
(732)
|
|
|
|
|
|
544
|
|
|
|
Other income (expense), net
|
|
|
|
|
227
|
|
|
|
|
|
68
|
|
|
|
|
|
(159)
|
|
|
|
Total other expense, net
|
|
|
|
|
(1,049)
|
|
|
|
|
|
(664)
|
|
|
|
|
|
385
|
|
|
|
Net loss
|
|
|
|
$
|
(12,884)
|
|
|
|
|
$
|
(2,593)
|
|
|
|
|
$
|
10,291
|
|
|
Revenue, Cost of Revenue and Gross profit
Product and service
|
|
|
|
Nine Months Ended September 30,
|
|
|
Change
|
|
|
|
|
|
2019
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
Product and service revenue
|
|
|
|
$
|
8,292
|
|
|
|
|
$
|
18,844
|
|
|
|
|
$
|
10,552
|
|
|
|
|
|
127%
|
|
|
|
Product and service cost of revenue
|
|
|
|
|
5,397
|
|
|
|
|
|
8,121
|
|
|
|
|
|
2,724
|
|
|
|
|
|
50%
|
|
|
|
Gross profit
|
|
|
|
$
|
2,895
|
|
|
|
|
$
|
10,723
|
|
|
|
|
$
|
7,828
|
|
|
|
|
|
270%
|
|
|
|
Gross profit margin
|
|
|
|
|
35%
|
|
|
|
|
|
57%
|
|
|
|
|
|
22%
|
|
|
|
|
|
|
|
|
Our product and service revenue is comprised of revenue from sales of devices and related consumables and service as follows:
|
|
|
|
Nine Months Ended September 30,
|
|
|
Change
|
|
|
|
|
|
2019
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
Device sales revenue
|
|
|
|
$
|
6,819
|
|
|
|
|
$
|
16,766
|
|
|
|
|
$
|
9,947
|
|
|
|
|
|
146%
|
|
|
|
Consumables and service revenue
|
|
|
|
|
1,473
|
|
|
|
|
|
2,078
|
|
|
|
|
|
605
|
|
|
|
|
|
41%
|
|
|
|
Total product and service revenue
|
|
|
|
$
|
8,292
|
|
|
|
|
$
|
18,844
|
|
|
|
|
$
|
10,552
|
|
|
|
|
|
127%
|
|
|
Product and service revenue increased by $10.6 million, or 127%, for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019. Device sales accounted for 82% and 89% of our product and service revenue for the nine months ended September 30, 2019 and 2020, respectively. Consumables and service revenue accounted for 18% and 11% of our product
and service revenue for the nine months ended September 30, 2019 and 2020, respectively. The increase in device sales of $9.9 million was primarily due to an increase of $8.2 million in handheld device sales driven by 180 MX908s delivered to a government customer in the nine months ended September 30, 2020. We also had a $1.7 million increase in device sales related to our desktop products primarily due to the sale of 18 Rebels in the nine months ended September 30, 2020, partially offset by a decrease in sales of our ZipChip Interfaces. We commercially launched Rebel in the fourth quarter of 2019. The decrease of four ZipChip Interfaces was primarily a result of laboratory shutdowns and reduced capital spend related to COVID-19. Consumables and service revenue increased by $0.6 million primarily due to an increase in service revenue of $0.4 million and an increase in Rebel kit sales.
Product and service cost of revenue increased by $2.7 million, or 50%, for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019. The increase in product and service cost of revenue was primarily related to a $3.4 million increase in materials and manufacturing costs related to volume increases, partially offset by a $0.5 million decrease in salaries and related costs as a result of our temporary furloughs related to COVID-19.
Product and service gross profit increased by $7.8 million, or 270%, and gross profit margin increased by 22 percentage points for the nine months ended September 30, 2020 as compared to the nine months ended September 30, 2019, primarily due to MX908 sales volume which leveraged our fixed costs related to our manufacturing facility.
License and contract
|
|
|
|
Nine Months Ended September 30,
|
|
|
Change
|
|
|
|
|
|
2019
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
License and contract revenue
|
|
|
|
$
|
1,332
|
|
|
|
|
$
|
2,333
|
|
|
|
|
$
|
1,001
|
|
|
|
|
|
75%
|
|
|
|
License and contract cost of revenue
|
|
|
|
|
418
|
|
|
|
|
|
712
|
|
|
|
|
|
294
|
|
|
|
|
|
70%
|
|
|
|
Gross profit
|
|
|
|
$
|
914
|
|
|
|
|
$
|
1,621
|
|
|
|
|
$
|
707
|
|
|
|
|
|
77%
|
|
|
|
Gross profit margin
|
|
|
|
|
69%
|
|
|
|
|
|
69%
|
|
|
|
|
|
0%
|
|
|
|
|
|
|
|
|
License and contract revenue increased by $1.0 million, or 75%, for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019. The increase was primarily related to activities under our subcontract agreement with a commercial entity that holds a U.S. government prime contract being greater in the nine months ended September 30, 2020 than the comparable period in 2019. The increase in revenue from this contract was partially offset by a reduction in license revenue from a contract that ended in 2019.
License and contract cost of revenue increased $0.3 million, or 70% for the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019 due to the increase in costs incurred under our subcontract. Gross profit margin remained consistent during the nine months ended September 30, 2020, compared to the nine months ended September 30, 2019.
Operating Expenses
Research and development
|
|
|
|
Nine Months Ended September 30,
|
|
|
Change
|
|
|
|
|
|
2019
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
|
$
|
7,020
|
|
|
|
|
$
|
5,953
|
|
|
|
|
$
|
(1,067)
|
|
|
|
|
|
(15)%
|
|
|
|
Percentage of total revenue
|
|
|
|
|
73%
|
|
|
|
|
|
28%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our research and development expenses were $6.0 million for the nine months ended September 30, 2020, a decrease of $1.1 million from research and development expenses of $7.0 million for the nine months ended September 30, 2019. The decrease was due primarily to a $0.4 million decrease in materials spend and consulting costs primarily associated with the development and testing of our Rebel as we commercially launched the Rebel in the fourth quarter of 2019, a $0.2 million decrease in
salary and related costs mainly as a result of our temporary furloughs and salary reductions related to COVID-19 and a $0.1 million decrease in travel expenses related to COVID-19.
Selling, general and administrative expenses
|
|
|
|
Nine Months Ended September 30,
|
|
|
Change
|
|
|
|
|
|
2019
|
|
|
2020
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
$
|
8,624
|
|
|
|
|
$
|
8,320
|
|
|
|
|
$
|
(304)
|
|
|
|
|
|
(4)%
|
|
|
|
Percentage of total revenue
|
|
|
|
|
90%
|
|
|
|
|
|
39%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our selling, general and administrative expenses were $8.3 million for the nine months ended September 30, 2020, a decrease of $0.3 million from selling, general and administrative expenses of $8.6 million for the nine months ended September 30, 2019. The decrease was due primarily to a $0.5 million decrease in travel expenses and a $0.2 million decrease in tradeshows and related marketing, both mainly related to COVID-19, a $0.3 million decrease in consulting costs as we shifted from consultants to employees, and a $0.2 million reduction in legal fees related to an abandoned debt refinancing during the first quarter of 2019. We also decreased our commercial services agreement liability by $0.4 million due to the decreased probability of payout. These reductions were partially offset by a $0.8 million increase in professional fees related to our preparations to operate as a public company, supporting our growing business and market research support and a $0.3 million increase in salaries and related costs as a result of expanding our sales force and sales commissions for increased product and service revenue during the nine months ended September 30, 2020.
Other income (expense)
Interest expense
Interest expense was $0.7 million for the nine months ended September 30, 2020, a decrease of $0.6 million from interest expense of $1.3 million for the nine months ended September 30, 2019. Interest expense for the nine months ended September 30, 2019 included a loss on extinguishment of debt of $0.3 million. Interest expense also decreased by $0.3 million due to a lower interest rate on our new credit facility entered into in August 2019 compared to our previous debt facility, partially offset by an increase in debt. Our previous loan and security agreement was outstanding through August 2019, when we terminated and repaid in full the borrowings under that agreement of $10.0 million and entered into a new credit agreement with Signature Bank for borrowings of $15.0 million.
Other income (expense), net
Other income (expense), net included interest income of $0.1 million for the nine months ended September 30, 2020, a decrease of $0.1 million from interest income of $0.2 million for the nine months ended September 30, 2019. Other income (expense), net also included other expense of less than $0.1 million for the nine months ended September 30, 2020 and other income of $0.1 million for the nine months ended September 30, 2019. The other income (expense), net was a result of the change in the fair value of our preferred stock warrant liability during the nine months ended September 30, 2020, and was due primarily to the changes in the fair value of our redeemable preferred stock.
Comparison of the Years ended December 31, 2018 and 2019
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
Change
|
|
|
|
|
|
(in thousands)
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service revenue
|
|
|
|
$
|
13,738
|
|
|
|
|
$
|
15,344
|
|
|
|
|
$
|
1,606
|
|
|
|
License and contract revenue
|
|
|
|
|
8,316
|
|
|
|
|
|
2,628
|
|
|
|
|
|
(5,688)
|
|
|
|
Total revenue
|
|
|
|
|
22,054
|
|
|
|
|
|
17,972
|
|
|
|
|
|
(4,082)
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service cost of revenue
|
|
|
|
|
9,002
|
|
|
|
|
|
9,098
|
|
|
|
|
|
96
|
|
|
|
License and contract cost of revenue
|
|
|
|
|
659
|
|
|
|
|
|
731
|
|
|
|
|
|
72
|
|
|
|
Total cost of revenue
|
|
|
|
|
9,661
|
|
|
|
|
|
9,829
|
|
|
|
|
|
168
|
|
|
|
Gross profit
|
|
|
|
|
12,393
|
|
|
|
|
|
8,143
|
|
|
|
|
|
(4,250)
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
|
9,528
|
|
|
|
|
|
8,993
|
|
|
|
|
|
(535)
|
|
|
|
Selling, general and administrative
|
|
|
|
|
9,304
|
|
|
|
|
|
11,294
|
|
|
|
|
|
1,990
|
|
|
|
Total operating expenses
|
|
|
|
|
18,832
|
|
|
|
|
|
20,287
|
|
|
|
|
|
1,455
|
|
|
|
Loss from operations
|
|
|
|
|
(6,439)
|
|
|
|
|
|
(12,144)
|
|
|
|
|
|
(5,705)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
(1,147)
|
|
|
|
|
|
(1,530)
|
|
|
|
|
|
(383)
|
|
|
|
Other income (expense), net
|
|
|
|
|
50
|
|
|
|
|
|
301
|
|
|
|
|
|
251
|
|
|
|
Total other expense, net
|
|
|
|
|
(1,097)
|
|
|
|
|
|
(1,229)
|
|
|
|
|
|
(132)
|
|
|
|
Net loss
|
|
|
|
$
|
(7,536)
|
|
|
|
|
$
|
(13,373)
|
|
|
|
|
$
|
(5,837)
|
|
|
Revenue, Cost of revenue and Gross profit
Product and service
|
|
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
Product and service revenue
|
|
|
|
$
|
13,738
|
|
|
|
|
$
|
15,344
|
|
|
|
|
$
|
1,606
|
|
|
|
|
|
12%
|
|
|
|
Product and service cost of revenue
|
|
|
|
|
9,002
|
|
|
|
|
|
9,098
|
|
|
|
|
|
96
|
|
|
|
|
|
1%
|
|
|
|
Gross profit
|
|
|
|
$
|
4,736
|
|
|
|
|
$
|
6,246
|
|
|
|
|
$
|
1,510
|
|
|
|
|
|
32%
|
|
|
|
Gross profit margin
|
|
|
|
|
34%
|
|
|
|
|
|
41%
|
|
|
|
|
|
7%
|
|
|
|
|
|
|
|
|
Our product and service revenue is comprised of revenue from sales of devices and related consumables and service as follows:
|
|
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
Device sales revenue
|
|
|
|
$
|
12,094
|
|
|
|
|
$
|
13,038
|
|
|
|
|
$
|
944
|
|
|
|
|
|
8%
|
|
|
|
Consumables and service revenue
|
|
|
|
|
1,644
|
|
|
|
|
|
2,306
|
|
|
|
|
|
662
|
|
|
|
|
|
40%
|
|
|
|
Total product and service revenue
|
|
|
|
$
|
13,738
|
|
|
|
|
$
|
15,344
|
|
|
|
|
$
|
1,606
|
|
|
|
|
|
12%
|
|
|
Product and service revenue increased by $1.6 million, or 12%, for the year ended December 31, 2019, compared to the year ended December 31, 2018. Device sales accounted for 88% and 85% of our product and service revenue for the years ended December 31, 2018 and 2019, respectively. Consumables and service revenue accounted for 12% and 15% of our product and service revenue for the years ended December 31, 2018 and 2019, respectively. The increase in device sales of $0.9 million
was primarily due to an increase of $1.9 million in desktop device sales driven by the shipment of 13 Rebels in the fourth quarter of 2019, partially offset by a $1.4 million decrease due to the conclusion of a product upgrade program that was in effect for 2017 and 2018, from the M908 to the newly launched MX908. Consumables and service revenue increased by $0.7 million primarily due to the increase in sales of desktop devices.
Product and service cost of revenue was relatively flat in 2019 as compared to 2018. Increased costs related to higher sales were mostly offset by higher margin product sales as the product upgrade sales in 2018 were for lower margin product than our product sales in 2019. Product and service gross profit margin increased by $1.5 million, or 32%, and gross profit increased by 7 percentage points for the year ended December 31, 2019, compared to the year ended December 31, 2018, primarily due to the lower cost base of our 2019 product sales.
License and contract
|
|
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
License and contract revenue
|
|
|
|
$
|
8,316
|
|
|
|
|
$
|
2,628
|
|
|
|
|
$
|
(5,688)
|
|
|
|
|
|
(68)%
|
|
|
|
License and contract cost of revenue
|
|
|
|
|
659
|
|
|
|
|
|
731
|
|
|
|
|
|
72
|
|
|
|
|
|
11%
|
|
|
|
Gross profit
|
|
|
|
$
|
7,657
|
|
|
|
|
$
|
1,897
|
|
|
|
|
$
|
(5,760)
|
|
|
|
|
|
(75)%
|
|
|
|
Gross profit margin
|
|
|
|
|
92%
|
|
|
|
|
|
72%
|
|
|
|
|
|
(20)%
|
|
|
|
|
|
|
|
|
License and contract revenue decreased by $5.7 million, or 68%, for the year ended December 31, 2019, compared to the year ended December 31, 2018. The decrease was primarily related to $5.3 million of license and contract revenue recognized in 2018 following application of the cumulative catch-up method under an agreement where the transaction price was previously constrained.
License and contract cost of revenue increased $0.1 million, or 11% for the year ended December 31, 2019, compared to the year ended December 31, 2018. The slight increase in license and contract cost of revenue is reflective of the mix of contracts in each period.
Operating Expenses
Research and development
|
|
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
Research and development expenses
|
|
|
|
$
|
9,528
|
|
|
|
|
$
|
8,993
|
|
|
|
|
$
|
(535)
|
|
|
|
|
|
(6)%
|
|
|
|
Percentage of total revenue
|
|
|
|
|
43%
|
|
|
|
|
|
50%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our research and development expenses were $9.0 million for the year ended December 31, 2019, a decrease of $0.5 million from research and development expenses of $9.5 million for the year ended December 31, 2018. The decrease was due primarily to a $1.2 million decrease in materials spend and consulting costs, mainly associated with development and testing of our Rebel device as we commercially launched our Rebel device in the fourth quarter of 2019, partially offset by increased occupancy costs of $0.5 million related to the move to our new facilities headquarters in October 2018 and a $0.3 million increase in headcount in our research and development function.
Selling, general and administrative expenses
|
|
|
|
Year Ended December 31,
|
|
|
Change
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
Amount
|
|
|
%
|
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
$
|
9,304
|
|
|
|
|
$
|
11,294
|
|
|
|
|
$
|
1,990
|
|
|
|
|
|
21%
|
|
|
|
Percentage of total revenue
|
|
|
|
|
42%
|
|
|
|
|
|
63%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our selling, general and administrative expenses were $11.3 million for the year ended December 31, 2019, an increase of $2.0 million from selling, general and administrative expenses of
$9.3 million for the year ended December 31, 2018. The increase was due primarily to personnel and related costs of $1.3 million due to increased headcount in our sales and marketing department as we increased our resources focused on desktop device sales. In addition, our consulting costs increased by $0.4 million related to international sales efforts for both our handheld and desktop products. Our travel and tradeshow expenses increased by $0.5 million primarily related to international travel and our digital marketing efforts and events related to our desktop products. These increases were partially offset by a $0.3 million decrease in material costs related to MX908s and consumables used in sales efforts.
Other Income (Expense)
Interest Expense
Interest expense was relatively flat for the years ended December 31, 2019 and 2018 as the increase in outstanding borrowings was offset by a decrease in the effective interest rate on our new facility. Our previous loan and security agreement was outstanding through August 2019, when we terminated and repaid in full the borrowings under that agreement of $10.0 million and entered into a new credit agreement with Signature Bank for borrowings of $15.0 million. Interest expense for the year ended December 31, 2019 also included a loss on extinguishment of debt of $0.3 million related to the repayment of outstanding debt and the end of term payment due under our previous debt facility, which we repaid in August 2019.
Other income (expense), net
Other income (expense), net included interest income of $0.2 million and $0.1 million for the years ended December 31, 2019 and 2018, respectively. The increase in interest income in 2019 was due primarily to a higher invested cash balance due to our sale of Series E redeemable preferred stock in April 2019. Other income (expense), net also included other income of $0.1 million for the year ended December 31, 2019 and a loss of $0.1 million for the year ended December 31, 2018 related to the change in the fair value of our preferred stock warrant liability. The change in the fair value of our preferred stock warrant liability in both periods was due primarily to the changes in the fair value of our redeemable preferred stock.
Quarterly Results of Operations Data
The following table sets forth quarterly statement of operations data for each of the seven most recent quarters in the period ended September 30, 2020. We have prepared the quarterly statement of operations data on the same basis as the audited financial statements included in this prospectus. In our opinion, the quarterly financial data reflects all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair statement of this data. This information should be read together with our financial statements and related notes included elsewhere in this prospectus. Our operating results may fluctuate due to a variety of factors. We have experienced some seasonality in our business from quarter to quarter based upon the timing of funding release related to the sale of handheld devices to our government customers as well as higher revenue in the fourth quarter of the calendar year related to our pharmaceutical/biotechnology customers. The results of historical periods are not necessarily indicative of the results to be expected for a full year or any future period.
|
|
|
|
Three Months Ended
|
|
|
|
|
|
March 31,
2019
|
|
|
June 30,
2019
|
|
|
Sept. 30,
2019
|
|
|
Dec 31,
2019
|
|
|
March 31,
2020
|
|
|
June 30,
2020
|
|
|
Sept. 30,
2020
|
|
|
|
|
|
(in thousands)
|
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service revenue
|
|
|
|
$
|
2,340
|
|
|
|
|
$
|
2,691
|
|
|
|
|
$
|
3,261
|
|
|
|
|
$
|
7,052
|
|
|
|
|
$
|
2,639
|
|
|
|
|
$
|
10,378
|
|
|
|
|
$
|
5,827
|
|
|
|
License and contract revenue
|
|
|
|
|
640
|
|
|
|
|
|
507
|
|
|
|
|
|
185
|
|
|
|
|
|
1,296
|
|
|
|
|
|
1,362
|
|
|
|
|
|
750
|
|
|
|
|
|
221
|
|
|
|
Total revenue
|
|
|
|
|
2,980
|
|
|
|
|
|
3,198
|
|
|
|
|
|
3,446
|
|
|
|
|
|
8,348
|
|
|
|
|
|
4,001
|
|
|
|
|
|
11,128
|
|
|
|
|
|
6,048
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
March 31,
2019
|
|
|
June 30,
2019
|
|
|
Sept. 30,
2019
|
|
|
Dec 31,
2019
|
|
|
March 31,
2020
|
|
|
June 30,
2020
|
|
|
Sept. 30,
2020
|
|
|
|
|
|
(in thousands)
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service cost of
revenue
|
|
|
|
|
1,432
|
|
|
|
|
|
1,506
|
|
|
|
|
|
2,459
|
|
|
|
|
|
3,701
|
|
|
|
|
|
1,570
|
|
|
|
|
|
4,471
|
|
|
|
|
|
2,080
|
|
|
|
License and contract cost of
revenue
|
|
|
|
|
92
|
|
|
|
|
|
181
|
|
|
|
|
|
145
|
|
|
|
|
|
313
|
|
|
|
|
|
333
|
|
|
|
|
|
247
|
|
|
|
|
|
132
|
|
|
|
Total cost of revenue
|
|
|
|
|
1,524
|
|
|
|
|
|
1,687
|
|
|
|
|
|
2,604
|
|
|
|
|
|
4,014
|
|
|
|
|
|
1,903
|
|
|
|
|
|
4,718
|
|
|
|
|
|
2,212
|
|
|
|
Gross profit
|
|
|
|
|
1,456
|
|
|
|
|
|
1,511
|
|
|
|
|
|
842
|
|
|
|
|
|
4,334
|
|
|
|
|
|
2,098
|
|
|
|
|
|
6,410
|
|
|
|
|
|
3,836
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
|
2,421
|
|
|
|
|
|
2,407
|
|
|
|
|
|
2,191
|
|
|
|
|
|
1,974
|
|
|
|
|
|
2,156
|
|
|
|
|
|
1,846
|
|
|
|
|
|
1,951
|
|
|
|
Selling, general and administrative
|
|
|
|
|
2,748
|
|
|
|
|
|
3,035
|
|
|
|
|
|
2,840
|
|
|
|
|
|
2,671
|
|
|
|
|
|
2,706
|
|
|
|
|
|
2,436
|
|
|
|
|
|
3,178
|
|
|
|
Total operating expenses
|
|
|
|
|
5,169
|
|
|
|
|
|
5,442
|
|
|
|
|
|
5,031
|
|
|
|
|
|
4,645
|
|
|
|
|
|
4,862
|
|
|
|
|
|
4,282
|
|
|
|
|
|
5,129
|
|
|
|
Income (loss) from operations
|
|
|
|
|
(3,713)
|
|
|
|
|
|
(3,931)
|
|
|
|
|
|
(4,189)
|
|
|
|
|
|
(311)
|
|
|
|
|
|
(2,764)
|
|
|
|
|
|
2,128
|
|
|
|
|
|
(1,293)
|
|
|
|
Total other expense, net
|
|
|
|
|
(231)
|
|
|
|
|
|
(228)
|
|
|
|
|
|
(591)
|
|
|
|
|
|
(179)
|
|
|
|
|
|
(202)
|
|
|
|
|
|
(33)
|
|
|
|
|
|
(429)
|
|
|
|
Net income (loss)
|
|
|
|
$
|
(3,944)
|
|
|
|
|
$
|
(4,159)
|
|
|
|
|
$
|
(4,780)
|
|
|
|
|
$
|
(490)
|
|
|
|
|
$
|
(2,966)
|
|
|
|
|
$
|
2,095
|
|
|
|
|
$
|
(1,722)
|
|
|
|
|
Product and service revenue in the second and third quarters of 2020 includes the shipment of 150 MX908s and 30 MX908s, respectively, delivered to a distributor for sale to a government customer. Product and service revenue in the fourth quarter of 2019 includes the shipment of 13 Rebels related to the commercial launch as well as a shipment of 50 MX908s to an international distributor for a government customer in Europe.
Operating expenses decreased during the second quarter of 2020 related to our temporary furloughs and salary reductions and reduced travel related to COVID-19.
Liquidity and Capital Resources
Since our inception, we have incurred significant operating losses. To date, we have funded our operations primarily with proceeds from sales of redeemable preferred stock, borrowings under loan agreements and revenue from sales of our products and services and license and contract revenue. As of September 30, 2020, we had cash of $19.7 million. We believe that the net proceeds from this offering, together with our existing cash will enable us to fund our operating expenses, capital expenditure requirements and debt service payments through .
We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we expect. Our future funding requirements will depend on many factors, including:
•
market uptake of our products, including the Rebel, which we launched commercially in the fourth quarter of 2019;
•
the cost and timing of establishing additional sales, marketing and distribution capabilities;
•
the cost of our research and development activities and timely launch of new features and products
•
the success of our existing collaborations and our ability to enter into additional collaborations in the future;
•
the effect of competing technological and market developments; and
•
the level of our selling, general and administrative expenses.
Without giving effect to the anticipated net proceeds from this offering, we expect that our existing cash will be sufficient to fund our operating expenses, capital expenditure requirements and debt service payments into the third quarter of 2021. We have concluded that this circumstance raises substantial doubt about our ability to continue as a going concern within one year after the October 2, 2020 issuance date of our financial statements for the year ended December 31, 2019 and the November 6, 2020
issuance date of our interim financial statements for the nine months ended September 30, 2020. See Note 1 to our financial statements included elsewhere in this prospectus for additional information on our assessment.
Similarly, in its report on our financial statements for the year ended December 31, 2019, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations since inception and required additional funding to finance our operations raise substantial doubt about our ability to continue as a going concern.
We cannot assure you that we will be able to obtain additional funds on acceptable terms, or at all. If we raise additional funds by issuing equity or equity-linked securities, our stockholders may experience dilution. Future debt financing, if available, may involve covenants, in addition to our existing covenants, restricting our operations or our ability to incur additional debt or potentially limiting our ability to obtain new debt financing or the refinance of our existing debt. Any debt or equity financing that we raise may contain terms that are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish some rights to our technologies or our products, or grant licenses on terms that are not favorable to us. If we do not have or are not able to obtain sufficient funds, we may have to delay development or commercialization of our products. We also may have to reduce marketing, customer support or other resources devoted to our products or cease operations.
Cash Flows
The following table summarizes our sources and uses of cash for each of the periods presented:
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
(in thousands)
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
$
|
(8,898)
|
|
|
|
|
$
|
(11,004)
|
|
|
|
|
$
|
(11,253)
|
|
|
|
|
$
|
1,799
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(1,167)
|
|
|
|
|
|
(392)
|
|
|
|
|
|
(278)
|
|
|
|
|
|
(9)
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
3,993
|
|
|
|
|
|
22,237
|
|
|
|
|
|
22,233
|
|
|
|
|
|
9
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
$
|
(6,072)
|
|
|
|
|
$
|
10,841
|
|
|
|
|
$
|
10,702
|
|
|
|
|
$
|
1,799
|
|
|
Operating Activities
During the nine months ended September 30, 2020, net cash provided by operating activities was $1.8 million, primarily consisting of net cash provided by changes in our operating assets and liabilities of $3.8 million and non-cash charges of $0.6 million, partially offset by our net loss of $2.6 million. Net cash provided by changes in our operating assets and liabilities for the nine months ended September 30, 2020 consisted primarily of an increase in deferred revenue of $7.2 million and an increase in accounts payable and accrued expenses of $1.1 million, partially offset by a $4.3 million increase in accounts receivable, a $0.3 million increase in prepaid expenses and other current and non-current assets and a less than $0.1 million decrease in the net effect of our right-of-use operating assets and operating lease liabilities.
During the nine months ended September 30, 2019, operating activities used $11.3 million of cash, primarily resulting from our net loss of $12.9 million, partially offset by non-cash charges of $1.3 million and net cash provided by changes in our operating assets and liabilities of $0.4 million. Net cash provided by changes in our operating assets and liabilities for the nine months ended September 30, 2019 consisted primarily of a $2.1 million decrease in unbilled receivables, a $1.9 million increase in deferred revenue, a $0.7 million increase in the net effect of our right-of-use operating assets and operating lease liabilities and a $0.4 million increase in accounts payable and accrued expenses, partially offset by a $2.7 million increase in inventory and a $1.9 million increase in accounts receivable.
During the year ended December 31, 2019, operating activities used $11.0 million of cash, primarily resulting from our net loss of $13.4 million, partially offset by non-cash charges of $1.6 million
and net cash provided by changes in our operating assets and liabilities of $0.7 million. Net cash provided by changes in our operating assets and liabilities for the year ended December 31, 2019 consisted primarily of a $2.1 million decrease in unbilled receivables, an increase in deferred revenue of $0.7 million and a $0.7 million increase in the net effect of our right-of-use operating assets and operating lease liabilities, partially offset by a $1.9 million increase in inventory and a $0.9 million increase in accounts receivable.
During the year ended December 31, 2018, operating activities used $8.9 million of cash, primarily resulting from our net loss of $7.5 million and net cash used by changes in our operating assets and liabilities of $3.1 million, partially offset by non-cash charges of $1.8 million. Net cash used by changes in our operating assets and liabilities for the year ended December 31, 2018 consisted primarily of a $2.1 million increase in unbilled receivables, a $1.7 million decrease in deferred revenue, a $1.0 million increase in inventory and a $1.0 million decrease in accounts payable and accrued expenses, partially offset by a $2.5 million decrease in accounts receivable and a $0.1 million increase in the net effect of our right-of-use operating assets and operating lease liabilities.
Investing Activities
During the nine months ended September 30, 2020, net cash used in investing activities was less than $0.1 million and during the nine months ended September 30, 2019, net cash used in investing activities was $0.3 million, due to purchases of property and equipment.
During the years ended December 31, 2019 and 2018, net cash used in investing activities was $0.4 million and $1.2 million, respectively, due to purchases of property and equipment. The purchases of property and equipment during the year ended December 31, 2018 were related to investments in demo equipment, mainly related to the MX908, as well as laboratory equipment and furniture and fixture purchases for our new corporate headquarters, which we moved into in September 2018.
Financing Activities
Cash provided by financing activities during the nine months ended September 30, 2020 was less than $0.1 million. We received proceeds from a Paycheck Protection Program loan of $2.2 million, which we then fully repaid in the same period.
During the nine months ended September 30, 2019, net cash provided by financing activities was $22.2 million, consisting primarily of net proceeds of $17.3 million from the issuance of our Series E redeemable preferred stock and the net proceeds from borrowings under our credit agreement with Signature Bank of $15.0 million, partially offset by the repayment of our previously outstanding borrowings under our loan and security agreement of $10.0 million.
During the year ended December 31, 2019 net cash provided by financing activities was $22.2 million, consisting primarily of net proceeds from the issuance of our Series E redeemable preferred stock of $17.3 million and net proceeds from borrowings under our credit agreement with Signature Bank of $15.0 million, partially offset by the repayment of our previously outstanding borrowings under our loan and security agreement of $10.0 million.
During the year ended December 31, 2018, net cash provided by financing activities was $4.0 million, consisting primarily of net proceeds from the issuance of our Series D redeemable preferred stock.
Long-Term Debt
In August 2019, we entered into a new Loan and Security Agreement, or the 2019 Loan, with Signature Bank, or the Lender. The 2019 Loan provides for up to $15.0 million in borrowings, of which the entire $15.0 million was borrowed in 2019. The 2019 Loan calls for monthly interest-only payments through February 28, 2021, followed by 30 monthly payments of principal and interest commencing March 1, 2021. The 2019 Loan matures on August 1, 2023 and bears interest at a rate equal to the greater of (i) 0.5% plus the Wall Street Journal prime rate, and (ii) 6.0%. The 2019 Loan is secured by a lien on our assets.
The 2019 Loan includes financial covenants requiring us to maintain a minimum liquidity ratio of unrestricted cash plus 50% of accounts receivable to debt outstanding under the 2019 Loan of at least
1.00 to 1.00. We are also required to maintain a balance of unrestricted cash at the Lender in an amount not less than $3.0 million. Further, we and the Lender agree to amend the 2019 Loan to set financial covenants for 2020 and beyond. The 2019 Loan also contains negative covenants restricting our activities, including limitations on dispositions, mergers or acquisitions; encumbering or granted in a security interest in our intellectual property, incurring indebtedness or liens, paying dividends, making certain investments and certain other business transactions.
On March 15, 2020, we signed the first amendment to the 2019 Loan which set the covenants for the first half of 2020 and increased the balance of minimum unrestricted cash held at the lender to an amount not less than $4.0 million. On August 7, 2020, we signed the second amendment to the 2019 Loan which set the covenants for the second half of 2020 to the achievement of either a minimum revenue amount or a defined liquidity ratio and the second amendment decreased the balance of minimum unrestricted cash held at the lender to an amount not less than $3.0 million. As of December 31, 2019 and September 30, 2020, we were in compliance with all covenants under the 2019 Loan, as amended.
Contractual Obligations and Commitments
The following table summarizes our contractual obligations as of December 31, 2019, and the effects that such obligations are expected to have on our liquidity and cash flows in future periods:
|
|
|
|
Payments Due by Period
|
|
|
|
|
|
Total
|
|
|
Less Than
1 Year
|
|
|
1 to 3
Years
|
|
|
4 to 5
Years
|
|
|
More
Than
5 Years
|
|
|
|
|
|
(in thousands)
|
|
|
Operating lease commitments(1)
|
|
|
|
$
|
10,478
|
|
|
|
|
$
|
1,792
|
|
|
|
|
$
|
3,540
|
|
|
|
|
$
|
3,711
|
|
|
|
|
$
|
1,435
|
|
|
|
Debt obligations(2)
|
|
|
|
|
17,213
|
|
|
|
|
|
900
|
|
|
|
|
|
12,223
|
|
|
|
|
|
4,090
|
|
|
|
|
|
—
|
|
|
|
Total
|
|
|
|
$
|
27,691
|
|
|
|
|
$
|
2,692
|
|
|
|
|
$
|
15,763
|
|
|
|
|
$
|
7,801
|
|
|
|
|
$
|
1,435
|
|
|
(1)
Amounts in the table reflect payments due for our lease of office and manufacturing space under operating lease agreements that expire at various dates through September 2025.
(2)
Amounts in the table reflect the contractually required principal and interest payments payable under our Loan and Security Agreement, under which borrowings bear interest at a variable rate. For purposes of this table, the interest due under the Credit Agreement was calculated using an assumed interest rate of 6.0% per annum, which was the interest rate in effect as of December 31, 2019.
Purchase orders or contracts for the purchase of supplies and other goods and services are not included in the table above. We are not able to determine the aggregate amount of such purchase orders that represent contractual obligations, as purchase orders may represent authorizations to purchase rather than binding agreements. Our purchase orders are based on our current procurement or development needs and are fulfilled by our vendors within short time horizons.
We have also entered into license agreements under which we are obligated to make royalty payments in the 2% to 5% range, subject to a minimum royalty fee of $0.1 million annually. We have not included future payments under these agreements in the table of contractual obligations above since the payment obligations under these agreements are contingent upon generating product sales. We have not included annual minimum royalty payments in the table above because, although the amounts and timing are known, we cannot currently determine the final termination date of the agreement and, as a result, we cannot determine the total amounts of such payments we will be required to make under the agreements.
We have a commercial services agreement entered into in 2015 with one of our preferred stock investors under which we will pay the investor $1.5 million upon the occurrence of a deemed liquidation event prior to a qualified public offering. We have not included this payment in the table of contractual obligations above since the payment obligation is contingent upon a deemed liquidation that may occur
prior to a qualified public offering. For additional details, refer to Note 3 in our financial statements included elsewhere in this prospectus.
Critical Accounting Policies and Significant Judgments and Estimates
Our financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of our financial statements and related disclosures requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are described in more detail in Note 2 to our financial statements included elsewhere in this prospectus, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Revenue Recognition
We recognize revenue from sales to customers under Accounting Standards Codification 606, Revenue from Contracts with Customers, or ASC 606 by applying the following five steps: (1) identification of the contract, or contracts, with a customer, (2) identification of the performance obligations in the contract, (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligations in the contract and (5) recognition of revenue when, or as, performance obligations are satisfied.
Product and Service Revenue
We derive revenue primarily from the sale of handheld and desktop products and related consumables and services. Revenue is recognized when control of the promised products consumables or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those products, consumables or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of accounting under ASC 606. For devices and consumables sold by us, control transfers to the customer at a point in time. To indicate the transfer of control, we must have a present right to payment, legal title must have passed to the customer, the customer must have the significant risks and rewards of ownership, and where acceptance is other than perfunctory, the customer must have accepted the product or service. Our principal terms of sale are freight on board, or FOB, shipping point, or equivalent, and, as such, we primarily transfer control and record revenue for product sales upon shipment. Sales arrangements with delivery terms that are not FOB shipping point are not recognized upon shipment and the transfer of control for revenue recognition is evaluated based on the associated shipping terms and customer obligations. If a performance obligation to the customer with respect to a sales transaction remains to be fulfilled following shipment (typically installation or acceptance by the customer), revenue recognition for that performance obligation is deferred until such commitments have been fulfilled. For extended warranty and support, control transfers to the customer over the term of the arrangement. Revenue for extended warranty and support is recognized based upon the period of time elapsed under the arrangement as this period represents the transfer of benefits or services under the agreement.
For a contract with multiple performance obligations, we allocate the contract’s transaction price to each performance obligation on a relative standalone selling price basis using our best estimate of the standalone selling price of each distinct product or service in the contract. The primary method used to estimate standalone selling price is the price observed in standalone sales to customers; however, when prices in standalone sales are not available we may use third-party pricing for similar products or services or estimate the standalone selling price, which is set by management. Allocation of the transaction price is determined at the contract’s inception.
License and Contract Revenue
We generate revenue from short and long-term contracts associated with the design and development and delivery of detection devices or related design and support services. To date, these
contracts are primarily with the U.S. government or commercial entities contracting with the U.S. government, but we have also had such contracts with commercial partners. Our contracts with the U.S. government typically are subject to the Federal Acquisition Regulation, or FAR, and are priced based on estimated or actual costs of producing goods or providing services. The FAR provides guidance on the types of costs that are allowable in establishing prices for goods or services provided under U.S. government contracts. The pricing for non-U.S. government contracts is based on the specific negotiations with each customer.
Under the typical payment terms of U.S. government fixed-price contracts, the customer pays in accordance with the terms of the specific agreement, but generally through progress payments. If these progress payments are made in advance, these payments are recorded as a contract liability, classified as deferred revenue within the accompanying balance sheet, until we provide the underlying services. For U.S. government cost-type contracts, the customer generally pays for actual costs incurred within a short period of time. For contracts with commercial partners, payments are made in accordance with the terms of the specific agreement. For agreements which call for milestone payments, to the extent we do not conclude that it is probable that a significant reversal of cumulative revenue will occur, a contract asset is generated until we are permitted to bill for costs incurred, which is classified as unbilled receivables in the accompanying balance sheet. In some cases, payments received in advance under license agreements are recorded as deferred revenue and recognized over the respective contract term, absent any other performance obligations.
Generally, revenue for long-term contracts is recognized based upon the cost-to-cost measure of progress, provided that we meet the criteria associated with transferring control of the good or service over time such as not creating an asset with an alternative use and having an enforceable right to payment for completed performance. However, we evaluate the proper revenue recognition on a contract by contract basis, as each contract generally contains terms specific to the underlying agreement which result in differing performance obligations and payment terms (cost plus, fixed price agreements among others). We include the unconstrained amount of consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, as required by ASC 606, we re-evaluate the estimated consideration included in the transaction price and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment. For example, during the year ended December 31, 2018, we determined that $6.4 million of consideration under a contract with a commercial entity was no longer constrained and we recognized $5.3 million of contract revenue on a cumulative catch up basis that was determined based on the progress that had been made following the cost to cost model.
Distribution Channels
A majority of our revenue is generated by sales in conjunction with our distribution partners, such as our international distributors and in the United States for end customers where a government contract is required or a customer has a pre-existing relationship. When we transact with a distribution partner, our contractual arrangement is with the partner and not with the end-use customer. Whether we transact business with and receive the order from a distribution partner or directly from an end-use customer, our revenue recognition policy and resulting pattern of revenue recognition for the order are the same.
Stock-Based Compensation
We measure stock-based option awards granted to employees, consultants and directors based on their fair value on the date of grant using the Black-Scholes option-pricing model. Compensation expense for those awards is recognized, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. The straight-line method of expense recognition is applied to all awards with service-only conditions, while the graded vesting method is applied to all grants with both service and performance conditions.
The Black-Scholes option-pricing model uses as inputs the fair value of our common stock and assumptions we make for the volatility of our common stock, the expected term of our common stock options, the risk-free interest rate for a period that approximates the expected term of our common stock options, and our expected dividend yield.
Determination of Fair Value of Common Stock
As there has been no public market for our common stock to date, the estimated fair value of our common stock has been determined by our board of directors as of the date of each option grant, with input from management, considering our most recently available third-party valuations of common stock and our board of directors’ assessment of additional objective and subjective factors that it believed were relevant and which may have changed from the date of the most recent valuation through the date of the grant. These third-party valuations were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our common stock valuations were prepared using either an option pricing method, or OPM, or a hybrid method, both of which used market approaches and income approaches to estimate our enterprise value. The hybrid method is a probability-weighted expected return method, or PWERM, where the equity value in one or more of the scenarios is calculated using an OPM. The PWERM is a scenario-based methodology that estimates the fair value of common stock based upon an analysis of future values for the company, assuming various outcomes. The common stock value is based on the probability-weighted present value of expected future investment returns considering each of the possible outcomes available as well as the rights of each class of stock. The future value of the common stock under each outcome is discounted back to the valuation date at an appropriate risk-adjusted discount rate and probability weighted to arrive at an indication of value for the common stock. A discount for lack of marketability of the common stock is then applied to arrive at an indication of value for the common stock. The OPM treats common stock and preferred stock as call options on the total equity value of a company, with exercise prices based on the value thresholds at which the allocation among the various holders of a company’s securities changes. Under this method, the common stock has value only if the funds available for distribution to stockholders exceeded the value of the preferred stock liquidation preferences at the time of the liquidity event, such as a strategic sale or a merger. These third-party valuations were performed at various dates, which resulted in valuations of our common stock of $0.97 per share as of January 31, 2018, $1.10 per share as of April 12, 2019, $0.64 per share as of June 1, 2020, $1.99 per share as of August 31, 2020 and $4.86 per share as of October 31, 2020. In addition to considering the results of these third-party valuations, our board of directors considered various objective and subjective factors to determine the fair value of our common stock as of each grant date, including:
•
the prices at which we sold shares of preferred stock and the superior rights and preferences of the preferred stock relative to our common stock at the time of each grant;
•
the progress of our research and development of our products;
•
our stage of development and commercialization and our business strategy;
•
external market conditions affecting the tools forensics and life sciences tools industry and trends within the industry;
•
our financial position, including cash on hand, and our historical and forecasted performance and operating results;
•
the lack of an active public market for our common stock and our preferred stock;
•
the likelihood of achieving a liquidity event, such as an initial public offering, or IPO, or sale of our company in light of prevailing market conditions; and
•
the analysis of IPOs and the market performance of similar companies in the forensics and life sciences tools industry.
The assumptions underlying these valuations represented management’s best estimate, which involved inherent uncertainties and the application of management’s judgment. As a result, if we had used significantly different assumptions or estimates, the fair value of our common stock and our stock-based compensation expense could have been materially different.
Once a public trading market for our common stock has been established in connection with the completion of this offering, it will no longer be necessary for our board of directors to estimate the fair value of our common stock in connection with our accounting for granted stock options and other such awards we may grant, as the fair value of our common stock will be determined based on the quoted market price of our common stock.
Options granted
The following table summarizes by grant date the number of shares subject to awards granted between January 1, 2019 and November 6, 2020, the per share exercise price of the options, the fair value of common stock on each grant date, and the per share estimated fair value of the awards:
|
Grant Date
|
|
|
Number of Shares Subject
to Options Granted
|
|
|
Per Share Exercise
Price of Options
|
|
|
Per Share Fair
Value of Common
Stock on Grant
Date
|
|
|
Per Share
Estimated Fair
Value of Options
|
|
|
January 21, 2019
|
|
|
|
|
516,000
|
|
|
|
|
$
|
0.97
|
|
|
|
|
$
|
0.97
|
|
|
|
|
$
|
0.51
|
|
|
|
April 24, 2019
|
|
|
|
|
42,000
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
0.57
|
|
|
|
June 20, 2019
|
|
|
|
|
26,000
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
0.57
|
|
|
|
September 10, 2019
|
|
|
|
|
30,500
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
0.57
|
|
|
|
November 13, 2019
|
|
|
|
|
20,000
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
0.57
|
|
|
|
December 12, 2019
|
|
|
|
|
4,000
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
0.57
|
|
|
|
January 31, 2020
|
|
|
|
|
46,000
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
0.56
|
|
|
|
March 25, 2020
|
|
|
|
|
11,000
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
1.10
|
|
|
|
|
$
|
0.60
|
|
|
|
June 16, 2020
|
|
|
|
|
44,000
|
|
|
|
|
$
|
0.64
|
|
|
|
|
$
|
1.06(1)
|
|
|
|
|
$
|
0.70
|
|
|
|
July 28, 2020
|
|
|
|
|
4,000
|
|
|
|
|
$
|
0.64
|
|
|
|
|
$
|
1.06(1)
|
|
|
|
|
$
|
0.70
|
|
|
|
August 27, 2020
|
|
|
|
|
289,500
|
|
|
|
|
$
|
0.64
|
|
|
|
|
$
|
1.99(1)
|
|
|
|
|
$
|
1.54
|
|
|
|
September 14, 2020
|
|
|
|
|
629,000
|
|
|
|
|
$
|
1.99
|
|
|
|
|
$
|
1.99
|
|
|
|
|
$
|
1.10
|
|
|
|
September 21, 2020
|
|
|
|
|
512,000
|
|
|
|
|
$
|
1.99
|
|
|
|
|
$
|
1.99
|
|
|
|
|
$
|
1.10
|
|
|
|
September 30, 2020
|
|
|
|
|
175,000
|
|
|
|
|
$
|
1.99
|
|
|
|
|
$
|
1.99
|
|
|
|
|
$
|
1.10
|
|
|
|
November 3, 2020
|
|
|
|
|
204,000
|
|
|
|
|
$
|
4.86
|
|
|
|
|
$
|
4.86
|
|
|
|
|
$
|
2.70
|
|
|
(1)
At the time of the option grants, our board of directors determined that the fair value of our common stock of $0.64 per share calculated in the third-party valuation as of June 1, 2020 described above reasonably reflected the per share fair value of our common stock as of the grant date. However, as described below, the fair value of common stock at the date of this grant was retroactively adjusted for accounting purposes.
In preparing for the issuance of our unaudited financial statements for the nine months ended September 30, 2020, in September 2020, we performed a retrospective fair value assessment and concluded that the fair value of our common stock underlying stock options that we granted on June 16, 2020 and July 28, 2020 was $1.06 per share for accounting purposes. We applied the fair value of our common stock from our retrospective fair value assessment to determine the fair value of these awards and calculate stock-based compensation expense for accounting purposes. This reassessed value was based, in part, upon a third-party valuation of our common stock prepared as of June 1, 2020 on a retrospective basis. The third-party valuation was prepared using the hybrid method and used market and income approaches to determine our enterprise value.
In preparing for our stock option grants in September 2020, we completed a fair value assessment as of August 31, 2020, which resulted in a fair value of our common stock of $1.99 per share. We applied the fair value of our common stock from our fair value assessment as of August 31, 2020 to determine the fair value of our August 27, 2020 grants and calculate stock-based compensation expense for accounting purposes.
Valuation of Warrants to Purchase Preferred Stock
We classify warrants to purchase shares of our redeemable preferred stock as liabilities on our balance sheets as these warrants are free-standing financial instruments that may require us to transfer assets upon exercise. The warrant liability associated with each of these warrants was initially recorded at fair value on the issuance date of each warrant and is subsequently remeasured to fair value at each balance sheet date. Changes in fair value of the warrants are recognized as a component of other
income (expense) in our statements of operations and comprehensive loss. We will continue to adjust the liability for changes in fair value until the warrants are exercised, expire or qualify for equity classification.
We utilize the Black-Scholes option-pricing model, which incorporates assumptions and estimates to value the preferred stock warrants. We assess these assumptions and estimates on a quarterly basis as additional information impacting the assumptions is obtained. Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying redeemable preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock. We determine the fair value per share of the underlying preferred stock by taking into consideration our most recent sales of our preferred stock as well as additional factors that we deem relevant. We have historically been a private company and lack company-specific historical and implied volatility information of our stock. Therefore, we estimate expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. We have estimated a 0% dividend yield based on the expected dividend yield and the fact that we have never paid or declared dividends.
The table below quantifies the weighted average of the most significant inputs used for the warrants:
|
|
|
|
December 31,
|
|
|
September 30,
2020
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
Fair value of preferred stock
|
|
|
|
$
|
3.47
|
|
|
|
|
$
|
5.67
|
|
|
|
|
$
|
5.46
|
|
|
|
Risk-free interest rate
|
|
|
|
|
2.6%
|
|
|
|
|
|
1.9%
|
|
|
|
|
|
0.5%
|
|
|
|
Expected volatility
|
|
|
|
|
67%
|
|
|
|
|
|
51%
|
|
|
|
|
|
60%
|
|
|
|
Expected dividend yield
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Remaining contractual term (in years)
|
|
|
|
|
4
|
|
|
|
|
|
8
|
|
|
|
|
|
7
|
|
|
Valuation of Inventory
Inventory is valued at the lower of cost or net realizable value. Cost is computed using the first-in, first-out method. We regularly review inventory quantities on-hand for excess and obsolete inventory and, when circumstances indicate, record charges to write down inventories to their estimated net realizable value, after evaluating historical sales, future demand, market conditions and expected product life cycles. Such charges are classified as cost of revenue in the statement of operations and comprehensive loss. Any write-down of inventory to net realizable value creates a new cost basis.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position, results of operations or cash flows is disclosed in Note 2 to our financial statements included elsewhere in this prospectus.
Quantitative and Qualitative Disclosures about Market Risks
We are exposed to changes in interest rates because we finance certain operations through variable rate debt instruments. Changes in these rates may have an impact on future cash flows and earnings. We manage these risks through normal operating and financing activities.
Interest rate sensitivity
As of September 30, 2020, our cash is held on deposit with banks, thus we do not currently have exposure to interest rate risk. Declines in interest rates, however, may reduce future investment income if we invest our cash.
Borrowings under our loan and security agreement bear interest at a rate equal to the greater of (i) 0.50% plus the Wall Street Journal prime rate, and (ii) 6.00%. An immediate 10% change in the Wall Street Journal prime rate would not have a material impact on our debt-related obligations, financial position or results of operations.
Foreign currency exchange risk
We are not currently exposed to significant market risk related to changes in foreign currency exchange rates. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.
Inflation Risk
We do not believe that inflation has had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition or results of operations.
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected not to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time private companies adopt the new or revised standard and will do so until such time that we either (i) irrevocably elect to “opt out” of such extended transition period or (ii) no longer qualify as an emerging growth company.
BUSINESS
Analysis for Life
We are leading a revolution in measurement devices for chemical and biochemical analysis. We are democratizing laboratory mass spectrometry instruments with our simple handheld and desktop devices, addressing critical-to-life applications. We are reimagining where Mass Spec technology can be used if it is sufficiently small in size, low in cost, and simple to operate.
Overview
We have developed an innovative suite of purpose-built handheld and desktop mass spectrometry, or Mass Spec, devices for the point-of-need. Leveraging our proprietary platform technology, we make the extraordinary analytical power of Mass Spec available in devices that are significantly smaller and more accessible than conventional laboratory instruments. Our Mass Spec devices are used at the point-of-need to interrogate unknown and invisible materials and provide quick, actionable answers to directly address some of the most critical problems in life sciences research, bioprocessing, industrial biotech, forensics and adjacent markets.
We create simplified measurement devices that our customers can use as accurate tools where-and-when their work needs to be done, rather than overly complex and centralized analytical instrumentation. We believe the insights and answers our devices provide will accelerate workflows, reduce costs, and offer transformational opportunities for our end users.
Since the launch of our first device, we have sold more than 1,200 handheld and desktop devices to over 300 customers in 32 countries, including 18 of the top 20 pharmaceutical companies by 2019 revenue, as well as numerous domestic and foreign government agencies and leading academic institutions. We generated total revenue of $9.6 million and $21.2 million in the nine months ended September 30, 2019 and 2020, respectively, representing 120% period-over-period growth, while incurring net losses of $12.9 million and $2.6 million in the nine months ended September 30, 2019 and 2020, respectively. Historically, we have derived a majority of our revenue from government customers. While we cannot provide any assurance as to our future results or the success of our sales efforts, we believe we will continue to derive a significant portion of our revenue from the government sector.
Our current products are available for both battery powered handheld and desktop applications, including our flagship devices—MX908 and Rebel.
Front-line workers rely upon our handheld devices to combat the opioid crisis and detect counterfeit pharmaceuticals and illicit materials in the air or on surfaces at levels 1,000 times below their lethal dose. Our desktop devices are accelerating development and production of biotherapeutics by identifying and quantifying extracellular species in bioprocessing critical to cell health and productivity. They sit alongside bioreactors and fermenters producing drug candidates, functional proteins, cell and gene therapies, and synthetic biology-derived products. We believe the insights and answers our devices provide accelerate workflows, reduce costs, and offer transformational opportunities for our end users.
Mass Spec is the gold-standard analytical technology for laboratory-based molecular analysis and can identify and quantify sample components via molecular weight measurements. Mass Spec is highly regarded for its ability to provide an extraordinarily detailed analysis of a wide variety of samples—from small molecules to large complex proteins. While Mass Spec is an extremely powerful analytical tool, conventional Mass Spec instruments are very large, expensive, and highly complex, which has profoundly bottlenecked market opportunities and relegated them to the equivalent of mainframe computers in central facilities. We are seeking to reimagine where Mass Spec technology can be used if it is sufficiently small in size, low in cost, and simple to operate.
Our proprietary Mass Spec platform relies on extreme miniaturization of the core of Mass Spec—the ion trap and its vacuum system. Using semiconductor microfabrication techniques, we design and produce components that are more than a thousand fold smaller in volume when compared with most laboratory Mass Spec instruments and costs only dollars to manufacture. The vacuum system alone in a typical laboratory instrument weighs hundreds of pounds and requires several hundred watts of power, 24 hours per day, 365 days per year. Our miniaturized vacuum system weighs less than a pound, and our Mass Spec in total requires less power than a 20-watt LED light bulb. These landmark proprietary advances have enabled the first truly handheld Mass Spec devices and compact desktops.
Sample preparation and separation can be a painfully slow hours-long process, and we have invested heavily in the development of microfluidic sample preparation and microscale separation technologies to reduce preparation and separation time from hours to minutes. The size of a business card, our microfluidic capillary-electrophoresis, or CE, chip has demonstrated world-class performance and speed in separating everything from small molecules such as metabolites and drugs, to biopharmaceutical proteins, antibodies, and oligonucleotides.
Lastly, it is imperative that a point-of-need solution is operable by the widest possible user base. We have an industry-leading software automation and machine learning team comprised of five members, each with advanced scientific degrees, who have collective experience working on 30 commercial product launches and have won numerous research and innovation awards. They have applied advanced software automation and machine learning techniques to both control the hardware in our devices and interpret the incredibly rich and complex data streaming off of them. It is common for expert data interpretation from a laboratory Mass Spec instrument to take hours or days—we can provide answers immediately to maximize value to the customer in critical-to-life applications where minutes matter.
We fundamentally believe that the technology platform we have built and the investments we are making will allow people to answer chemical and biochemical questions in times and places that were previously inconceivable. Given the market opportunity, we expect to face substantial competition from large established manufacturers of Mass Spec laboratory-based instruments and from new entrants; however, our proprietary advances have enabled us to manufacture the first truly handheld Mass Spec devices and compact desktops and we believe we are well-positioned to face future competition.
As we democratize the extraordinary power of Mass Spec, we believe our technology platform can expand in future opportunities far beyond the current $8 billion market for Mass Spec and associated front-end separations. We estimate our total addressable market, or TAM, for our devices to be $4.8 billion in 2020 growing to an estimated $22 billion over the next five years. The TAM for our handhelds is estimated to be $1.5 billion in 2020 with expansion to over $3 billion with software application extensions into GxP facilities for raw material inspection, counterfeit and adulteration inspection, contamination and cleaning validation, and other quality assurance and quality control assays. Our desktop devices supporting bioprocess development represent a TAM of $260 million in 2020 expanding significantly to approximately $12 billion with execution of our roadmap and the rapid growth of cell therapy. We see additional opportunity to address $3.0 billion in 2020 across the research chromatography market space growing to more than $6.9 billion with further market growth and roadmap expansion into complex proteomics by 2025. Our estimates of our TAM are based on potential customer research and development spending, addressable aspects of potential customers’ end product development process, and potential platform usage. We also utilize estimated penetration and placement rates for our platform with potential customers in our target markets and historical patterns for consumables usage.
Our Strengths
We believe the following competitive strengths provide us the ability to address point-of-need applications in forensics, life sciences research, bioprocessing, industrial biotech, and synbio:
•
Our proprietary microscale Mass Spec platform leverages well established, gold-standard technology. Mass Spec is already ubiquitous in the laboratory. Users do not need to take a risk on a completely unknown technology. We bring laboratory-grade capability to handhelds and desktops. We have developed a proprietary Mass Spec platform and approach that allow us to move the capabilities of conventional Mass Spec beyond the central laboratory. Our proprietary High-Pressure Mass Spec, or HPMS, technology enables us to produce significantly smaller, purpose-built Mass Spec devices that are much more ideal for use in point-of-need settings, in contrast to conventional mainframe Mass Spec solutions. The combination of HPMS, our proprietary microfluidic separation technology, and our data analytics, and machine-learning technology provides the foundations of an adaptable platform that can serve a growing number of new and adjacent applications and markets.
•
Point-of-need technologies disrupting Mass Spec and creating new product categories. Leveraging our Mass Spec platform, we have developed a portfolio of desktop and handheld devices that are reinventing the Mass Spec industry by accessing a variety of point-of-need market segments that were historically considered impossible for conventional Mass Spec manufacturers. Our products are small, purpose-built devices that avoid the typical size and complexity issues related to conventional Mass Spec while also offering real-time, actionable answers to new classes of users. As we continue to expand the capabilities of our Mass Spec platform, we believe our devices will continue to penetrate new and adjacent opportunities in life sciences, quality assurance and control, diagnostics and applied markets.
•
Highly attractive business model validated by rapidly growing installed base of devices. We have over 300 customers, including 18 of the top 20 pharmaceutical companies, academic and major government institutions, including the Department of Homeland Security, the U.S. Army and the U.S. Marine Corps and other international, federal and state agencies. These customers have validated our platform through the collective purchase of more than 1,200 devices, with 4,600 users trained on our devices. As we continue to grow our installed base, we expect to increase our recurring revenue derived from the sale of consumables and support services. For example, in the first nine months of 2020, over 75% of our MX908s were purchased with multiple years of warranty service.
•
Talented team with significant domain expertise. We are a technology driven company that has built vertically integrated capabilities to design, manufacture, and commercial our products. We are led by a dedicated and highly experienced senior management team with significant industry experience and proven ability to deliver novel products. Each member of our senior management team has more than 20 years of relevant experience. Members of our technical team have been collectively responsible for numerous commercial product launches prior to joining the company, in varying markets such as point-of-care clinical diagnostics, handheld pharmaceutical inspection devices, high-throughput cell culture control systems, autonomous warehouse logistics, motion capture animation, high-volume telecom transmitters and receivers, and consumer wearables. The team possesses deep expertise in Mass Spec, system design and engineering, usability and ergonomics, thermal and mechanical engineering, software development, artificial intelligence and optical spectroscopy, as well as microfluidics and separations science. We have 39 full-time employees dedicated to research and development as of September 30, 2020. Of these, approximately 40% have advanced degrees in science and engineering.
Our Growth Strategy
We are pursuing the democratization of the gold-standard molecular analysis laboratory technique: Mass Spec. Just as mainframe computers transitioned to desktops, tablets, and mobile devices, we are leading a transformation of the Mass Spec market. Our growth strategy includes the following key elements:
•
A continued focus on simplicity, speed, convenience and cost increases measurement consumption. We are a technology-driven company with significant core expertise in engineering, hard sciences and data analytics and a proven track record of delivering products that delight our customers by making things easy. We believe a relentless focus on these fundamentals drives consumption of consumables. We further believe broadscale democratization of Mass Spec is enabled by our progress on these same fundamentals.
•
Drive enterprise adoption in our seeded accounts. We intend to continue to aggressively invest in and support our field applications team to accelerate the development of post-sale partnerships with customers and to drive broader adoption across the organization. We will focus on building upon our track record of leveraging our customers’ success in trials and pilots into enterprise-wide adoption of both devices and consumables. As an example, for our handheld device, it is typical for government organizations to conduct a one week or longer trial prior to purchase to test our technology in their real-world setting. A trial generally results in budgeting for a pilot that can range in size from ten to more than 50 units. During the pilot, we support our customers closely to ensure their success. Data is compiled throughout to assist our customer in making a larger enterprise-wide justification, purchase and deployment. It is our belief that investment pre- and post-sale with prospects that have the potential for enterprise adoption creates a predictable pipeline of opportunity for our devices and their entrenchment as they become the organizational standard for our customers. Enterprise customers range from large government organizations with full fielding potential of more than 1,000 handheld devices to leading biopharma companies with capacity for ten or more desktop devices per site.
•
Grow the installed base through expansion of commercial channels. Since the commercial launch of our first handheld, the installed base of our handheld and desktop devices has grown to more than 1,200 devices across 32 countries. Our desktop devices are now taking root in the United States, and we will focus on expanding our commercial channels to better serve the forensics, life sciences research, bioprocessing, industrial biotech, and synbio markets. We look to expand both our direct channel in the United States and our international reach. We anticipate growing our network of international distributors focused in regions with a concentrated and rapidly expanding life sciences presence, specifically, Europe, China, Japan, India, and South Korea. We look to have local application and support specialists and sales managers supporting our distribution partners.
•
Deepen our footprint into the rapidly growing bioprocessing market. We designed our first desktop device to accelerate development and enhance production by identifying and quantifying extracellular species critical to cell health and productivity. They sit alongside bioreactors and fermenters producing drug candidates, functional proteins, cell and gene therapies, and synbio derived products. We look to expand our product line into broader extracellular panels, intracellular analysis, such as cellular flux, and pathway analysis. Consistent with our thesis of driving simplicity and convenience of measurement, we will progress from an at-line measurement tool to an on-line integrated device with comprehensive bioprocess analytics and control. We believe our technology platform can serve as the cornerstone of an integrated “bioprocess brain” by monitoring and managing the comprehensive extracellular environment.
•
Expand our customer-driven pipeline of new point-of-need applications. We will continue to leverage our integrated sample preparation and microfluidic separations platform to expand our pipeline of new, customer-driven point-of-need applications that can be addressed by both our handheld and desktop devices. As our customers continue to prove out new applications in areas such as diagnostics and proteomics, we will look to incorporate select assays investigated by these customers into our handheld and desktop devices where those form factors can accelerate usage. We have already incorporated a number of customer-driven assays into both MX908 and Rebel and will continue to do so as we believe this will provide us with an expanding list of new point-of-need applications and market opportunities within forensics, life sciences research, bioprocessing, industrial biotech and synbio. In addition, we continue to make advancements in our core technologies to drive the evolution of our product portfolio beyond current applications and needs to enter new markets.
Our Industry Background
Conventional Mass Spec—The Mainframe Computer of the Analytical Laboratory
Mass Spec is the gold-standard analytical technique for molecular analysis. This technology is highly regarded for its ability to provide an extraordinarily detailed analysis of a wide variety of molecular samples—from small molecule chemicals to large complex proteins. Mass Spec instruments identify the components of samples via highly detailed mass-to-charge (m/z) measurements, and in some cases, can quantify those components. Together with its associated front-end separation technologies, Mass Spec can resolve and analyze the most complex of samples with high fidelity.
We believe Mass Spec has become the cornerstone of the chemical laboratory within academia, industry and government, serving an extremely wide range of markets including forensics, life sciences, environmental, and industrial. However, while Mass Spec is an extremely powerful analytical technique, the capabilities of conventional Mass Spec instruments are largely relegated to centralized laboratory settings due to their size, complexity, and high price. When compared in context to the computer industry, conventional Mass Spec instruments represent the mainframe computer of the analytical laboratory.
Mass Spec instruments contain three standard components: an ionization source, a mass analyzer and an ion detector. Utilizing these three components, the Mass Spec process is completed in three corresponding steps:
1.
Ionization: First, the molecular sample must be ionized so that it takes on one or more positive or negative charges. This allows the charged molecule to be precisely manipulated by static or dynamic electric fields. The means of ionization itself also allows the user to selectively evaluate certain molecular classes, such as acids vs. bases, while ignoring others.
2.
Ion-Sorting: Following ionization, the ions are trapped under vacuum, manipulated, and sorted based on their mass-to-charge ratio (m/z) within the mass analyzer. This is where the fine structural characteristics of the molecules begin to emerge with extraordinary levels of detail.
3.
Detection: Finally, the detector converts the ion energy into electric signals as it carefully records the ion pattern representing the structure. The recorded data is then typically interpreted by a computer and then manipulated, studied and analyzed by a specialist.
Conventional “Mainframe” Laboratory Mass Spec instruments
Employing and building upon these three process steps, conventional Mass Spec instruments have penetrated almost every analytical laboratory. It is estimated there are thousands of laboratories
employing more than 50,000 Mass Spec instruments according to a recent third party report. As the needs of laboratory scientists have evolved, Mass Spec instrument manufacturers for decades have grown their franchise and stimulated capital equipment replacement cycles by orienting their research and development towards sustained improvements in raw analytical performance metrics such as resolution, sensitivity, and range. As a result, conventional Mass Spec instruments:
•
are extremely large and not readily mobile;
•
are expensive (often ranging from $100,000 to $1 million);
•
require a dedicated fixed power source; and
•
require onsite specialists to maintain and operate.
These significant limitations have profoundly bottlenecked market opportunities for conventional Mass Spec instruments. Despite this, the conventional Mass Spec and associated front-end separations market is significant, with estimated annual revenues of $8 billion.
The Democratization of Mass Spec—Handhelds and Desktops
Given the inherent limitations of conventional mainframe Mass Spec instruments, we believe there is a compelling opportunity for handheld and compact desktop Mass Spec devices. Analogous to the democratization of computer technologies, as price, access, and complexity are reduced, user space expands, utilization increases, and new applications emerge. While our expectation is that centralized laboratory Mass Spec instruments will continue to exist in laboratory settings—just as mainframes still exist today as supercomputers servicing the most challenging computational problems—we believe that the democratization of Mass Spec will open up new markets and applications. We also see many parallels with how next generation gene sequencing, or NGS, was democratized and has expanded the market for NGS through desktop devices.
Our Technology Platform
We have developed a technology platform designed to bring Mass Spec out of the confines of central laboratories and to the point-of-need. Our technology platform democratizes the Mass Spec market with high-fidelity handheld and desktop devices. We believe this democratization gives rise to:
•
an expanded and more diverse set of users;
•
more frequent measurements; and
•
new use cases that were previously untenable.
These results are possible as our handheld and desktop devices are designed for extreme convenience and speed, requiring minimal training and maintenance. Our platform uses proprietary microscale Mass Spec and microfluidic technologies to prepare, separate, and characterize species at the molecular level, with integrated machine learning and analytics to automatically provide answers regarding identity, purity, and quantity. The core elements of our technology platform include:
•
Our High-Pressure Mass Spec, or HPMS, approach enables Mass Spec at the point-of-need
•
microfluidics enable convenient sample preparations and fast separations; and
•
analytics and machine learning technology provide actionable answers versus raw data.
HPMS Approach Enables Mass Spec at the Point-of-Need
A key component of our technology is our proprietary microscale ion trap, which we estimate is 1,000 times smaller than those in conventional laboratory Mass Spec instruments. These microfabricated traps are able to operate a million times closer to atmospheric pressures than conventional Mass
Spec instruments. This HPMS approach results in devices with dramatically smaller size and lower cost-of-goods through a reduction of vacuum pump requirements and power consumption, and an overall simplification of the hardware topology.
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Conventional laboratory Mass Spec
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Our Mass Spec
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HPMS allows us to build ultracompact, high-fidelity measurement devices that are purpose-built for specific applications and deployable at the point-of-need. HPMS allows us to circumvent the complexities associated with the conventional and much larger, general-purpose, central laboratory Mass Spec instruments.
Our technology operates at size and cost scales that are multiple orders of magnitude smaller than conventional mainframe laboratory instruments. And while large, expensive, high maintenance vacuum systems have been a historical requirement for Mass Spec, our HPMS approach is capable of running with extreme efficiency on very small, robust, low-cost scroll pumps of our own proprietary designs. Our technology requires significantly less power than a 20-watt light bulb, allowing for up to 100x lower power consumption when compared to a competing product. The flexibility afforded by our approach provides access to existing and new market segments that were previously inconceivable for conventional Mass Spec instruments. We believe the insights and answers our devices provide will accelerate workflows, reduce costs and offer transformational opportunities for our end users.
Microfluidics Enable Convenient Sample Preparations and Fast Separations
Today, most central laboratory Mass Spec instruments are paired with large, complex solid and liquid handling systems for sample preparation and separation. Common examples include liquid chromatography stacks and robotic sample preparation systems. These systems are engineered for general applications and require large quantities of solvents, high level of maintenance, and expertly trained users, leading to higher operating costs.
Our approach integrates proprietary microfluidic sample preparation, separation, and ionization technologies on a single chip that can be produced efficiently at scale using semiconductor microfabrication techniques. These microfluidic chips can be paired with our microscale Mass Spec technology to create devices with extraordinary performance that are accessible and usable at the point-of-need by non-experts.
Our integrated microfluidics—sample injection, preparation, separation and electrospray simplified
Our integrated microfluidic chip brings the benefits of:
•
highly controlled small sample injections at the nanoliter, or nL, scale;
•
integrated preparation such as desalting;
•
extractions and preconcentration by physical and chemical properties;
•
capillary electrophoresis, or CE, for extremely high-resolution separations of complex samples; and
•
integrated nanoscale electrospray ionization.
The integrated microfluidic CE can perform extremely high-performance separations of a wide range of molecular species from small molecule metabolites, amino acids, and vitamins, to intact antibodies and other proteins. Importantly for our platform, microfluidic CE is electrically driven and requires no bulky liquid pumping and valving systems. The microfluidic chip consumes only 100-200 nL of electrolyte per minute making it remarkably efficient with source and waste fluids. Microfluidic CE separations can be an order of magnitude or faster than similar chromatography separations. This allows for highly complex separations with high resolution to be completed in minutes.
Examples shown below illustrate the versatility of our microfluidic CE chip and include separation of cell lysate with minimal sample preparation and a highly detailed characterization of an antibody drug conjugate:
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Three minute separation of cell lysate. Preparation: lys, dilute filter, and run
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Three minute characterization of antibody drug conjugate, drug payload distribution, glycoforms and other post-translational modifications.
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Faster high resolution separations attainable in minutes using our microfluidic CE chip
Analytics and Machine Learning Technology Provide Actionable Answers, Not Just Raw Data
The third crucial element of our technology platform is holistic device design with embedded analytics and machine learning. Our development team designs devices for a specific purpose, rather than for a wide scope of often disparate needs. Conventional Mass Spec manufacturers focus their attention on canonical analytical specifications such as “instrument resolution” or “detection limit” or “data rate” in the hopes of appealing to a wide range of laboratory specialist needs. Our devices are designed to do a job quickly, easily, and cost effectively. Achieving that aim requires very sophisticated autonomous and adaptive control systems and the machine learning engine to interpret the data and produce a clear, accurate result.
Control/optimization: Conventional Mass Spec configuration and tuning is highly complex. An example of such a configuration panel is shown on the right below. Our devices need to manage themselves autonomously for maximum value to the customer. They can manage themselves by adapting to environmental factors like elevation, humidity, temperature, and vibration, and by optimizing themselves for the analytical objectives of the user, such as looking for traces of potent drug substances or sniffing for airborne hazards. This ability to automatically control the system reduces or eliminates the user’s responsibility and opportunity for error in set up, optimization, and troubleshooting. Our product’s “settings” screen shown below on the left looks very simple, but the embedded analytics and machine learning system controls and optimizes more than a hundred parameters continuously in real-time.
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MX908 Settings/Configuration
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Laboratory Mass Spec Settings/Configuration
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Machine learning/embedded analytics: The integrated analysis of our platform’s data is also critical to our customers’ success. Conventional platforms may give the user basic tools to view data, and some limited analysis functionality, but they fall far short of completing the analysis loop. “Out of the box” machine and statistical learning methods are not really applicable to complex analytical sensor data and real-life molecular systems. Our data team has a commercial track record of embedding a “scientist in the box” with highly customized statistical and machine learning methods for our platforms to complete the customer experience. Several examples of these elements are highlighted below in the “Our Products” section.
Our devices are designed to provide fast, statistically-rigorous answers by providing autonomous control systems and applying rigorous machine learning methods.
Our Products
We were founded on a vision to deliver high quality Mass Spec to a broad set of users at the point-of-need. We offer handheld and desktop devices, each of which are capable of providing quick, high-fidelity and actionable results. These aspects are important to our customers, who previously have had to choose between a slow and thorough analysis by Mass Spec in a laboratory or a point-of-need result that may have been more timely but provided only a partial measurement picture prone to false-positives. For instance, forensics customers who do not have access to laboratory-based Mass Spec instruments have at best had access to the field techniques of Ion-mobility spectrometry and Raman/FTIR spectroscopy, each with its own severe limitation of specificity (ability to distinguish one chemical from another) and sensitivity (ability to detect minute amounts), respectively. Our bioprocess customers have likewise only had access to a cropped measurement picture by largely relying on simple enzymatic and electrochemical sensors that can measure just a few simple gases and other analytes with poor accuracy. Our devices are changing this paradigm and providing laboratory-like results at the point-of-need.
MX908®
Launched in June 2017, MX908 is a handheld, battery-powered, Mass Spec device designed for rapid analysis of gas, liquid and solid materials of unknown identity. It is an agile, multi-purpose device utilized by a wide spectrum of user segments for a variety of forensic field applications such as chemical, explosive, priority drug and HazMat operations, detecting materials at the trace level.
We have sold approximately 1,000 MX908s into every U.S. State, in 32 countries and across five continents. More than 4,000 operators, including in numerous domestic and foreign government agencies, have been trained to use the MX908.
When a civilian or military first responder, customs agent, or front-line worker is presented with residue on a package, a powder in the ER, pills at a border crossing, an apparent overdosing individual, or a mass casualty event, immediate actionable information is needed. The U.S. opioid crisis in particular is driving demand for broadly capable point-of-need measurement devices that can detect a multitude of hazards at trace quantities.
The MX908 detects trace quantities of more than 100 named dangerous materials, including fentanyl and its many derivatives, explosives, and hazardous chemical agents with sensitivity comparable to existing field-based technologies, but with much higher specificity. This allows users to conduct rapid field analysis for a broad range of unknown substances at trace levels that would typically lead to confusion and false positives in other instruments. The device is also able to identify a far greater number of substances than other trace technologies and with one million times the dynamic range of those other handheld or mobile technologies. Compared to a leading transportable Mass Spec product, the MX908 is up to 15x faster, up to 10x smaller and up to 2x cheaper. The MX908 is able to start up in less than a minute, completing analysis of gas and vapor materials in less than ten seconds, and solids and liquids in less than a minute.
The MX908 was designed to operate in harsh outdoor environments such as pervasive rain and dust, and scorching to freezing temperatures in a nimble 4.3 kg (approximately 10 lb) handheld form factor. Our systems also undergo extensive mechanical shock, drop, vibration, and environmental testing as part of the development and certification process.
Designed with the non-technical user in mind, the user interface on the MX908 requires no Mass Spec knowledge for navigation, operation or interpretation of results. The MX908 user interface is very mission driven. These mission modes provide a categorization of functionality, allow the device to guide operators through proper procedures with visual cues, and present results in a manner most relevant for that operational intent. The mission modes also allow the software to optimize the hardware operation of the MX908 to maximize sensitivity and specificity for a given class of chemicals, much as a laboratory chemist would do by changing the settings on their conventional Mass Spec.
The MX908’s machine-learning software, enabled by our proprietary technology platform, serves as a critical element of the device. For example, one of the challenges associated with analyzing fentanyl derivatives is that there are potentially thousands of pharmacologically-active variants for this same compound. However, MX908 is pre-programmed to evaluate against the dozen most common fentanyl variants and is then able to utilize a machine learning classifier to look for characteristic mass fragment loss patterns that are suggestive of the more than 2,000 fentanyl analogs.
Since introducing the MX908, we have continued to expand the device's capability through mission add-ons via software updates, and we will continue to do so as we expand the product's capabilities. We are currently working to expand the MX908’s mission add-ons to support the detection of adulterated and counterfeit pharmaceuticals, detection of pesticide residues, and applications in quality control and quality assurance such as raw material purity and GxP cleaning validation.
Services and Consumables
Our MX908 comes with a standard warranty for up to one year from purchase. Our customers also can purchase extended warranty service plans, which include hardware repair and replacement coverage, technical support, and software updates. We designed the MX908 to be intuitive and easy-to-use, while ensuring that the MX908 is operating as it is intended is critical to our customers. The annual and extended warranty service plans provide the customer the ability to contact us to assist in validating their results given the severity and context of the situations in which our devices operate. Our technical support, also known as our Reachback program, allows any participating MX908 user to email, text, or call a 908 Devices Scientific Support Team member to receive support 24 hours per day, 365 days per year to ensure the MX908 is working as intended. The Scientific Support Team is staffed by M.Sc. and Ph.D. chemists and forensic scientists expert in the operation of the MX908 and other field analytical technologies. Our extended warranty service plans are sold with multiyear commitments, which allows us to deepen our relationship with customers and provides us with an upfront payment, a predictable recurring revenue stream, and an opportunity to offer additional future services. In the first nine months of 2020, over 75% of our MX908s were purchased with an extended warranty service plan.
For simplicity and convenience, we also sell single-use swab samplers for the analysis of liquid and solid materials. These swab samplers are most heavily used today by customers who are evaluating drug substances. However, we designed the MX908 so that it does not require swab samplers or any other consumables for a number of other applications. Our customers value the low-logistics tail of our MX908.
RebelTM
The Rebel is a small desktop analyzer providing real-time information on the extracellular environment in bioprocesses. Compared to a traditional central laboratory high-performance liquid chromatography, or HPLC, Mass Spec assay, Rebel’s price per sample is up to 10 times lower, at approximately one-third of the capital cost, and delivers answers up to 2,000 times faster. Rebel provides results within seven minutes, enabling critical on-the-spot decisions regarding bioprocess media
optimization, accelerating process-development cycles and maximizing bioreactor efficiency. Customers are using Rebel in environments subject to FDA and other regulatory guidelines regarding biological and pharmaceutical product quality, or GxP environments, to evaluate fresh media for conformity to standards, track the extracellular environment and metabolic flux during growth cycles, monitor performance during stress experiments, and characterize spent media.
Since the launch of the Rebel in November 2019, we have sold 31 units and 13 of those units have been placed with some of the top-20 pharmaceutical companies by revenue. Three organizations have already purchased multiple units. Our focus has been on increasing U.S. placements, but we also have a meaningful international opportunity and have recently sold Rebels in China, Japan, and Europe.
Cells have been harnessed to serve as microscopic factories producing myriad molecular species large and small. The markets for cellular-derived products include therapeutics, including cell therapy and personalized medicine, new and sustainable foods and beverages, and industrial materials. Many of these products, such as protein-based therapeutics, can only be economically produced by cells in a bioreactor. Making these products in an efficient and reproducible way remains a challenge to our customers in bioprocessing. Cell culture media forms the critical growth environment for the cell. Our
customers’ measurement of this extracellular environment in bioprocesses is critical to their development and operational efficiency.
However, it is rare that researchers conducting these types of experiments have analytical tools for extracellular media characterization on their local bench, which means samples need to be frozen, packaged, and transported to core laboratories for analysis with large HPLC Mass Spec instruments. This adds substantial delays and cost and typically takes three to six weeks to produce lab reports equivalent to those produced by the Rebel in only 15 minutes. The following graphics illustrate the complexity and processing time of a traditional HPLC Mass Spec analysis compared to the Rebel process.
![[MISSING IMAGE: TM2032047D4-PH_HBLC4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2020/11/25/0001104659-20-129342_TM2032047D4-PH_HBLC4CLR.JPG)
Rebel is currently configured to report concentrations of 32 critical extracellular metabolites in cell culture media, such as amino acids, vitamins, and biogenic amines, which are known to substantially affect the growth profile and properties of the resulting biological entities and their expressed materials. Incorporating our microfluidic sample handling and CE technology, as well as our microscale Mass Spec technology, Rebel’s internal autosampler is capable of queueing approximately 96 such samples for unattended analysis and delivering reported concentrations for each sample.
![[MISSING IMAGE: TM2032047D4-PH_REBEL4CLR.JPG]](https://content.edgar-online.com/edgar_conv_img/2020/11/25/0001104659-20-129342_TM2032047D4-PH_REBEL4CLR.JPG)
A fit-for-purpose at-line system, the Rebel is designed to be located within the same laboratory as a bioreactor, enabling more frequent monitoring of key cell media parameters. To run this analysis, the Rebel requires as little as one microliter of cell culture media with little sample preparation. This allows customers to run more tests while preserving precious cell culture media, which is extremely valuable for small batches as used in cell therapy and personalized medicine.
The Rebel, using its onboard algorithms, eliminates the need for manual calibration and delivers processed and actionable results in real-time. As runs are completed, users can access the report either as a PDF print out or a laboratory information system compatible file exported to the network. The Rebel software is compliant for operation in GxP environments.
Consumables and Services
Rebel’s operation requires a consumable kit that includes:
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one microfluidic preparation and separation chip;
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diluent electrolyte for samples, including internal standards;
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background electrolyte for separation; and
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performance qualification and calibration standards.
Currently, customers of Rebel are consuming on average one kit per month. With continuous operation, the Rebel is capable of consuming approximately one 200-sample kit a day.
We also offer an annual certification kit and service plan. The certification kit is shipped to the customer, who loads the provided samples, and executes a certification protocol. The system is remotely qualified and certified based on the data acquired meeting factory specifications.
Annual and extended warranty and service plans are available for the Rebel.
ZipChip
Our ZipChip solution is a plug-and-play, high-resolution separation platform that optimizes Mass Spec sample analysis. Our ZipChip platform consists of a ZipChip Interface, which is installed into a conventional Mass Spec instrument, and consumable microfluidic chips, or ZipChips. We designed this technology to be compatible with third party Mass Spec instruments. Powered by our integrated microfluidic technology, the ZipChip platform allows researchers to consolidate a host of time-consuming biotherapeutic, metabolomic, and proteomic applications typically run on multiple instruments
or configurations onto a single platform. With ZipChip, researchers can switch applications in minutes, instead of hours typical with an alternative such as liquid chromatography.
Leveraging our data analytics capabilities, we have also incorporated an automated software solution called DARWIN to expedite the analysis of the ZipChip and Mass Spec data for proteins and biotherapeutics. DARWIN eliminates most of the manual choices, selections, and decisions encumbering typical analysis software and directly and rapidly reports identified species, modifications and relative abundances.
Since launch of the ZipChip platform, we have sold more than 150 ZipChip Interfaces and have established 17 multi-unit accounts in leading, global pharmaceutical organizations and academic institutions. Our ZipChip platform is compatible with market-leading conventional Mass Spec instruments currently installed in laboratories, and we intend to continue to expand the ZipChip platform to become compatible with any conventional Mass Spec instrument.
As an open-access discovery platform that can interface with more than 10,000 conventional Mass Spec instruments, ZipChip provides us the ability to leverage the growing list of newly established applications and publications from customers who have incorporated the device into their projects. By incorporating select assays investigated on the ZipChip by customers into our MX908 and Rebel devices, we can create an evolving pipeline of new customer-driven, point-of-need Mass Spec applications as the scope of analytes our devices can detect and analyze will continue to expand. We have already incorporated a number of the customer-driven assays in our MX908 and Rebel devices, and we are investigating several more for our future product pipeline.
ZipChip Consumables
We offer a variety of kits for the ZipChip Interface that include microfluidic ZipChips and different reagents optimized for a wide scope of applications. These kits include intact antibody, metabolomics, peptide and others. We also expect to grow our revenue from warranty and annual certification related to the ZipChip platform as the product sales expand.
Market Opportunities
We have developed ultracompact, high-fidelity Mass Spec devices to interrogate the unknown and invisible and provide actionable results in critical-to-life point-of-need applications. Our first products are purpose-built handheld and desktop Mass Spec devices that currently address a range of applications and markets. We estimate our TAM for our devices to be $4.8 billion in 2020 growing to an estimated $22 billion over the next five years. The TAM for our handhelds is estimated to be $1.5 billion in 2020 with expansion to over $3 billion with software application extensions into GxP facilities for raw material inspection, counterfeit and adulteration inspection, contamination and cleaning validation, and other quality assurance and quality control assays. Our desktop devices supporting bioprocess development represent a total addressable market of $260 million in 2020 expanding significantly to approximately $12 billion with execution of our roadmap and the rapid growth of cell therapy. We see additional future opportunity to address $3.0 billion in 2020 across the laboratory chromatography market space growing to more than $6.9 billion with further market growth and roadmap expansion into complex
proteomics by 2025. Our estimates of our TAM are based on potential customer research and development spending, addressable aspects of potential customers’ end product development process, and potential platform usage. We also utilize estimated penetration and placement rates for our platform with potential customers in our target markets and historical patterns for consumables usage.
Our TAM for all device placements in 2020 and expanding in 2025 with product roadmap and market growth.
Our Initial Market—Field Forensics
Forensic labs have historically used conventional Mass Spec instruments to chemically analyze a diverse array of submitted samples. Testing for controlled substances is one of the major drivers for the use of Mass Spec in the field forensics setting. According to the latest available data from the Bureau of Justice, U.S. criminal forensic laboratories handled approximately 4 million requests, roughly 1.2 million of which were controlled substances-related. We believe that this increase in requests will be even more acute for the point-of-need setting.
In the field forensics setting, high accuracy and fidelity can be just at important at the point-of-need as it is in the laboratory. Simple and inexpensive colorimetric tests are being abandoned in many jurisdictions due to their extremely narrow and poor performance capabilities, in favor of handheld technologies with broad lab-like capabilities. This is creating an expanded market of individual users that is a multiple of the centralized laboratory Mass Spec instrument market.
The need for such field technologies is acute for controlled substances and identification of other priority chemicals and hazards at trace levels. The toxicity of fentanyl and its analogs is 100 to 10,000 times the potency of morphine, creating an opioid crisis of unprecedented scale and breadth. Drug overdose deaths saw a significant increase during the first few months of 2020. Preliminary data from the U.S. Centers for Disease Control and Prevention, or CDC, shows that overdose deaths have increased by about 10%, with the CDC estimating the country could see more than 75,500 drug-related deaths this year. The CDC estimates that the total economic burden of opioid abuse in the United States is $78 billion a year. More than $35 billion in counter drug initiatives is being budgeted for fiscal year 2021 by the United States alone.
The potency and diversity of these emerging classes pose a major challenge for point-of-need measurements, as depicted in the graph below. Near invisible quantities of opioids can be fatal, and street drugs are often heavily obscured with filler materials, making trace detection with high-fidelity
technologies an imperative for success. The diversity of the problem also drives the need for agility with devices that can be rapidly updated in the field with new machine learning updates. There are thousands of variants of these highly potent opioids, and other emerging classes such as cathinones and cannabinoids that will further exacerbate the problem.
In addition to controlled substances, point-of-need Mass Spec instruments can address a wide variety of other use cases, including:
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first responders and local, state, and federal law enforcement;
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U.S. and international defense and homeland security;
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forensic laboratories' case management and triage;
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package inspection for postal services, couriers, customs agencies, and corporate mail rooms;
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facility safety for hotels, local, state and federal government facilities, and private enterprises; and
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quality assurance and control.
We estimate that the TAM for our handhelds is $1.5 billion per year in 2020 for trace detection of drugs, explosives, priority chemicals, and other hazards on surfaces and in the air. Our TAM expands to over $3 billion with use cases in GxP facilities for raw material inspection, counterfeit and adulteration inspection, contamination and cleaning validation, and other quality assurance and quality control assays. These use cases would be accessed through release of additional software apps or mission modes for our base hardware.
Life Sciences
Mass Spec addresses a significant number of applications along the life sciences research and biopharma value chain. It is integral in research and discovery, drug development, product validation and quality control. Biologic therapeutic modalities and all cell-based products more broadly, use bioreactors to manufacture product in two stages—process development and clinical and GXP manufacturing.
Within a cell, thousands of intertwined processes govern the cells ability to produce various proteins, its ability to perform a specific function, and its energy and waste expenditure. But efficient intracellular operations are also highly reliant on the extracellular environment—the cell culture media. In bioreactors, the timely influx of raw materials, environmental controls, and management of waste can be not only essential to efficiency, but literally to the life or death of the cells. The worldwide cell culture media market itself is estimated to be a $2 billion business in 2020. Regardless of how carefully the starting cell culture media has been designed and selected, bioprocessing is by definition a dynamic and inhomogeneous process. Cellular biology is complicated and unpredictable.
Due to issues with both the existing point-of-need solutions and alternative laboratory-based workflows, development scientists currently lack an ideal solution to accurately analyze the extracellular environment during or after the growth cycle without having to compromise between timing or completeness.
Democratization of Mass Spec will allow for significant efficiencies and new applications for the technology within life sciences. With real-time access to comprehensive media profiles, bioprocess development scientists can:
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accelerate their product development cycles with feedback in minutes rather than weeks;
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improve process yield and lower costs throughout their value chain;
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enable a broad range of complex therapeutic modalities in biopharmaceuticals; and
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increase the probability of successfully developing cell-based products.
We believe these efficiencies will lead to substantial growth opportunities in biologic-based therapeutics where a better understanding of the extracellular environment is a crucial element of bioprocessing.
For antibody therapeutics, a key requirement is that monoclonal production cell lines not only produce high titers of antibody but with acceptable Critical Quality Attributes, or CQAs. The extracellular media properties can greatly impact both the titer and the CQAs of the produced antibody. Likewise, for cell and gene therapeutics, management of the complex mammalian cell culture system and measurement and control of the extracellular environment is crucial. Historically, bioprocessing has been focused on large-scale batched production of monoclonal antibodies, or mAbs, using genetically stable clones, whose production has largely been optimized over many years of refinement. Today, newer advanced modalities, like cell and gene therapies, are fueling growth in the market while introducing variability of input materials (e.g., patient or donor cells, transient transfected cell lines), higher cost of goods sold, and the necessity for small-batched production — driven by smaller patient populations and the need to scale out. This change is driving manufacturers toward increased monitoring and optimization at a level of intensity beyond what is seen historically.
End market sales of biologics across mAbs, cell, and gene therapies are estimated at $150 billion in 2020, growing to approximately $250 billion by 2025 at a 11% compounded annual growth rate according to third party reports and analyst sources. While mAbs are forecasted to continue to dominate end-product sales in 2025, it is estimated that the pipeline of cell and gene therapies will be nearly 6,000 assets, representing more than 50% of the total biologics pipeline. A massive expansion of global bioprocessing capacity is underway to accommodate the needed small batched production. We estimate Rebel’s TAM to be $260 million in 2020, representing more than 1,700 device placements and 1.6 million media tests to support process development, and is expected to expand to approximately $12 billion TAM by 2025 with the execution of our roadmap and the rapid growth of cell therapy.
Our product development roadmap for the Rebel platform includes the extension of current capabilities and move to an online and, ultimately, a real-time “bioreactor brain”. In process development today, smaller scale bioreactors are outfitted with a variety of disconnected multi-party simple sensors and controllers. With the increasing trend toward highly parallelized systems with many small-scale bioreactors running simultaneously, manual sampling becomes a significant bottleneck. The roadmap expansion of Rebel’s analyte panel to address core culture kinetics (e.g., glucose, lactate, ammonium, pH, dissolved oxygen) and attributes like cell count, and viable cell density means that this future online Rebel system could have a uniquely comprehensive assessment of the present state and trajectory of the extracellular environment. Historical data profiles across parallel bioreactors and designed experiments form an excellent basis for machine learning and multivariable predictive control to optimize experimental variables to maximize yield, minimize risk of loss, and improve kinetics — the “bioreactor brain”. An outsize portion of this opportunity is driven by testing in autologous cell therapies and is commensurate with the total expected cell batches produced.
Future Market Opportunities
The fastest and most convenient way to explore new applications incorporating our platform technology is through interfacing with a conventional general-purpose laboratory Mass Spec instrument. Our laboratory interface connects our proprietary microfluidic chips, called ZipChips, to conventional
Mass Spec Instruments, in a simple and customer friendly manner to form a discovery platform. Our research customers incorporate our ZipChip Interface into their projects due to its preparation convenience and separation speed. These customers prove-out new assays spanning a range of markets from diagnostics to consumer health and beauty, to agrochemical, oil and gas, and defense. They measure such things as novel therapeutics, metabolites, and quality and process attributes, and explore complex proteomics. We estimate our ZipChip platform is able to address $3.0 billion in 2020 across the research chromatography market space growing to more than $6.9 billion with further market growth roadmap expansion into complex proteomics by 2025. The resulting pipeline and market multiplier for subsequent point-of-need products has not been considered and may be significant.
Customers
We sell our products worldwide through an experienced direct sales force as well as through domestic and international channel distribution partners. Representative organizations using our products in each of our primary markets are as follows:
Pharma/Biotech:
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Amgen Inc.
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Merck & Co. Inc.
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Biogen Inc.
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New England BioLabs Inc.
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Bristol-Myers Squibb Co.
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Nucleus Biologics, LLC
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Dana-Farber Cancer Institute
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Teva Pharmaceutical Industries
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Lonza Group AG
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Transcenta Holding Limited
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Government:
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Federal Emergency Management Agency Center for Domestic Preparedness
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United States Department of Homeland Security
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The National Institute for BioProcessing Research and Training
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The National Institute for Innovation in Manufacturing Biopharmaceuticals
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United States Army
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United States Marine Corps
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U.S. Centers for Disease Control and Prevention
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U.S. Food and Drug Administration
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Academia:
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Boston University
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North Carolina State University
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Duke University
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University of Kentucky
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Johns Hopkins University
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University of North Carolina-Chapel Hill
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Manufacturing and Supply
Our manufacturing strategy has two components: to outsource subassemblies or assemblies to domestic contract manufacturers where it is cost and capital favorable, and to use our internal manufacturing facilities for the balance of our production needs. Our in-house manufacturing facilities are located at our headquarters in Boston, Massachusetts. These facilities are ISO 9001:2015 certified and include approximately 5,100 square feet of configurable production assembly floor, 1,800 square feet of advanced machining space, and 2,000 square feet of configurable cleanroom. Inventory is held in our Boston facilities in a 700 square foot controlled-access cage.
Devices
The MX908 and Rebel are manufactured, tested and shipped from our Boston facility. Several custom components of the MX908 and Rebel are fabricated by third party suppliers, including printed circuit boards and cables, and metal and plastic mechanical components. The assembly of technology-sensitive components such as our proprietary vacuum pumps and ion trap/ionization module is completed in-house.
Currently, our Boston manufacturing facility is capable of supporting the production of approximately 2,000 MX908 and Rebel units combined per year. When our annual sales exceed 2,000 MX908 and Rebel units, we expect that we would need to either expand our in-house production operations, or transfer some or all aspects of MX908 and/or Rebel assembly to contract manufacturers, to accommodate larger run-rates. We believe there are numerous domestic and international contract manufacturers that could be qualified to produce the MX908 and/or Rebel when third-party demand for our products outpace our current manufacturing capacity. The autosampler subassembly of the Rebel is supplied by a single supplier, Spark Holland B.V.
Volume manufacturing of the ZipChip Interface is outsourced to Columbia Tech, an ISO 9001 wholly-owned subsidiary of Coghlin Companies, Inc. Our Boston facility can and has manufactured ZipChip Interfaces on demand. Typically, upon the launch of a ZipChip Interface that is compatible with a particular conventional Mass Spec instrument, we manufacture and test initial devices at our facility, before transferring production to our contract manufacturer. We maintain resources to handle all warranty and service of our installed base and, if required, these resources are capable of manufacturing ZipChip Interfaces. The final testing and shipment of ZipChip Interfaces are completed from our Boston facility.
We are continuously evaluating and updating our supply chain to ensure our ability to respond to customer demand for our products. For example, we have relationships with a number of machine shops and electronics suppliers that can provide components for our devices, including components currently provided by a single source. We plan to continue the diversification of our supply chain as we scale. We use our annual demand planning to assess initial device needs for each year, and we update and reassess those estimates as needed, including with respect to the levels of inventory that we believe will be required to support anticipated customer demand.
Consumables
The MX908 incorporates a number of non-proprietary consumables that are commercial-off-the-shelf available and sourced from a number of reputable suppliers. Sampling swabs that are used for the analysis of liquid and solid materials in the MX908 are currently single-sourced from DSA Detection. While we believe that alternatives are available, it would take time to identify and validate replacement swab samples, which could compromise our ability to supply these to our MX908 customers on a timely basis.
Consumable kits for the Rebel and ZipChip Interface include electrolytes, standards, and microfluidic chips. All assay kits and standards are assembled in our Boston cleanroom facilities. Component reagents and standards are widely available from multiple suppliers. Our microfluidic chips are produced and assembled in our Boston cleanroom facilities. The substrate is supplied by Micronit Microtechnologies B.V. While we believe that alternative suppliers would be available, it would take time to identify and qualify alternate suppliers and transfer design requirements to them, which could negatively affect our ability to supply these chips to our Rebel and ZipChip customers on a timely basis.
Sales and Marketing
We distribute our devices and consumables via direct field sales and support organizations located in North America and through a combination of our own sales force and more than 25 third party distributors in domestic and international markets which include Australia, Canada, China, Czech Republic, Germany, Japan, Singapore, Turkey, and the United Kingdom. In North America, we use distribution partners to provide our products to end customers where a contract vehicle is required. Since the commercial launch of our first handheld, the installed base of our devices has grown to more than 1,200 devices across 32 countries.
Our domestic sales force and international partners inform our current and potential customers of current product offerings, new target applications, and advances in our technologies and products. As our primary point of contact in the marketplace, our sales force focuses on delivering a consistent marketing message and high level of customer service, while also attempting to help us better understand the evolving market and customer needs.
As of September 30, 2020, we had 29 people employed in sales, sales support and marketing, including five technical field application scientists. This staff is located in the United States and we
have two consultants working internationally to support our sales and applications efforts. We intend to significantly expand our sales, support, and marketing efforts in regions with a concentrated life sciences presence, including large pharmaceutical and biopharma companies. For example, we plan to establish a direct sales footprint in Europe, and to develop a distribution and support network in China. Additionally, we believe that there is significant opportunity in other Asia-Pacific countries such as India and South Korea as well as other areas such as Australia and South America. We plan to expand into these regions via initial penetration with distributors and then subsequent support with direct sales and support personnel.
Our business model is focused on driving the adoption of our products and maximizing use across our customers’ value chains. This is enabled through customer trials and partnerships that allows us to further understand the critical applications for our technology and inform our future developments and market expansion.
Our MX908 devices often are sold to governmental institutions and other customers that require participation in a tender process that involves preparation of extensive documentation and a lengthy review process. As a result of these factors, and the budget cycles of our customers, our sales cycle can often be six to twelve months, or longer. Our Rebel devices are relatively new to the life science marketplace and require a capital investment by our customers. The sales process typically involves numerous interactions and demonstrations with multiple people within an organization. Some potential customers conduct in-depth evaluations of the system, including running experiments at our Boston headquarters and comparing results from alternative systems and technologies.
Service and Support
We offer warranty and extended warranty service plans, as well as on-site training, in order to improve customer adoption of our products. Support under warranty and extended service contracts include the following:
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Technical support. Customers can call a hot-line number 24 hours per day, 365 days per year for support on issues ranging from questions on proper usage of the device, to assistance in interpretation of chemical spectra to ensure the device is working as intended. We refer to this support as our Reachback program.
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Software updates and library updates. We periodically release updates to the embedded software in our products. These updates will ensure the ongoing functionality of our products and repair defects in the software. We also release updates and additions to our library of spectral images enabling identification of additional chemicals.
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Warranty. Our MX908 and ZipChip Interface devices are covered under a return-to-factory warranty model for repairs. Depending on availability, loaner units are made available to minimize downtime with our customers.
We provide training at the customer’s location with the initial purchase of our devices. Each training event is between four to six hours and covers device functionality and hands-on training with the device. At the conclusion of the training, certificates are issued for all attendees. Additional training days are available on a per diem basis. For our desktop devices, we offer an advanced training and applications training to assist customers in implementing their required applications with our device.
Research and Development
Investment in research and development is at the core of our business strategy. Our research and development team is responsible for designing, developing and enhancing our products, as well as performing product testing and quality assurance activities. Members of our research and development team specialize in many functional areas including algorithms, machine learning, electrical and mechanical engineering as well as software development.
As of September 30, 2020, we had 39 full-time employees dedicated to research and development. Of these, approximately 40% have advanced degrees in engineering or the sciences. We have made substantial investments in product and technology development since our inception. Research and development expense totaled $9.0 million in the year ended December 31, 2019 and $6.0 million in the nine months ended September 30, 2020. We expect our research and development expense to
increase significantly for the foreseeable future as we enhance our existing products, develop new products for our current markets and introduce new products in new markets.
We consider the holistic nature of our internal product development teams critical to our products’ success. Accordingly, our research and development team possesses functional expertise in critical areas such as:
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chemistry, biochemistry, physics of Mass Spec and separations and sample processing;
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embedded, desktop and mobile software engineering;
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machine learning, high-speed digital signal processing, multivariate statistical learning, algorithms and decision theory;
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user experience design and user interface design;
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mechanical engineering and industrial design;
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analog, digital and mixed signal electronics engineering;
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ultra-efficient pumping and pneumatics engineering; and
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microfluidic design, and volume fabrication at the micro- and meso-scale.
The majority of our research and development operations are conducted in our Boston facility. We also conduct additional research and development operations out of a second facility in Chapel Hill (approximately 2,000 square feet), North Carolina to support assay development for Rebel and ZipChip.
Competition
We have a range of competitors extending from small, privately held companies with single-point solutions to large, publicly-held corporations, including those with a portfolio of Mass Spec products, such as Agilent, Bruker, Danaher, Inficon, FLIR, PerkinElmer, Shimadzu, Thermo Fisher Scientific, and Waters Corp. Many of these companies have greater resources and market presence than we do.
We expect the markets for our products to remain highly competitive and dynamic and to reflect rapid technological evolution and continually evolving customer requirements. Our ability to compete successfully will depend on a number of factors including our ability to:
•
offer differentiated point-of-need Mass Spec devices;
•
translate market requirements into an engineering roadmap of new software and hardware features to remain competitive;
•
demonstrate the value of employing our products at the point-of-need through accelerated workflows; and
•
provide pro-active support and service that delights our customers.
Intellectual Property
Protection of our intellectual property is fundamental to the long-term success of our business. We believe that our continued success depends in large part on our proprietary technology, the skills of our employees and the ability of our employees to continue to innovate and incorporate advances into our products. We regard our products and the internally developed software embedded in our products as proprietary.
We rely primarily on a combination of trade secret, patent, copyright and trademark laws, as well as contractual provisions with employees and third parties, to establish and protect our intellectual property rights. Our patent strategy is to seek broad protection on fundamental enabling technologies, and layer on additional patents on specific implementations or methods of operation critical to our present and anticipated products, and to prevent competitive operation. While our expertise in signal processing and machine learning is critical to our success, we typically keep these inventions as trade secrets to avoid public disclosure. Some high value consumables have been engineered with clandestine product integrity features to inhibit duplication or counterfeiting efforts of our intellectual property. We provide our products to customers pursuant to terms and conditions that impose restrictions on use and disclosure. We also seek to avoid disclosure of our intellectual property using contractual obligations, by requiring employees, consultants and contractors with access to our proprietary information to execute nondisclosure, non-competition and assignment of intellectual property agreements. In addition, we generally control access to our proprietary and confidential information through the use of internal and external controls.
Our foundational technology in the area of miniature Mass Spec originated as an effort at Oak Ridge National Laboratories led by our Scientific Founder J. Michael Ramsey, now a Professor of Chemistry at the University of North Carolina.
As of September 30, 2020, our owned patent assets included approximately 14 U.S. patents, two pending U.S. patent applications, 11 foreign patents and six pending foreign patent applications in various foreign jurisdictions, including Australia, Canada, China, the European Union, Hong Kong, Israel, Japan, South Korea, Singapore and Taiwan. The subject matter covered by our owned patent assets includes core aspects of compact Mass Spec technology, a design for a handheld Mass Spec device, a design for a modular Mass Spec chamber, patents for multiple ionization modes and adaptive pressure operation within survey period, the determination of preferred ionization mode, adaptive resolution control, adaptive operation to reduce power consumption, and the detection of positive and negative ions. As of September 30, 2020, our in-licensed patent assets included 26 U.S. patents, five foreign patents, five pending U.S. patent application, and six pending foreign patent application. The subject matter covered by our in-licensed patent assets includes a microfabricated ionization source and a microfabricated ionizer chip, microscale Mass Spec systems, devices and related methods, a miniature charged particle trap with an enlongated trapping region for Mass Spec, high pressure Mass Spec signal enhancement by means of convective transport, electrospray ionization interface to high pressure Mass Spec, a method of sample injection for chemical separations in microfluidic devices, integrated sample processing for electrospray ionization devices, and microchips with integrated multiple electrospray ionization emitters and related methods, systems and devices. Excluding any patent term extension, the currently issued 908 Devices-owned patents are expected to expire between 2032 to 2038. The currently issued in-licensed patents are expected to expire from 2020 to 2029. We do not expect any of the in-licensed patents that are set to expire in 2020 to have a material effect on our business as those patents relate to a prior design for the ion trap and we have since in-licensed new patents covering the current design.
We also seek to protect our brand through procurement of trademark rights. As of September 30, 2020, we owned seven registered trademarks in the United States, nine registered foreign trademarks, and two U.S. pending trademark applications. Our registered trademarks and pending trademark applications include trademarks for 908 Devices, Rebel, MX908, and our logo. In order to supplement protection of our brand, we have also registered several internet domain names.
Licenses
UT-Battelle
In June 2012, we entered into two license agreements, which were subsequently amended in August 2013 with UT-Battelle, LLC, or UTB, which manages and operates the Oak Ridge National Laboratory under its prime contract with the U.S. Department of Energy, pursuant to which UTB granted us an exclusive, sublicensable, worldwide license under certain patent rights owned by UTB related to Mass Spec technology to develop, manufacture, use and commercialize products, services and methods that are covered by such patent rights, or the Licensed Products, in the defined fields of use within forensics, life sciences, industrial process monitoring and food and environmental testing and safety. The patents are related to the design and operation of microscale ion traps and ion sources with flexible operating pressures, and were the first patents that enabled us to reduce the size of our Mass Spec platform. We refer to these two licenses as the UTB Agreements.
We paid UTB an upfront payment of $5,000 in connection with executing the UTB Agreements and made a payment of $15,000 in January 2013. In addition, we issued an aggregate of 120,000 shares of our common stock to UTB, which had an aggregate fair value at the time of issuance of approximately $120,000. Additionally, we must pay UTB a low-single digit percentage royalty on our net sales of Licensed Products that are covered by a valid claim of the licensed patents, subject to an annual minimum royalty payment owed to UTB of $70,000. We are also obligated to pay UTB a percentage of certain royalty income received from any sublicensees ranging from the lower- to mid-double-digit percentages. To date, we have not issued any sublicenses under the UTB Agreements. The are no future milestone payments to be made by the Company under the UTB Agreements.
We are obligated to use commercially reasonable efforts to develop, manufacture and commercialize the Licensed Products.
The UTB Agreements will continue until the expiration of the last to expire patent or last to be abandoned patent application that is licensed to us, unless terminated earlier in accordance with the terms of the UTB Agreements, which we currently expect will be in 2029. We may terminate the UTB Agreements by providing advance written notice of 60 days as specified in the UTB Agreements. UTB may terminate the UTB Agreements if we violate or fail to perform any terms of the UTB Agreements and we fail to cure such violation or failure within 90 days of notice thereof from UTB. Additionally, if we challenge the validity or enforceability of any of the licensed patents, the UTB Agreements will automatically terminate.
University of North Carolina, Chapel Hill
In June 2012, we entered into a license agreement, which was subsequently amended in April 2013 and August 2014, and then amended and restated in May 2015, which we refer to in this prospectus as the UNC Agreements, with the University of North Carolina, Chapel Hill, or UNC, pursuant to which UNC granted us an exclusive, sublicensable, worldwide license to develop, manufacture, use, and commercialize products, services and methods, covered by certain patent rights owned by UNC, including patents related to a microfabricated ionization source and a microfabricated ionizer chip.
We issued an aggregate of 180,000 shares of our common stock to UNC, which had an aggregate fair value at the time of issuance of approximately $180,000. Additionally, we must pay UNC a low-single digit percentage royalty on our net sales of any products that are covered by a valid claim of the licensed patents, subject to an annual minimum royalty payment of $30,000. We are also obligated to pay UNC a low double-digit percentage of certain royalty income received from our sublicensees. To date, we have not issued any sublicenses under the UNC Agreements.
We are obligated to use commercially reasonable efforts to develop, manufacture and commercialize the Licensed Products and achieve defined milestones within the UNC Agreements. There are no future milestone payments to be made by the Company under the UNC Agreements.
We are responsible for all reasonable, documented patent expenses incurred during the life of the UNC Agreements and associated costs associated with the preparation, filing, prosecuting, issuance and maintenance of all patent applications and patents included within the patent rights covered by the UNC Agreements. In addition, we have the option to exclusively license UNC rights in improvements to the license patents and related portfolio, by paying $10,000 per improvement.
The UNC Agreement will continue until the expiration of the last to expire patent or last to be abandoned patent application that is licensed to us, unless terminated earlier in accordance with the terms of the UNC Agreements. There are current patent applications pending under the UNC Agreements so we expect the UNC Agreements will continue through at least 2040. We may terminate the UNC Agreements by providing advance written notice of 60 days as specified therein. UNC may terminate the UNC Agreements if we violate or fail to perform any terms of the UNC Agreements and we fail to cure such violation or failure within 90 days of notice thereof from UNC.
Regulations
Chemical detection, identification, and authentication technologies are of value to military, governmental, and law enforcement organizations worldwide. As a result, our products and technologies are subject to export control laws and regulations, which are imposed to ensure that sensitive technologies are withheld from unfriendly governments, terrorists or criminal organizations.
Our current products are dual-use items with both military and civilian applications. These products are subject to the U.S. Export Administration Regulations, or EAR. The EAR imposes various documentation, recordkeeping and transaction screening requirements and may impose licensing requirements for certain countries, customers, or end-use applications of our products. Applicable U.S. export regulations will continue to apply to our products and technologies even after they are exported to non-U.S. customers or to any non-U.S. subsidiaries or affiliates.
Articles, services and technologies that have certain military applications or that are designed, developed, modified or adapted specifically for military applications may be subject to the International Traffic in Arms Regulations, or ITAR. When ITAR requirements apply, they apply in place of EAR. ITAR imposes registration requirements and broader, more stringent export licensing requirements than EAR. We must determine whether ITAR or EAR governs each of our products, services, and technologies. We may assume the risk of making these determinations on our own, or we may decide to request formal governmental jurisdictional rulings.
Although our current products and services are not subject to ITAR licensing requirements, such licensing requirements could apply to our future products and services.
Under generally applicable U.S. trade regulations administered by the Office of Foreign Assets Control, or OFAC, of the U.S. Department of the Treasury, we are generally prohibited from engaging in transactions involving sanctioned countries, as well as certain persons and entities that have been designated for targeted sanctions by OFAC. EAR and ITAR also impose export restrictions targeted at identified persons and entities, and we are required to comply with these restrictions as well.
Violations of the ITAR, EAR, and OFAC requirements can result in significant fines, penalties, denial of export privileges, and even terms of imprisonment for the individuals involved.
In addition, the U.S. Food and Drug Administration, or FDA, regulates, among other things, the research, development, testing, manufacturing, clearance, approval, labeling, storage, recordkeeping, advertising, promotion, marketing, distribution, post-market monitoring and reporting, and import and export of medical devices. Our products are currently marketed as research use only, or RUO. Products such as ours that are marketed for RUO are not intended for use in a clinical investigation or for clinical diagnostic use outside an investigation and must be labeled “For Research Use Only. Not for use in diagnostic procedures.” Products that are intended for RUO and are properly labeled as RUO are exempt from compliance with the FDA’s requirements applicable to medical devices more generally, including the requirements for clearance or approval and compliance with manufacturing requirements known as the Quality System Regulation.
A product labeled RUO but intended to be used diagnostically may be viewed by the FDA as adulterated and misbranded under the Federal Food, Drug, and Cosmetics Act and subject to FDA enforcement activities. RUO products cannot make any claims related to safety, effectiveness or diagnostic utility and they cannot be intended for human clinical diagnostic use. The FDA will also evaluate the totality of the circumstances to determine if the product is intended for diagnostic purposes. If the FDA were to determine, based on the totality of circumstances, that our products labeled and marketed for RUO are intended for diagnostic purposes, they would be considered medical devices that will require clearance or approval prior to commercialization.
Although we currently market our products as RUO, we may in the future make the decision to market them for clinical or diagnostic purposes, or may develop other different products intended for clinical or diagnostic purposes, which would result in the application of a more onerous set of regulatory requirements.
Employees
As of September 30, 2020, we had 96 employees, of which 29 work in sales, sales support and marketing, 39 work in engineering and research and development, 21 work in manufacturing and operations and seven work in general and administrative. As of September 30, 2020, all of our employees were located in the United States. None of our employees is represented by a labor union or is subject to a collective bargaining agreement. We consider our relationship with our employees to be good.
Facilities
Our corporate headquarters are located in Boston, Massachusetts, where we lease and occupy approximately 37,500 square feet of space. The lease for this facility expires on October 7, 2025. We also operate an additional office in Chapel Hill, North Carolina that is approximately 2,000 square feet
and supports assay development for Rebel and ZipChip. The lease for this facility expires on November 30, 2022. We also operate an additional office in Campbell, California that is approximately 1,500 square feet and supports our west coast employees. The lease for this facility expires on February 28, 2021. We believe that our facilities meet our current and future anticipated needs through 2024.
Legal Proceedings
From time to time, we may become involved in litigation or other legal proceedings. We are not currently a party to any material litigation or legal. Regardless of outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
MANAGEMENT
The following table sets forth certain information concerning our executive officers as of the date of this prospectus who, subject to rights pursuant to any employment agreements, serve at the pleasure of our board of directors:
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Name
|
|
|
Age
|
|
|
Position
|
|
|
Kevin J. Knopp, Ph.D.
|
|
|
|
|
48
|
|
|
|
President, Chief Executive Officer and Director
|
|
|
Joseph H. Griffith IV
|
|
|
|
|
45
|
|
|
|
Chief Financial Officer
|
|
|
Christopher Brown, Ph.D.
|
|
|
|
|
46
|
|
|
|
Chief Technology Officer
|
|
|
Maura Fitzpatrick
|
|
|
|
|
50
|
|
|
|
Vice President, Product Management & Marketing
|
|
|
Kevin McCallion, Ph.D.
|
|
|
|
|
55
|
|
|
|
Vice President, Production and New Product Introduction
|
|
|
Trent Basarsky, Ph.D..
|
|
|
|
|
53
|
|
|
|
Vice President, Commercial
|
|
|
John Kenneweg.
|
|
|
|
|
48
|
|
|
|
Vice President, Government
|
|
|
Michael S. Turner
|
|
|
|
|
53
|
|
|
|
Vice President, General Counsel
|
|
The following table sets forth certain information concerning our non-employees who serve on our board of directors as of the date of this prospectus:
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Name
|
|
|
Age
|
|
|
Position
|
|
|
Nicolas Barthelemy
|
|
|
|
|
54
|
|
|
|
Director
|
|
|
Keith L. Crandell
|
|
|
|
|
60
|
|
|
|
Director
|
|
|
E. Kevin Hrusovsky
|
|
|
|
|
59
|
|
|
|
Chairman
|
|
|
Sharon Kedar.
|
|
|
|
|
46
|
|
|
|
Director
|
|
|
J. Michael Ramsey, Ph.D.
|
|
|
|
|
68
|
|
|
|
Director
|
|
|
Mark Spoto.
|
|
|
|
|
51
|
|
|
|
Director
|
|
The following is a biographical summary of the experience of our executive officers.
Executive officers
Kevin J. Knopp, Ph.D. has been our President and Chief Executive Officer, and a member of our board of directors since February 2012. Prior to that, Dr. Knopp served as Vice-President and Site Leader of the Portable Optical Analysis division of Thermo Fisher Scientific Inc. following the acquisition of Ahura Scientific, Inc., a company he co-founded in 2002 that commercialized handheld optical spectrometers for a range of applications in the pharma and security markets. Dr. Knopp earned a B.S. in Electrical Engineering from Boston University, and his M.S. and Ph.D. degrees from the University of Colorado at Boulder. Our board of directors has concluded that Dr. Knopp is qualified to serve as a director because of his operational and historical expertise gained from serving as our President and Chief Executive Officer, and his extensive professional and educational experience in the analytical tools and instrumentation industry.
Joseph H. Griffith IV has been our Chief Financial Officer since March 2014. From November 2011 to March 2014, Mr. Griffith served as Chief Financial Officer of the Life Sciences and Technology business unit of PerkinElmer, Inc., a publicly traded company that produces analytical instruments, genetic testing and diagnostic tools, medical imaging components, software, instruments and consumables for multiple end markets. Previously, Mr. Griffith served as Chief Accounting Officer and Vice President of Finance form April 2008 to November 2011 and as Corporate Controller from July 2003 to April 2008, of Caliper Life Sciences, Inc., a publicly traded life sciences company that developed and sold lab automation equipment, that was acquired by PerkinElmer, Inc. Prior to that, he served as Corporate Controller of Zymark Corporation, a company that provided laboratory automation, robotics, and liquid handling solutions, from April 2002 to July 2003, when it was acquired by Caliper Life Sciences, Inc. From August 1997 to February 2002, Mr. Griffith served as an Audit Senior at Arthur
Andersen, a national accounting firm. He is a licensed Certified Public Accountant and holds a B.S. in Accounting from Villanova University.
Christopher Brown, Ph.D. is a co-founder and has been our Chief Technology Officer & Vice President of Research & Development since February 2012. Prior to founding 908 Devices, Dr. Brown was a platform architect at Apple Inc. leading investigations in future-gen health-technologies. Prior to Apple, from April 2010 to October 2010, he was a Senior Director at Thermo Fisher Scientific, Inc. and from 2005 until 2010 he was Senior Director of Product Development and Engineering at Ahura Scientific, Inc. Prior to Ahura Scientific he held roles of increasing responsibility at InLight Solutions, Inc. Dr. Brown holds a B.Sc. in Mathematics/Chemistry from Brandon University, and Ph.D. in Chemistry from Dalhousie University where he specialized in statistical and machine learning methods for chemical data.
Maura Fitzpatrick has been our Vice President of Product Management and Marketing since September 2020. From November 2019 until September 2020, Ms. Fitzpatrick served as Vice President of Product Management at Waters Corporation, a company in the life sciences market specializing in liquid chromatography, mass spectrometry, and informatics and from January 2018 to November 2019 Ms. Fitzpatrick served as Senior Director of Product Marketing. From September 2015 to December 2017, Ms. Fitzpatrick served as the Vice President of Product Management and Marketing at Cambridge Technology Inc., a company that provides laser beam steering solutions. From January 2009 to September 2015, she held various Director and Senior Director roles in Marketing and Product Management at Thermo Fisher Scientific, Inc. Ms. Fitzpatrick earned a B.S. in Chemistry from Merrimack College and an A.S. in Marketing from Johnson and Wales University.
Kevin McCallion, Ph.D. has been our Vice President of Production and New Product Introduction since August 2020 and was our Director, Component Engineering from May 2013 to August 2020. Prior to joining us, Dr. McCallion served as Vice President of Engineering for TeraDiode, Inc., a developer of compact, high efficiency laser sources. Previously, Dr. McCallion was Director of Engineering at Finisar Corp, a manufacturer of optical communications subsystems and components. Prior to that, he was a co-founder and Vice President of Product Development at Azna LLC, implementing novel, high-speed diode lasers for long haul transmission. Earlier in his career, he also held senior technical management positions at Nortel Networks Corporation and CoreTek, Inc. He received a B.Eng. (1st Hons), M.Sc. and Ph.D. in Electrical Engineering and Optoelectronics from the University of Strathclyde in the United Kingdom. Dr. McCallion is an inventor on more than 30 U.S. patents and is author on numerous technical publications.
Trent Basarsky, Ph.D. is our Vice President of Commercial Business, and since January 2017, he has also been our Vice President and General Manager of Life Sciences. Prior to joining us, Dr. Basarsky was Chief Business Officer at Zephyrus Biosciences, a company focused on single-cell Westerns, which was acquired by Bio-Techne Corporation. From 2009 to 2014, Dr. Basarsky was Vice President of Corporate Development at ProteinSimple, Inc., also acquired by Bio-Techne Corporation, with responsibilities including acquisitions, marketing, and intellectual property. From July 2008 to October 2009, Dr. Basarsky served as Director of Corporate Development and Marketing at Codexis Inc., a cleantech company focused on next generation biofuels and pharmaceutical manufacturing. Dr. Basarsky was an independent sports technology entrepreneur from September 2007 to June 2008. From July 2004 to July 2007, Dr. Basarsky was Director of Corporate and Business Development of Molecular Devices, LLC which was acquired by MDS, Inc. From 1998 to 2004, he held positions in marketing, product management, business development and intellectual property at Axon Instruments, a life science instrumentation company acquired by Molecular Devices. Dr. Basarsky received a B.Sc. in Zoology from the University of Alberta, a Ph.D. in Neuroscience from Iowa State University, and he has passed the USPTO patent bar exam.
John Kenneweg is our Vice President of Government Business and, since April 2013, he has also been our Vice President and General Manager of Field Forensics. Prior to joining us, Mr. Kenneweg served as the Director of Federal Government Programs at Thermo Fisher Scientific’s Portable Analytical Instrument Division from 2010 to 2013, a publicly traded company that produces a range of solutions to include life science technology, analytical instruments, diagnostics and lab equipment and services. Prior to that, Mr. Kenneweg managed government sales for Ahura Scientific, Inc. from 2005
until it was acquired by Thermo Fisher Scientific in 2010. Prior to that, he served as Business Development Manager from 2002 to 2005, Sales Manager from 1999 to 2002 and Product Manager from 1997 to 1999, at Draeger Safety, Inc, the U.S. subsidiary of Drägerwerk AG, a company that sells and manufactures gas detection and respiratory protection equipment for safety and medical purposes. He earned a B.A. from West Virginia University and served honorably in the United States Marine Corps.
Michael S. Turner has been our Vice President, General Counsel since November 2020. Previously, Mr. Turner served as Co-Chief Executive Officer, General Counsel and Executive Director from June 2019 to March 2020, and as Executive Vice President, General Counsel and Company Secretary from May 2014 to June 2019, of Allied Minds plc, a publicly traded venture firm focused on early stage company development within the technology and life science sectors. Prior to that, he served as Partner at DLA Piper LLP from January 2010 to May 2014, and at Goodwin Procter LLP from September 1998 to December 2009, counseling public and private companies, investment banks, and private equity and venture capital firms, with an emphasis on capital markets, mergers and acquisitions and corporate governance for growth companies in the technology and life science sectors. Michael received his B.A. from Colgate University and his J.D. from Cornell Law School and is admitted to the bar in Massachusetts and New York.
Non-employee directors
The following is a biographical summary of the experience of our non-employee directors.
Nicolas Barthelemy has served as a member of our board of directors since February 2018. Mr. Barthelemy brings over 25 years of industry experience to the director role. Mr. Barthelemy previously served as the President and Chief Executive Officer of Biotheranostics, Inc., a molecular diagnostics company, from September 2014 to February 2017. Prior to joining Biotheranostics, Inc., he held a variety of senior executive roles at Life Technologies Corporation, including President, Global Commercial Operations and President of the Cell Systems Division, until its acquisition by Thermo Fisher Scientific, Inc. Prior to joining Invitrogen Corporation (which later became Life Technologies), Mr. Barthelemy held a variety of operational and commercial roles with Biogen, Inc., including Vice President of Manufacturing. Before that, he held various technical positions at Merck & Co., Inc.’s manufacturing division. Mr. Barthelemy serves on the boards of directors of several public companies, including Repligen Corporation, Fluidigm Corporation and Twist Bioscience Corporation. Mr. Barthelemy has an engineering degree from Ecole Superieure de Physique et Chimie Industrielles (ESPCI), France, as well as an M.S. in chemical engineering from the University of California, Berkeley. Our board of directors has concluded that Mr. Barthelemy possesses specific attributes that qualify him to serve as a member of our board of directors, including his financial and investment expertise and his extensive knowledge and experience in manufacturing, distributing and commercializing life science instruments, reagents and services as well as his knowledge of the bioprocessing space.
Keith L. Crandell has served as a member of our board of directors since June 2012. Since July 1994, Mr. Crandell has served as a managing director of ARCH Venture Partners, a venture capital firm focused on early-stage technology companies. He serves on the board of directors of Quanterix Corporation, a publicly-traded company focusing on digital biomarker detection for infectious disease screening and therapeutics development and Twist Bioscience a publicly-traded company focused on silicon-based DNA writing platform with genomic tools to classify viral samples; genome engineering tools to build vaccines. He is also a director of several private companies and serves on the Entrepreneurship Advisory Board at the Polsky Center for Entrepreneurship, the University of Chicago Booth School of Business, the University of Chicago Pritzker School of Molecular Engineering Advisory Council, on the investment advisory board for the Partners Innovation Fund, a venture capital fund affiliated with Harvard Medical School Hospitals and on the Chicago History Museum Board of Trustees. Mr. Crandell has a B.S. degree in chemistry and mathematics from St. Lawrence University, an M.S. in chemistry from the University of Texas at Arlington, and an M.B.A. from the University of Chicago. Our board of directors has concluded that Mr. Crandell possesses specific attributes that qualify him to serve as a member of our board of directors, including his financial expertise and his substantial experience as an investor in emerging companies.
E. Kevin Hrusovsky has served as a member of our board of directors since September 2013 and Chairman of our board of directors since September 2020. Since June 2014, Mr. Hrusovsky has served as President and, since January 2015, as Chief Executive Officer of Quanterix Corporation, a publicly traded company. Prior to joining Quanterix, Mr. Hrusovsky served as Senior Vice President of PerkinElmer, Inc., a publicly traded company that produces analytical instruments, genetic testing and diagnostic tools, medical imaging components, software, instruments and consumables for multiple end markets from February 2012 to May 2013 and served as President of the Life Sciences and Technology business unit of PerkinElmer, Inc. from November 2011 to May 2013. From May 2013 through September 2013, he served as a consultant to PerkinElmer. Previously, Mr. Hrusovsky served as Chief Executive Officer and President of Caliper Life Sciences, Inc., a life sciences company that developed and sold lab automation equipment, from July 2003 to November 2011 when it was acquired by PerkinElmer, Inc. Prior to that, he served as Chief Executive Officer and President of Zymark, a company that provided laboratory automation, robotics, and liquid handling solutions, and Director of International Business, Agricultural Chemical Division, and President of the Pharmaceutical Division for FMC Corporation, a publicly traded chemical manufacturing company. He also held several management positions at E.I. DuPont de Nemours, a publicly traded chemical manufacturing company. Mr. Hrusovsky serves on the board of directors of BioreclamationIVT, LLC. Mr. Hrusovsky has a B.S. in mechanical engineering from Ohio State University and an M.B.A. from Ohio University. Mr. Hrusovsky is also the founder of Powering Precision Health, a non-profit global think tank composed of the industry’s top medical, research and financial experts. Our board of directors has concluded that Mr. Hrusovsky possesses specific attributes that qualify him to serve as a member of our board of directors, including his financial expertise, operational expertise and his substantial experience as a President and Chief Executive Officer.
Sharon Kedar has served as a member of our board of directors since April 2019. Ms. Kedar is the Co-Founder, Partner of Northpond Ventures, a science, medical and technology focused venture capital firm, where she has been a partner since its formation. Prior to founding Northpond, Ms. Kedar spent fifteen years at Sands Capital Management where she served as Chief Financial Officer and was active in all key functions of the company. Ms. Kedar serves on the boards of directors of several private companies, including Codex DNA, Inc., Emulate, Inc., Hawthorne Effect, Inc., and IsoPlexis Corporation, Inc. Ms. Kedar is a CFA charter holder, has an M.B.A. from Harvard Business School and a B.A. in Economics from Rice University. Our board of directors has concluded that Ms. Kedar possesses specific attributes that qualify her to serve as a member of our board of directors, including her financial expertise and her substantial experience as an investor in emerging companies.
J. Michael Ramsey, Ph.D. has served as a member of our board of directors since February 2012 and is the company’s scientific founder. Dr. Ramsey is the Goldby Distinguished Professor of Chemistry with faculty positions in the departments of Biomedical Engineering and Applied Physical Sciences at the University of North Carolina, Chapel Hill and the director of the University of North Carolina Center for Biomedical Microtechnologies. Prior to UNC, he was a Group Leader and Corporate Research Fellow at Oak Ridge National Laboratory where he directed the Chemical Microtechnology and Laser Spectroscopy Group within the Division of Chemistry. Dr. Ramsey is the sole scientific founder of Caliper Technologies, later renamed Caliper Life Sciences, Inc. and acquired by PerkinElmer in 2011. He also serves on the board of directors of Genturi Inc., a privately held company, where he is the scientific founder. Dr. Ramsey received a Ph.D. in Chemistry from Indiana University and a B.S. in Chemistry from Bowling Green State University. Our board of directors has concluded that Dr. Ramsey possesses specific attributes that qualify him to serve as a member of our board of directors, including his experience in developing life sciences companies and his expertise in micro- and nanofluidics, microscale biochemical separations, miniaturization of mass spectrometry, digital assays, and laser-based chemical detection.
Mark Spoto has served as a member of our board of directors since June 2012. Mr. Spoto is a Co-Founder and General Partner at Razor’s Edge Ventures, a multi-stage investment firm that invests in technology companies solving significant challenges in national security and high-growth commercial markets where he has been a partner since 2011. Prior to Razor’s Edge, Mr. Spoto was a partner at the national technology law firm of Cooley LLP. Mr. Spoto serves on the boards of directors of several private companies, including HawkEye 360, BlackSky and Ursa Space. Mr. Spoto holds a B.S. in
Aerospace Engineering from Boston University and a J.D. from Georgetown University Law Center. Our board of directors has concluded that Mr. Spoto possesses specific attributes that qualify him to serve as a member of our board of directors, including his financial and investment expertise and his significant legal, managerial and corporate governance expertise.
Our Board of Directors
As of , 2020, our board of directors consisted of members, each of whom is a member pursuant to the board composition provisions of our certificate of incorporation and agreements with our stockholders. These board composition provisions will terminate upon the completion of this offering. Upon the termination of these provisions, there will be no further contractual obligations regarding the election of our directors. Our nominating and corporate governance committee and our board of directors may therefore consider a broad range of factors relating to the qualifications and background of nominees. Our nominating and corporate governance committee’s and our board of directors’ priority in selecting board members is the identification of persons who will further the interests of our stockholders through their established record of professional accomplishment, the ability to contribute positively to the collaborative culture among board members, knowledge of our business, understanding of the competitive landscape, and professional and personal experiences and expertise relevant to our growth strategy. Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal. Our sixth amended and restated certificate of incorporation and amended and restated by-laws that will become effective upon the completion of this offering also provide that our directors may be removed only for cause by the affirmative vote of the holders of at least two-thirds of the votes that all our stockholders would be entitled to cast in an annual election of directors, and that any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors then in office.
Director Independence
Our board of directors has determined that all members of our board of directors, except Dr. Knopp, are independent directors, including for purposes of the rules of the Nasdaq Global Market and the Securities and Exchange Commission, or SEC. In making such independence determination, our board of directors considered the relationships that each non-employee director has with us and all other facts and circumstances that our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director. In considering the independence of the directors listed above, our board of directors considered the association of our directors with the holders of more than 5% of our common stock. Upon the completion of this offering, we expect that the composition and functioning of our board of directors and each of our committees will comply with all applicable requirements of the Nasdaq Global Market and the rules and regulations of the SEC. There are no family relationships among any of our directors or executive officers.
Staggered Board
In accordance with the terms of our sixth amended and restated certificate of incorporation and amended and restated by-laws that will become effective upon the completion of this offering, our board of directors will be divided into three staggered classes of directors and each director will be assigned to one of the three classes. At each annual meeting of the stockholders, a class of directors will be elected for a three-year term to succeed the directors of the same class whose terms are then expiring. The terms of the directors will expire upon the election and qualification of successor directors at the annual meeting of stockholders to be held during the years 2021 for Class I directors, 2022 for Class II directors and 2023 for Class III directors.
•
Our Class I directors will be Sharon Kedar and Michael Ramsey;
•
Our Class II directors will be Nicolas Barthelemy, Kevin Knopp and Mark Spoto; and
•
Our Class III directors will be Keith Crandell and Kevin Hrusovsky.
Our sixth amended and restated certificate of incorporation and amended and restated by-laws that will become effective upon the completion of this offering will provide that the number of directors shall be fixed from time to time by a resolution of the majority of our board of directors.
The division of our board of directors into three classes with staggered three-year terms may delay or prevent stockholder efforts to effect a change of our management or a change in control.
Board Leadership Structure and Board’s Role in Risk Oversight
Risk is inherent with every business, and how well a business manages risk can ultimately determine its success. We face a number of risks, including risks relating to our financial condition, development and commercialization activities, operations, strategic direction and intellectual property as more fully discussed in the section entitled “Risk Factors” appearing elsewhere in this prospectus. Management is responsible for the day-to-day management of risks we face, while our board of directors, as a whole and through its committees, has responsibility for the oversight of risk management. In its risk oversight role, our board of directors has the responsibility to satisfy itself that the risk management processes designed and implemented by management are adequate and functioning as designed.
The role of our board of directors in overseeing the management of our risks is conducted primarily through committees of our board of directors, as disclosed in the descriptions of each of the committees below and in the charters of each of the committees. The audit committee of our board of directors is primarily responsible for overseeing our risk management processes on behalf of our board of directors. Going forward, we expect that the audit committee will receive reports from management on at least a quarterly basis regarding our assessment of risks. In addition, the audit committee reports regularly to our board of directors, which also considers our risk profile. The audit committee and our board of directors focus on the most significant risks we face and our general risk management strategies. While our board of directors oversees our risk management, management is responsible for day-to-day risk management processes. Our board of directors expects management to consider risk and risk management in each business decision, to proactively develop and monitor risk management strategies and processes for day-to-day activities and to effectively implement risk management strategies. When a board committee is responsible for evaluating and overseeing the management of a particular risk or risks, the chairman of the relevant committee reports on the discussion to the full board of directors during the committee reports portion of the next board meeting. This enables our board of directors and its committees to coordinate the risk oversight role, particularly with respect to risk interrelationships.
Committees of our Board of Directors
Our board of directors has established an audit committee, a compensation committee and a nominating and corporate governance committee, each of which will operate pursuant to a charter adopted by our board of directors and will be effective upon the effectiveness of the registration statement of which this prospectus is a part. Upon the effectiveness of the registration statement of which this prospectus is a part, the composition and functioning of all of our committees will comply with all applicable requirements of the Sarbanes-Oxley Act of 2002, Nasdaq and SEC rules and regulations.
Audit Committee
Effective upon completion of this offering Keith L. Crandell, Sharon Kedar and Mark Spoto will serve on the audit committee, which will be chaired by Mark Spoto. Our board of directors has determined that each member is “independent” for audit committee purposes as that term is defined in the rules of the SEC and the applicable Nasdaq rules, and each has sufficient knowledge in financial and auditing matters to serve on the audit committee. Our board of directors has designated Mark Spoto as an “audit committee financial expert,” as defined under the applicable rules of the SEC. The audit committee’s responsibilities include:
•
appointing, approving the compensation of, and assessing the independence of our independent registered public accounting firm;
•
pre-approving auditing and permissible non-audit services, and the terms of such services, to be provided by our independent registered public accounting firm;
•
reviewing the overall audit plan with our independent registered public accounting firm and members of management responsible for preparing our financial statements;
•
reviewing and discussing with management and our independent registered public accounting firm our annual and quarterly financial statements and related disclosures as well as critical accounting policies and practices used by us;
•
coordinating the oversight and reviewing the adequacy of our internal control over financial reporting;
•
establishing policies and procedures for the receipt and retention of accounting-related complaints and concerns;
•
recommending based upon the audit committee’s review and discussions with management and our independent registered public accounting firm whether our audited financial statements shall be included in our Annual Report on Form 10-K;
•
monitoring the integrity of our financial statements and our compliance with legal and regulatory requirements as they relate to our financial statements and accounting matters;
•
preparing the audit committee report required by SEC rules to be included in our annual proxy statement;
•
reviewing all related person transactions for potential conflict of interest situations and approving all such transactions; and
•
reviewing quarterly earnings releases.
Compensation Committee
Effective upon completion of this offering Nicholas Barthelemy, Keith L. Crandell and Mark Spoto will serve on the compensation committee, which will be chaired by Nicholas Barthelemy. Our board of directors has determined that each member of the compensation committee is “independent” as defined in the applicable Nasdaq rules. The compensation committee’s responsibilities include:
•
annually reviewing and approving the corporate goals and objectives relevant to the compensation of our Chief Executive Officer;
•
evaluating the performance of our Chief Executive Officer in light of such corporate goals and objectives and based on such evaluation: (i) approving the cash compensation of our Chief Executive Officer and (ii) approving grants and awards to our Chief Executive Officer under equity-based plans;
•
reviewing and approving the cash compensation of our other executive officers;
•
reviewing and establishing our overall management compensation, philosophy and policy;
•
overseeing and administering our compensation and similar plans;
•
evaluating and assessing potential and current compensation advisors in accordance with the independence standards identified in the applicable Nasdaq rules;
•
reviewing and approving our policies and procedures for the grant of equity-based awards;
•
reviewing and recommending to our board of directors the compensation of our directors;
•
preparing the compensation committee report required by SEC rules, if and when required, to be included in our annual proxy statement; and
•
reviewing and approving the retention, termination or compensation of any consulting firm or outside advisor to assist in the evaluation of compensation matters.
Nominating and Corporate Governance Committee
Effective upon completion of this offering Keith L. Crandell, Kevin Hrusovsky and Mark Spoto will serve on the nominating and corporate governance committee, which will be chaired by Mark Spoto. Our board of directors has determined that each member of the nominating and corporate governance committee is “independent” as defined in the applicable Nasdaq rules. The nominating and corporate governance committee’s responsibilities include:
•
developing and recommending to our board of directors criteria for board and committee membership;
•
establishing procedures for identifying and evaluating board of director candidates, including nominees recommended by stockholders;
•
reviewing the composition of our board of directors to ensure that it is composed of members containing the appropriate skills and expertise to advise us;
•
identifying individuals qualified to become members of our board of directors;
•
recommending to our board of directors the persons to be nominated for election as directors and to each of our board’s committees;
•
developing and recommending to our board of directors a code of business conduct and ethics and a set of corporate governance guidelines; and
•
overseeing the evaluation of our board of directors and management.
Our board of directors may from time to time establish other committees.
Compensation Committee Interlocks and Insider Participation
None of the members of our compensation committee has at any time been one of our officers or employees. None of our executive officers currently serves, or in the past fiscal year has served, as a member of our board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.
Corporate Governance
We have adopted a written code of business conduct and ethics, which will become effective upon the effectiveness of the registration statement of which this prospectus is a part, that applies to our directors, officers and employees, including our principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions. Following the effectiveness of the registration statement of which this prospectus is a part, a current copy of the code will be posted on the investor relations section of our website, which is located at http://www.908devices.com. If we make any substantive amendments to, or grant any waivers from, the code of business conduct and ethics for any officer or director, we will disclose the nature of such amendment or waiver on our website or in a current report on Form 8-K.
EXECUTIVE COMPENSATION
The following is a discussion of compensation arrangements of our named executive officers, or NEOs. This discussion contains forward looking statements that are based on our current plans, considerations, expectations and determinations regarding future compensation programs. Actual compensation programs that we adopt may differ materially from currently planned programs as summarized in this discussion.
To date, the compensation of our NEOs has consisted of a combination of base salary, cash incentive compensation and long-term incentive compensation in the form of stock options. Compensation of our executives is structured around the achievement of individual performance and near-term corporate targets as well as long-term business objectives. We seek to ensure that the total compensation paid to our executive officers is reasonable and competitive. As we transition from a private company to a publicly traded company, we intend to evaluate our compensation values and philosophy and compensation plans and arrangements as circumstances require.
The compensation provided to our NEOs for the year ended December 31, 2019 is detailed in the 2019 Summary Compensation Table and the accompanying footnotes and narrative that follow.
Our NEOs for the year ended December 31, 2019, which consist of our Chief Executive Officer and our two most highly-compensation executive officers other than our Chief Executive Officer, are as follows:
•
Kevin J. Knopp, Ph.D., our President and Chief Executive Officer;
•
John Kenneweg, our Vice President, Government; and
•
Christopher Brown, Ph.D., our Chief Technology Officer.
2019 Summary Compensation Table
The following table shows the total compensation awarded to, earned by, or paid to our NEOs for services rendered to us in all capacities during the year ended December 31, 2019.
|
Name and principal position
|
|
|
Year
|
|
|
Salary
($)
|
|
|
Option
Awards
($)(1)
|
|
|
Non-Equity
Incentive Plan
Compensation
($)(2)
|
|
|
All Other
Compensation
($)(3)
|
|
|
Total
($)
|
|
|
Kevin J. Knopp, Ph.D.
|
|
|
|
|
2019
|
|
|
|
|
|
287,481
|
|
|
|
|
|
92,219
|
|
|
|
|
|
64,622
|
|
|
|
|
|
238
|
|
|
|
|
|
444,560
|
|
|
|
President and Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John Kenneweg
|
|
|
|
|
2019
|
|
|
|
|
|
209,879
|
|
|
|
|
|
51,233
|
|
|
|
|
|
112,000
|
|
|
|
|
|
—
|
|
|
|
|
|
373,112
|
|
|
|
Vice President, Government
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Brown, Ph.D.
|
|
|
|
|
2019
|
|
|
|
|
|
256,190
|
|
|
|
|
|
51,233
|
|
|
|
|
|
59,325
|
|
|
|
|
|
1,988
|
|
|
|
|
|
368,736
|
|
|
|
Chief Technology Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
These amounts represent the aggregate grant date fair value for option awards granted during our year ended December 31, 2019, computed in accordance with Financial Accounting Standards Board, or FASB, Accounting Standards Codification, or ASC, Topic 718. A discussion of the assumptions used in determining grant date fair values may be found in Notes 3 and 9 to our financial statements for the year ended December 31, 2019, included elsewhere in this prospectus. These amounts do not correspond to the actual value that may be recognized by the NEOs upon exercise of the applicable award or sale of the underlying shares of common stock.
(2)
For Drs. Knopp and Brown, the amounts represent cash bonuses earned under our annual performance-based bonus plan for the 12-month period from January 1, 2019 to December 31, 2019 and paid in 2020. For more information on these bonuses, see the description of the annual performance bonuses under “2019 Bonuses” below. For Mr. Kenneweg, the amount reported represents commissions earned with respect to the year ended December 31, 2019. For more
information on these commission payments, see the descriptions of the commissions under “2019 Commissions” below.
(3)
These amounts represent premiums paid by us during 2019 with respect to individual term life insurance policies where we pay the death proceeds to the beneficiary on the death of the insured.
Narrative Disclosure to Summary Compensation Table
2019 Salaries
Our NEOs each receive a base salary to compensate them for services rendered to our company. The base salary payable to each NEO is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities.
The board of directors increased the base salary of each of Dr. Knopp, Mr. Kenneweg and Dr. Brown effective as of February 1, 2019 from $275,000, $185,000 and $245,068, respectively, to $288,750, $210,900 and $257,321, respectively.
Our board of directors and compensation committee may adjust base salaries from time to time in their discretion.
2019 Bonuses
For the year ended December 31, 2019, each of Dr. Knopp and Dr. Brown was eligible to earn an annual bonus based on the achievement of certain corporate and individual performance milestones. The target annual bonus for each of Dr. Knopp and Dr. Brown for the year ended December 31, 2019 was equal to 30% of the executive’s respective annual base salary.
For the year ended December 31, 2019, 70% of the target bonus was tied to the achievement of corporate milestones, of which 80% related to market level revenue targets and 20% related to cash management, and 30% of the target bonus was tied to achievement of individual performance milestones. Following review and determinations of corporate and individual performance for 2019, the compensation committee determined that: (i) Dr. Knopp’s annual bonus was earned at 74.6% of his target bonus and (ii) Dr Brown’s annual bonus was earned at 76.9% of his target bonus. The annual bonus earned by each NEO with respect to the year ended December 31, 2019 is reported under the “Non-Equity Incentive Plan Compensation” column in the “2019 Summary Compensation Table” above.
2019 Commissions
For the year ended December 31, 2019, Mr. Kenneweg was eligible to earn commissions based on achievement of certain performance metrics. For 2019, the total target commission was established as $240,000, comprised of $31,500 related to the corporate milestones noted above, $50,000 in individual performance milestones and $158,500 in compensation related to revenue. The commissions targets were proposed by our Chief Executive Officer and approved by our compensation committee.
Based upon performance in 2019, Mr. Kenneweg earned $112,000, or 46.7% of the 2019 target commissions for 2019. The commissions earned represented $10,000 in individual performance milestones and $110,000 in compensation related to revenue.
Equity-Based Compensation
Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, we believe that equity grants provide our executives with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executives and our stockholders. In addition, we believe that equity grants promote executive retention because they incentivize our executive officers to remain in our employment during the vesting period. Accordingly, our board of directors has periodically reviewed the equity incentive compensation of our NEOs and granted equity incentive awards to them from time to time. In January 2019, we granted each of Dr. Knopp, Mr. Kenneweg and Dr. Brown an option to purchase 180,000, 100,000 and 100,000 shares of our common stock, respectively, each with an exercise price per share equal to the fair market value of our common stock on the date of grant. Each of the awards vests and becomes exercisable as to 1/48th of the shares on each monthly anniversary of January 21, 2019, subject to the applicable holder’s continued service to our company through the applicable vesting date.
Other Elements of Compensation
Retirement Savings and Health and Welfare Benefits
We currently maintain a 401(k) retirement savings plan for our employees, including our NEOs, who satisfy certain eligibility requirements. Our NEOs are eligible to participate in the 401(k) plan on the same terms as other full-time employees. We believe that providing a vehicle for tax-deferred retirement savings though our 401(k) plan adds to the overall desirability of our executive compensation package and further incentivizes our employees, including our NEOs, in accordance with our compensation policies.
All of our full-time employees, including our NEOs, are eligible to participate in our health and welfare plans, including medical, dental and vision benefits, medical and dependent care flexible spending accounts, short-term and long-term disability insurance, and life and AD&D insurance.
Perquisites and other personal benefits
We may provide limited perquisites to our NEOs when our compensation committee determines that such perquisites are necessary or advisable to fairly compensate or incentivize our employees. In 2019, we did not provide our NEOs with any perquisites that were not provided to all employees generally other than term life insurance premiums for Dr. Knopp and Dr. Brown and the amounts of such life insurance premiums for the year ended December 31, 2019 are reported under the “All Other Compensation” column in the “2019 Summary Compensation Table” above.
Outstanding Equity Awards at 2019 Year End
The following table sets forth information regarding outstanding equity awards held by our NEOs as of December 31, 2019.
|
|
|
|
Option Awards(1)
|
|
|
Name
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
|
|
|
Number of
Securities
Underlying
Unexercised
Options (#)
Unexercisable
|
|
|
Vesting
Commencement
Date
|
|
|
Option
Exercise
Price
($)
|
|
|
Option
Expiration
Date
|
|
|
Kevin J. Knopp, Ph.D.
|
|
|
|
|
150,000(2)
|
|
|
|
|
|
50,000(2)
|
|
|
|
|
|
1/1/2017
|
|
|
|
|
|
1.07
|
|
|
|
|
|
1/1/2027
|
|
|
|
|
|
|
|
|
41,250(3)
|
|
|
|
|
|
138,750(3)
|
|
|
|
|
|
1/21/2019
|
|
|
|
|
|
0.97
|
|
|
|
|
|
1/21/2029
|
|
|
|
John Kenneweg
|
|
|
|
|
249,000
|
|
|
|
|
|
—
|
|
|
|
|
|
2/12/2013
|
|
|
|
|
|
0.21
|
|
|
|
|
|
2/12/2023
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
|
|
—
|
|
|
|
|
|
1/16/2015
|
|
|
|
|
|
0.57
|
|
|
|
|
|
1/16/2025
|
|
|
|
|
|
|
|
|
33,750(4)
|
|
|
|
|
|
11,250(4)
|
|
|
|
|
|
12/2/2016
|
|
|
|
|
|
0.59
|
|
|
|
|
|
12/2/2026
|
|
|
|
|
|
|
|
|
22,917(3)
|
|
|
|
|
|
77,083(3)
|
|
|
|
|
|
1/21/2019
|
|
|
|
|
|
0.97
|
|
|
|
|
|
1/21/2029
|
|
|
|
Christopher Brown, Ph.D.
|
|
|
|
|
150,000(2)
|
|
|
|
|
|
50,000(2)
|
|
|
|
|
|
1/1/2017
|
|
|
|
|
|
1.07
|
|
|
|
|
|
1/1/2027
|
|
|
|
|
|
|
|
|
22,917(3)
|
|
|
|
|
|
77,083(3)
|
|
|
|
|
|
1/21/2019
|
|
|
|
|
|
0.97
|
|
|
|
|
|
1/21/2029
|
|
|
(1)
Each of the outstanding equity awards in the table above was granted pursuant to our 2012 Stock Option and Grant Plan, as amended, or the 2012 Plan.
(2)
Represents an option to purchase shares of our common stock granted on June 22, 2017. The shares underlying this option vest, as follows: 1/48th of the shares vest on each monthly anniversary of January 1, 2017, subject to the applicable holder’s continued service to our company through the applicable vesting date.
(3)
Represents an option to purchase shares of our common stock granted on January 21, 2019. The shares underlying this option vest, as follows: 1/48th of the shares on each monthly anniversary of January 21, 2019, subject to the applicable holder’s continued service to our company through the applicable vesting date.
(4)
Represents an option to purchase shares of our common stock granted on December 5, 2016. The shares underlying this option vest, subject to continued service, as follows: 25% of the shares vested on December 2, 2017, with the remainder vesting over the next three years in equal
monthly installments on the last day of each succeeding calendar month thereafter, subject to Mr. Kenneweg’s continued service to our company through the applicable vesting date.
Executive Compensation Arrangements
We initially entered into an offer letter with each of the NEOs in connection with his employment with us, which sets forth the terms and conditions of his employment, including base salary, target annual bonus opportunity, initial equity awards and standard employee benefit plan participation. Effective upon the closing of this offering, we intend to enter into employment agreements with each of the NEOs that will replace the offer letters and provide for specified payments and benefits in connection with a termination of employment in certain circumstances. Our goal in providing these severance and change in control payments and benefits is to offer sufficient cash continuity protection such that the named executive officers will focus their full time and attention on the requirements of the business rather than the potential implications of a qualifying employment termination or change in control for their respective positions. We prefer to have certainty regarding the potential severance amounts payable to the NEOs, rather than negotiating severance at the time that an NEO’s employment terminates. We have also determined that accelerated vesting provisions with respect to outstanding equity awards in connection with a qualifying termination of employment in certain circumstances are appropriate because they encourage our NEOs to stay focused on the business in those circumstances, rather than focusing on the potential implications of the termination of employment for them personally. The employment agreements with our NEOs will require the named executive officers to execute a separation agreement containing a general release of claims in favor of us to receive any severance payments and benefits. The material terms of the employment agreements we intend to enter into with our NEOs are summarized below.
Kevin J. Knopp, Ph.D.
Under the employment agreement we intend to enter into with Dr. Knopp, or the Knopp Employment Agreement, Dr. Knopp will continue to serve as our President and Chief Executive Officer on an at-will basis. Dr. Knopp’s base salary upon the closing of this offering will be $400,000, which is subject to periodic review, and he will be eligible to earn an annual bonus with a target amount equal to 100% of his base salary. Dr. Knopp will also continue to be eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.
Pursuant to the Knopp Employment Agreement, in the event that Dr. Knopp’s employment is terminated by us without “cause” or Dr. Knopp resigns for “good reason” (as each term is defined in the Knopp Employment Agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, (i) he will be entitled to receive base salary continuation for 12 months following termination, (ii) subject to Dr. Knopp’s copayment of premium amounts at the applicable active employees’ rate and proper election to continue COBRA health coverage, we will cover the monthly employer contribution that we would have paid to provide health insurance to Dr. Knopp had he remained employed with us until the earliest of (A) 12 months following termination, (B) Dr. Knopp’s eligibility for group medical plan benefits under any other employer’s group medical plan or (C) the end of Dr. Knopp’s COBRA health continuation period, (iii) he will be entitled to receive a prorated portion of the annual bonus earned for the year in which the date of termination occurs; and (iv) if the date of termination occurs after the last day of the year to which a bonus applies but before we pay such bonus, and Dr. Knopp has otherwise earned such bonus under the Employment Agreement, we shall pay him such bonus in a lump sum when we determine and pay bonuses to senior executives for the applicable year (the “Prior Year Bonus”).
In lieu of the payments and benefits described in the preceding paragraph, in the event that Dr. Knopp’s employment is terminated by us without cause or Dr. Knopp resigns for good reason, in either case within 12 months following a “change in control” (as defined in the Knopp Employment Agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, (i) he will be entitled to receive a lump sum in cash equal to one times the sum of (A) Dr. Knopp’s then-current annual base salary (or Dr. Knopp’s annual base salary in effect immediately prior to the change in control, if higher) plus (B) Dr. Knopp’s average annual cash bonuses and commission payments earned for the three full calendar years immediately preceding the date of termination, (ii) subject to Dr. Knopp’s copayment of premium amounts at the applicable active
employees’ rate and proper election to continue COBRA health coverage, we will we will cover the monthly employer contribution that we would have paid to provide health insurance to Dr. Knopp had he remained employed with us until the earliest of (A) 12 months following termination, (B) Dr. Knopp’s eligibility for group medical plan benefits under any other employer’s group medical plan or (C) the end of Dr. Knopp’s COBRA health continuation period, (iii) he will be entitled to receive a prorated portion of the annual bonus earned for the year in which the date of termination occurs; (iv) he will be entitled to receive the Prior Year Bonus and (v) he will be entitled to accelerated vesting of 100% of all stock options and other stock-based awards held by him that are subject solely to time-based vesting.
John Kenneweg
Under the employment agreement we intend to enter into with Mr. Kenneweg, or the Kenneweg Employment Agreement, Mr. Kenneweg will continue to serve as our Vice President, Government on an at-will basis. Mr. Kenneweg’s base salary upon the closing of this offering will be $250,000, which is subject to periodic review, and he will be eligible to earn an annual bonus with a target amount equal to 15% of his base salary and annual commissions with a target amount equal to $200,000. Mr. Kenneweg will also continue to be eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.
Pursuant to the Kenneweg Employment Agreement, in the event that Mr. Kenneweg’s employment is terminated by us without “cause” or Mr. Kenneweg resigns for “good reason” (as each term is defined in the Kenneweg Employment Agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, (i) he will be entitled to receive base salary continuation for six months following termination, (ii) subject to Mr. Kenneweg’s copayment of premium amounts at the applicable active employees’ rate and proper election to continue COBRA health coverage, we will cover the monthly employer contribution that we would have paid to provide health insurance to Mr. Kenneweg had he remained employed with us until the earliest of (A) six months following termination, (B) Mr. Kenneweg’s eligibility for group medical plan benefits under any other employer’s group medical plan or (C) the end of Mr. Keneweg’s COBRA health continuation period, (iii) he will be entitled to receive a prorated portion of the annual bonus earned for the year in which the date of termination occurs and (iv) if the date of termination occurs after the last day of the year to which a bonus applies but before we pay such bonus, and Mr. Kenneweg, has otherwise earned such bonus under the Employment Agreement, we shall pay him such bonus in a lump sum when we determine and pay bonuses to senior executives for the applicable year (the “Prior Year Bonus”).
In lieu of the payments and benefits described in the preceding paragraph, in the event that Mr. Kenneweg’s employment is terminated by us without cause or Mr. Kenneweg resigns for good reason, in either case within 12 months following a “change in control” (as defined in the Kenneweg Employment Agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, (i) he will be entitled to receive a lump sum in cash equal to one times the sum of (A) Mr. Kenneweg’s then-current annual base salary (or Mr. Kenneweg’s annual base salary in effect immediately prior to the change in control, if higher) plus (B) Mr. Kenneweg’s average annual cash bonuses and commission payments earned for the three full calendar years immediately preceding the date of termination, (ii) subject to Mr. Kenneweg’s copayment of premium amounts at the applicable active employees’ rate and proper election to continue COBRA health coverage, we will cover the monthly employer contribution that we would have paid to provide health insurance to Mr. Kenneweg had he remained employed with us until the earliest of (A) 12 months following termination, (B) Mr. Kenneweg’s eligibility for group medical plan benefits under any other employer’s group medical plan or (C) the end of Mr. Kenneweg’s COBRA health continuation period, (iii) he will be entitled to receive a prorated portion of the annual bonus earned for the year in which the date of termination occurs (iv) he will be entitled to receive the Prior Year Bonus and (v) he will be entitled to accelerated vesting of 100% of all stock options and other stock-based awards held by him that are subject solely to time-based vesting.
Christopher Brown, Ph.D.
Under the employment agreement we intend to enter into with Dr. Brown, or the Brown Employment Agreement, Dr. Brown will continue to serve as our Chief Technology Officer on an at-will basis. Dr. Brown’s base salary upon the closing of this offering will be $300,000, which is subject to periodic review and adjustment, and he will be eligible to earn an annual bonus with a target amount equal to 50%
of his base salary. Dr. Brown will also continue to be eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.
Pursuant to the Brown Employment Agreement, in the event that his employment is terminated by us without “cause” or Dr. Brown resigns for “good reason” (as each term is defined in the Brown Employment Agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, (i) he will be entitled to receive base salary continuation for nine months following termination, (ii) subject to Dr. Brown’s copayment of premium amounts at the applicable active employees’ rate and proper election to continue COBRA health coverage, we will cover the monthly employer contribution that we would have paid to provide health insurance to Dr. Brown had he remained employed with us until the earliest of (A) nine months following termination, (B) Dr. Brown’s eligibility for group medical plan benefits under any other employer’s group medical plan or (C) the end of Dr. Brown’s COBRA health continuation period, (iii) he will be entitled to receive a prorated portion of the annual bonus earned for the year in which the date of termination occurs; and (iv) if the date of termination occurs after the last day of the year to which a bonus applies but before we pay such bonus, and Mr. Brown has otherwise earned such bonus under the Employment Agreement, we shall pay him such bonus in a lump sum when we determine and pay bonuses to senior executives for the applicable year (the “Prior Year Bonus”).
In lieu of the payments and benefits described in the preceding paragraph, in the event that Dr. Brown’s employment is terminated by us without cause or Dr. Brown resigns for good reason, in either case within 12 months following a “change in control” (as defined in the Brown Employment Agreement), subject to the execution and effectiveness of a separation agreement, including a general release of claims in our favor, (i) he will be entitled to receive a lump sum in cash equal to one times the sum of (A) Dr. Brown’s then-current annual base salary (or Dr. Brown’s annual base salary in effect immediately prior to the change in control, if higher) plus (B) Dr. Brown’s average annual cash bonuses and commission payments earned for the three full calendar years immediately preceding the date of termination, (ii) subject to Dr. Brown’s copayment of premium amounts at the applicable active employees’ rate and proper election to continue COBRA health coverage, we will cover the monthly employer contribution that we would have paid to provide health insurance to Dr. Brown had he remained employed with us until the earliest of (A) 12 months following termination, (B) Dr. Brown’s eligibility for group medical plan benefits under any other employer’s group medical plan or (C) the end of Dr. Brown’s COBRA health continuation period, (iii) he will be entitled to receive a prorated portion of the annual bonus earned for the year in which the date of termination occurs (iv) he will be entitled to receive the Prior Year Bonus and (v) he will be entitled to accelerated vesting of 100% of all stock options and other stock-based awards held by him that are subject solely to time-based vesting.
Parachute Payments Under Section 280G of the Code
The payments and benefits provided to the NEOs in connection with a change in control may not be eligible for a federal income tax deduction for the company pursuant to Section 280G of the U.S. Internal Revenue Code of 1986, as amended, or the Code, and may subject the NEOs to an excise tax under Section 4999 of the Code. Under the employment agreements with the NEOs, if the payments or benefits payable to an NEOs in connection with a change in control would be subject to the excise tax on golden parachutes imposed under Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would result in a higher net after-tax benefit to the such NEO.
Restrictive Covenants Agreements
Each of our NEOs is signing an agreement containing confidential information, invention assignment, nonsolicitation and noncompetition protections.
Employee Benefit and Equity Compensation Plans
2012 Stock Option and Grant Plan
Our 2012 Plan was adopted by our board of directors and approved by our stockholders on June 12, 2012, and was most recently amended in September 2020. Under the 2012 Plan, we have reserved for issuance an aggregate of 6,119,702 shares of our common stock. The number of shares of common stock reserved for issuance is subject to adjustment in the event of any merger, consolidation,
sale of all or substantially all of our assets, reorganization, recapitalization, reclassification, stock split, stock dividend, reverse stock split or other similar transaction.
The shares of common stock underlying awards that are forfeited, canceled, reacquired by us prior to vesting, satisfied without the issuance of stock or otherwise terminated (other than by exercise) and shares of common stock that are withheld upon exercise of an option or settlement of an award to cover the exercise price or tax withholding are currently added back to the shares of common stock available for issuance under the 2012 Plan. Following this offering, such shares will be added to the shares of common stock available for issuance under the 2020 Plan.
Our board of directors has acted as administrator of the 2012 Plan. The administrator has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted, and to determine the specific terms and conditions of each award, subject to the provisions of the 2012 Plan. Persons eligible to participate in the 2012 Plan are those full or part-time employees, officers and directors of, and consultants to, our company as selected from time to time by the administrator in its discretion.
The 2012 Plan permits the granting of (1) options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code, and (2) options that do not so qualify. The per share exercise price of each option is determined by our board of directors but may not be less than 100% of the fair market value of the common stock on the date of grant. The term of each option is fixed by our board of directors but may not exceed 10 years from the date of grant. Our board of directors determines at what time or times each option may be exercised. In addition, the 2012 Plan permits the granting of restricted shares of common stock and unrestricted shares of common stock. Our board of directors may award restricted shares of common stock to participants subject to such conditions and restrictions as it may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with us through a specified vesting period.
The 2012 Plan provides that upon the occurrence of a “sale event,” as defined in the 2012 Plan, all outstanding stock options will terminate at the effective time of such sale event, unless the parties to the sale event agree that such awards will be assumed or continued by the successor entity. In the event of a termination of the 2012 Plan and all options issued thereunder in connection with a sale event, optionees will be provided an opportunity to exercise options that are then exercisable or will become exercisable as of the effective time of the sale event within a specified period of time prior to the consummation of the sale event. In addition, we have the right to provide for cash payment to holders of options, in exchange for the cancellation thereof, in an amount per share equal to the difference between the value of the consideration payable per share of common stock in the sale event and the per share exercise price of such options. In the event of, and subject to the consummation of, a sale event, restricted stock (other than shares of restricted stock that become vested as a result of the sale event) will be forfeited immediately prior to the effective time of a sale event unless such awards are assumed or continued by the successor entity. In the event that shares of restricted stock are forfeited in connection with a sale event, such shares of restricted stock shall be repurchased at a price per share equal to the lower of the original per share purchase price of such shares or the current fair market value of such shares determined immediately prior to the sale event. We have the right to provide for cash payment to holders of restricted stock in exchange for the cancellation thereof, in an amount per share equal to the value of the consideration payable per share of common stock in the sale event.
Additionally, the 2012 Plan provides for certain drag along rights pursuant to which grantees may be obligated, on the request of the company or the accepting requisite holder, to sell, transfer and deliver, or cause to be sold, transferred and delivered, to a buyer, their shares in the event the Company or the accepting requisite holder determines to enter into a sale event with a buyer.
The board of directors may amend or discontinue the 2012 Plan at any time, subject to stockholder approval where such approval is required by applicable law. The administrator of the 2012 Plan may also amend or cancel any outstanding award, provided that no amendment to an award may adversely affect a participant’s rights without his or her consent. The administrator of the 2012 Plan is specifically authorized to exercise its discretion to reduce the exercise price of outstanding stock options or effect the repricing of such awards through cancellation and re-grants.
The 2012 Plan will automatically terminate upon the earlier of 10 years from the date on which the 2012 Plan was initially adopted by our board of directors or 10 years from the date the 2012 Plan was initially approved by our stockholders. As of October 31, 2020, options to purchase 5,311,085 shares of common stock were outstanding under the 2012 Plan. Our board of directors has determined not to make any further awards under the 2012 Plan following the closing of this offering.
2020 Stock Option and Incentive Plan
Our 2020 Plan was adopted by our board of directors on November 23, 2020, approved by our stockholders on , 2020 and will become effective upon the date immediately preceding the date on which the registration statement of which this prospectus is part is declared effective by the SEC. The 2020 Plan will replace the 2012 Plan as our board of directors has determined not to make additional awards under the 2012 Plan following the closing of our initial public offering. However, the 2012 Plan will continue to govern outstanding equity awards granted thereunder. The 2020 Plan allows us to make equity-based and cash-based incentive awards to our officers, employees, directors and consultants.
Authorized Shares. We have initially reserved 3,000,000 shares of our common stock for the issuance of awards under the 2020 Plan, or the Initial Limit. The 2020 Plan provides that the number of shares reserved and available for issuance under the 2020 Plan will automatically increase on January 1, 2022 and each January 1 thereafter, by 4% of the outstanding number of shares of our common stock on the immediately preceding December 31 or such lesser number of shares as determined by our compensation committee, or the Annual Increase. These limits are subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization. The shares we issue under the 2020 Plan will be authorized but unissued shares or shares that we reacquire. The shares of common stock underlying any awards under the 2020 Plan and the 2012 Plan that are forfeited, cancelled, held back upon exercise or settlement of an award to satisfy the exercise price or tax withholding, reacquired by us prior to vesting, satisfied without the issuance of stock, expire or are otherwise terminated (other than by exercise) will be added back to the shares of common stock available for issuance under the 2020 Plan.
Incentive Stock Option Limit. The maximum number of shares of common stock that may be issued in the form of incentive stock options shall not exceed the Initial Limit, cumulatively increased on January 1, 2022 and on each January 1 thereafter by the lesser of the Annual Increase for such year or 2,000,000 shares of common stock.
Plan Administration. The 2020 Plan will be administered by our compensation committee. Our compensation committee has full power to select, from among the individuals eligible for awards, the individuals to whom awards will be granted and the number of shares subject to such awards, to make any combination of awards to participants, to accelerate at any time the exercisability or vesting of any award and to determine the specific terms and conditions of each award, subject to the provisions of the 2020 Plan.
Eligibility. Persons eligible to participate in the 2020 Plan will be those full or part-time officers, employees, non-employee directors and consultants as selected from time to time by our compensation committee in its discretion.
Stock Options. The 2020 Plan permits the granting of both options to purchase common stock intended to qualify as incentive stock options under Section 422 of the Code, and options that do not so qualify. The option exercise price of each option will be determined by our compensation committee but may not be less than 100% of the fair market value of our common stock on the date of grant unless the option is granted (i) pursuant to a transaction described in, and in a manner consistent with Section 424(a) of the Code or (ii) to individuals who are not subject to U.S. income tax. The term of each option will be fixed by our compensation committee and may not exceed 10 years from the date of grant. Our compensation committee will determine at what time or times each option may be exercised.
Stock Appreciation Rights. Our compensation committee may award stock appreciation rights under the 2020 Plan subject to such conditions and restrictions as it may determine. Stock appreciation rights entitle the recipient to shares of common stock, or cash, equal to the value of the appreciation
in our stock price over the exercise price. The exercise price of each stock appreciation right may not be less than 100% of the fair market value of our common stock on the date of grant. The term of each stock appreciation right will be fixed by our compensation committee and may not exceed 10 years from the date of grant. Our compensation committee will determine at what time or times each stock appreciation right may be exercised.
Restricted Stock Awards, Restricted Stock Units, and Unrestricted Stock Awards. Our compensation committee may award restricted shares of common stock and restricted stock units to participants subject to such conditions and restrictions as it may determine. These conditions and restrictions may include the achievement of certain performance goals and/or continued employment with us through a specified vesting period. Our compensation committee may also grant shares of common stock that are free from any restrictions under the 2020 Plan. Unrestricted stock may be granted to participants in recognition of past services or for other valid consideration and may be issued in lieu of cash compensation due to such participant.
Dividend Equivalent Rights. Our compensation committee may grant dividend equivalent rights to participants that entitle the recipient to receive credits for dividends that would be paid if the recipient had held a specified number of shares of common stock.
Cash-Based Awards. Our compensation committee may grant cash bonuses under the 2020 Plan to participants, subject to the achievement of certain performance goals.
Sale Event. The 2020 Plan provides that upon the effectiveness of a “sale event,” as defined in the 2020 Plan, an acquirer or successor entity may assume, continue or substitute for the outstanding awards under the 2020 Plan. To the extent that awards granted under the 2020 Plan are not assumed or continued or substituted for by the successor entity, upon the effective time of the sale event, such awards shall terminate. In such case, except as may be otherwise provided in the relevant award certificate, all awards with time-based vesting, conditions or restrictions shall become fully vested and exercisable or nonforfeitable as of the effective time of the sale event and all awards with conditions and restrictions relating to the attainment of performance goals may become vested and nonforfeitable in connection with a sale event in the administrator’s discretion or to the extent specified in the relevant award certificate. In the event of such termination, individuals holding options and stock appreciation rights will be permitted to exercise such options and stock appreciation rights (to the extent exercisable) within a specified period of time prior to the sale event. In addition, in connection with the termination of the 2020 Plan upon a sale event, we may make or provide for a payment, in cash or in kind, to participants holding vested and exercisable options and stock appreciation rights equal to the difference between the per share consideration payable to stockholders in the sale event and the exercise price of the options or stock appreciation rights and we may make or provide for a payment, in cash or in kind, to participants holding other vested awards.
Amendment and Termination. Our board of directors may amend or discontinue the 2020 Plan and our compensation committee may amend or cancel outstanding awards for purposes of satisfying changes in law or any other lawful purpose, but no such action may adversely affect rights under an award without the holder’s consent. Certain amendments to the 2020 Plan require the approval of our stockholders. The administrator of the 2020 Plan is specifically authorized to exercise its discretion to reduce the exercise price of outstanding stock options and stock appreciation rights or effect the repricing of such awards though cancellation and re-grants without stockholder consent. No awards may be granted under the 2020 Plan after the date that is 10 years from the effective date of the 2020 Plan. No awards under the 2020 Plan have been made prior to the date of this prospectus.
2020 Employee Stock Purchase Plan
Our 2020 Employee Stock Purchase Plan, or the ESPP, was adopted by our board of directors on November 23, 2020, approved by our stockholders on , 2020 and will become effective on the date immediately preceding the date on which the registration statement of which this prospectus forms a part is declared effective by the SEC. The ESPP is intended to qualify as an “employee stock purchase plan” within the meaning of Section 423 of the Code. The ESPP initially reserves and authorizes the issuance of up to a total of 470,000 shares of our common stock to participating employees. The ESPP provides that the number of shares reserved and available for issuance will
automatically increase on January 1, 2022 and each January 1 thereafter through January 1, 2030, by the least of (i) 500,000 shares of our common stock, (ii) 1% of the outstanding number of shares of common stock on the immediately preceding December 31, or (iii) such lesser number of shares of common stock as determined by the administrator of the ESPP. The number of shares reserved under the ESPP is subject to adjustment in the event of a stock split, stock dividend or other change in our capitalization.
All employees are eligible to participate in the ESPP. However, any employee who owns 5% or more of the total combined voting power or value of all classes of our stock will not be eligible to purchase shares of common stock under the ESPP.
We may make one or more offerings each year to our employees to purchase shares under the ESPP. Offerings will usually begin on each May 1 and November 1 and will continue for six-month periods, referred to as offering periods. Each eligible employee may elect to participate in any offering by submitting an enrollment form at least 15 business days before the applicable offering date.
Each employee who is a participant in the ESPP may purchase shares of our common stock by authorizing payroll deductions of up to 15% of his or her eligible compensation during an offering period. Unless the participating employee has previously withdrawn from the offering, his or her accumulated payroll deductions will be used to purchase shares of our common stock on the last business day of the offering period at a price equal to 85% of the fair market value of the shares of our common stock on the first business day or the last business day of the offering period, whichever is lower, provided that no more $25,000 worth of common stock (or such other lesser maximum number of shares as may be established by the administrator) may be purchased by any one employee during any offering period. Under applicable tax rules, an employee may purchase no more than $25,000 worth of shares of our common stock, valued at the start of the purchase period, under the ESPP in any calendar year.
The accumulated payroll deductions of any employee who is not a participant on the last day of an offering period will be refunded. An employee’s rights under the ESPP terminate upon voluntary withdrawal from the plan or when the employee ceases employment with us for any reason.
The ESPP may be terminated or amended by our board of directors at any time. An amendment that increases the number of shares of our common stock authorized under the ESPP and certain other amendments require the approval of our stockholders.
Senior Executive Cash Incentive Bonus Plan
On November 23, 2020 our board of directors adopted the Senior Executive Cash Incentive Bonus Plan, or the Bonus Plan. The Bonus Plan provides for annual cash bonus payments based upon the attainment of our company and individual performance targets established by our compensation committee. The payment targets will be related to financial and operational measures or objectives with respect to our company, or the Corporate Performance Goals, as well as individual performance objectives.
Our compensation committee may select Corporate Performance Goals from among the following: cash flow (including, but not limited to, operating cash flow and free cash flow), revenue, corporate revenue, earnings before interest, taxes, depreciation and amortization, net income (loss) (either before or after interest, taxes, depreciation and/or amortization), changes in the market price of our common stock, economic value-added, acquisitions or strategic transactions, including collaborations, joint ventures or promotion arrangements, operating income (loss), return on capital assets, equity, or investment, stockholder returns, return on sales, gross or net profit levels, productivity, expense efficiency, margins, operating efficiency, customer satisfaction, working capital, earnings (loss) per share of our common stock, bookings, new bookings or renewals, sales or market shares, number of customers, number of new customers or customer references, operating income, and/or net annual recurring revenue, any of which may be measured in absolute terms, as compared to any incremental increase, in terms of growth, as compared to results of a peer group, against the market as a whole, compared to applicable market indices and/or measured on a pre-tax or post-tax basis.
Our compensation committee may select executive officers to participate in the Bonus Plan. Each executive officer who is selected to participate in the Bonus Plan will have a target bonus opportunity
set for each performance period. The bonus formulas will be adopted in each performance period by the compensation committee and communicated to each executive. The Corporate Performance Goals will be measured at the end of each performance period after our financial reports have been published or such other appropriate time as the compensation committee determines. If the Corporate Performance Goals and individual performance objectives are met, payments will be made as soon as practicable following the end of each performance period, but no later than 74 days after the end of the year in which such performance period ends. Subject to the rights contained in any agreement between the executive officer and us, an executive officer must be employed by us on the bonus payment date to be eligible to receive a bonus payment. The Bonus Plan also permits the compensation committee to approve additional bonuses to executive officers in its sole discretion.
NON-EMPLOYEE DIRECTOR COMPENSATION
The following table presents the total compensation for each person who served as a non-employee member of our board of directors for such service during the year ended December 31, 2019. Other than as set forth in the table and described more fully below, we did not pay any compensation, make any equity awards or non-equity awards to, or pay any other compensation to any of the non-employee members of our board of directors in 2019. We reimburse non-employee members of our board of directors for reasonable travel and out-of-pocket expenses incurred in attending meetings of our board of directors and committees of our board of directors.
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|
|
|
Fees Earned or Paid
in Cash ($)
|
|
|
Option Awards
($)(1)
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|
|
All Other
Compensation ($)
|
|
|
Total ($)
|
|
|
J. Michael Ramsey, Ph.D.(2)
|
|
|
|
|
60,000
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
60,000
|
|
|
|
E. Kevin Hrusovsky
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Nicolas Barthelemy
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Keith Crandell
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Mark Spoto
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Sharon Kedar
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
(1)
There were no options or other equity awards granted to directors in 2019. Except as noted below in footnote (3), none of our directors held options to purchase our common stock or any other stock awards as of December 31, 2019.
(2)
Dr. Ramsey is party to an independent contractor agreement with us, pursuant to which Dr. Ramsey receives $5,000 per month as compensation for services provided to us, including one full day a week of consulting services, serving on our board of directors and serving as the chair of our scientific advisory board.
(3)
The outstanding options held by our directors as of December 31, 2019 are set forth below.
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Aggregate
Number of Shares
Subject to Stock
Options
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|
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J. Michael Ramsey, Ph.D.
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|
|
|
|
75,000(1)
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|
|
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E. Kevin Hrusovsky
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|
|
|
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203,686(2)
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|
|
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Nicolas Barthelemy
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|
|
|
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80,000(3)
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|
|
(1)
The shares underlying this option vest monthly over four years and will become fully vested in January 2021.
(2)
Represents an option to purchase 123,686 shares that is fully vested and an option to purchase 80,000 shares that vests monthly over three years and will become fully vested in April 2021.
(3)
The shares underlying this option vest monthly over three years and will become fully vested in March 2021.
Non-Employee Director Compensation Policy
Our board of directors intends to adopt a non-employee director compensation policy, to be effective upon effectiveness of the registration statement of which this prospectus forms a part, that is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors. Under the policy, each director who is not an employee will be paid cash compensation from and after the completion of this offering, as set forth below:
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Member
Annual
Fee
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|
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Chairman
Annual
Fee
|
|
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Board of Directors
|
|
|
|
$
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37,500
|
|
|
|
|
$
|
25,000*
|
|
|
|
Audit Committee
|
|
|
|
|
9,000
|
|
|
|
|
|
18,000
|
|
|
|
Compensation Committee
|
|
|
|
|
6,000
|
|
|
|
|
|
12,000
|
|
|
|
Nominating and Corporate Governance Committee
|
|
|
|
|
5,000
|
|
|
|
|
|
10,000
|
|
|
*
The annual fee for service as Chairman of the board of directors is in addition to the annual fee for service on the board of directors.
In addition, the non-employee director compensation policy will provide that, upon initial election to our board of directors (or, in the case of each non-employee director other than our Chairman as of the effectiveness of the registration statement of which this prospectus forms a part, upon such effectiveness), each non-employee director will be granted an option to purchase a number of shares equal to 0.055% of the number of shares of our common stock outstanding on the grant date, or the Initial Grant. The Initial Grant will vest in equal monthly installments over 36 months from the grant date, subject to continued service through the applicable vesting date. Furthermore, on the date of each annual meeting of stockholders following the completion of this offering, each non-employee director who continues as a non-employee director following such meeting will be granted an option to purchase a number of shares equal to 0.037% of the number of shares of our common stock outstanding on such grant date, or the Annual Grant. The Annual Grant will vest in 12 equal monthly installments from the grant date, subject to continued service through the applicable vesting date. Such awards are subject to full accelerated vesting upon a sale of the company.
We will reimburse all reasonable out-of-pocket expenses incurred by non-employee directors in attending meetings of our board of directors and committees thereof.
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
Other than the compensation agreements and other arrangements described under “Executive compensation” and “Director compensation” in this prospectus and the transactions described below, since January 1, 2017, we have not entered into any transactions, nor are there any currently proposed transactions, between us and a related party where the amount involved exceeds, or would exceed, $120,000, and in which any related person had or will have a direct or indirect material interest. We believe the terms of the transactions described below were comparable to terms we could have obtained in arm’s-length dealings with unrelated third parties.
Equity Financings
Series E Preferred Stock Financing
On April 12, 2019, we sold an aggregate of 2,169,563 shares of our Series E preferred stock at a purchase price of $6.29 per share, and on April 29, 2019, we sold an aggregate of 612,631 shares of our Series E preferred stock, for an aggregate purchase price of approximately $17.5 million, pursuant to our Series E preferred stock financing. The following table summarizes purchases of our Series E preferred stock by our directors, holders of more than 5% of our capital stock and their affiliated entities. None of our executive officers purchased shares of Series E preferred stock.
|
Stockholder
|
|
|
Shares of
Series E
Preferred Stock
|
|
|
Total
Purchase
Price
|
|
|
Northpond Ventures, LP(1)
|
|
|
|
|
1,589,826
|
|
|
|
|
$
|
10,000,005
|
|
|
|
The Barthelemy 2001 Trust(2)
|
|
|
|
|
31,796
|
|
|
|
|
|
199,996
|
|
|
|
ARCH Venture Fund VII, L.P.(3)
|
|
|
|
|
293,818
|
|
|
|
|
|
1,848,115
|
|
|
|
SAEV Guernsey Holdings Limited(4)
|
|
|
|
|
74,448
|
|
|
|
|
|
468,277
|
|
|
|
Yodabyte Investments, LLC(5)
|
|
|
|
|
96,979
|
|
|
|
|
|
609,998
|
|
|
(1)
Sharon Kedar, a member of our board of directors, is a partner at Northpond Ventures.
(2)
Nicolas Barthelemy, a member of our board of directors, is a beneficiary of the Barthelemy 2001 Trust.
(3)
Keith Crandell, a member of our board of directors, is a partner at ARCH Venture Fund.
(4)
Cory Steffek, a former member of our board of directors, was a Managing Director of SAEV Guernsey Holdings Limited.
(5)
Mark Spoto, a member of our board of directors, is a Managing Member of Razor’s Edge Fund, LP (“Razor’s Edge”), which is an affiliate of Yodabyte Investments, LLC, in which Mr. Spoto is also a Managing Director.
Series D Preferred Stock Financing
On March 2, 2017, we sold an aggregate of 3,549,176 shares of our Series D preferred stock at a purchase price of $5.6351 per share, for an aggregate purchase price of approximately $20 million, pursuant to our Series D preferred stock financing. We had a second closing on September 7, 2018, where we sold an aggregate of 709,835 additional shares of our Series D preferred stock at a purchase price of $5.6351 per share, for an aggregate purchase price of approximately $4 million. The following
table summarizes purchases of our Series D preferred stock by our directors, holders of more than 5% of our capital stock and their affiliated entities. None of our executive officers purchased shares of Series D preferred stock.
|
Stockholder
|
|
|
Shares of
Series E
Preferred Stock
|
|
|
Total
Purchase
Price
|
|
|
ARCH Venture Fund VII, L.P.(1)
|
|
|
|
|
727,869
|
|
|
|
|
|
4,101,614
|
|
|
|
SAEV Guernsey Holdings Limited(2)
|
|
|
|
|
727,869
|
|
|
|
|
|
4,101,614
|
|
|
|
RE Sidecar 4, LLC(3)
|
|
|
|
|
150,840
|
|
|
|
|
|
849,998
|
|
|
|
Yodabyte Investments, LLC (3)
|
|
|
|
|
177,459
|
|
|
|
|
|
999,999
|
|
|
(1)
Keith Crandell, a member of our board of directors, is a partner at ARCH Venture Fund.
(2)
Cory Steffek, a former member of our board of directors, was a Managing Director of SAEV Guernsey Holdings Limited.
(3)
Mark Spoto, a member of our board of directors, is a Managing Member of Razor’s Edge Fund LP (“Razor’s Edge”), which is an affiliate of RE Sidecar 4, LLC (“RE Sidecar”), and which Mr. Spoto is also a Managing Director. Razor’s Edge, RE Sidecar and Yodabyte are referred to collectively as the “Razor’s Edge Funds.”
Stockholders Agreement
We are party to a fourth amended and restated stockholders agreement, that provides, among other things, that certain holders of our capital stock, including ARCH Venture Fund VII, L.P., Razor’s Edge Funds, SAEV Guernsey Holdings Limited and UTEC 2 L.P., which each hold more than 5% of our outstanding capital stock, Kevin Knopp, our Chief Executive Officer, director and co-founder, Christopher Brown, our Chief Technology Officer, director and co-founder, and J. Michael Ramsey, our director and co-founder, have agreed as to the manner in which they will vote their shares of our capital stock on certain matters, including with respect to the election of directors. Upon completion of this offering, the voting provisions of the stockholders agreement will terminate and none of our stockholders will have any special rights regarding the election or designation of members of our board of directors.
Right of First Refusal
Pursuant to our equity compensation plans and certain agreements with our stockholders, including the fourth amended and restated stockholders agreement with certain holders of our capital stock, including ARCH Venture Fund VII, L.P., Razor’s Edge Funds, SAEV Guernsey Holdings Limited and UTEC 2 L.P., which each hold more than 5% of our outstanding capital stock, Kevin Knopp, our Chief Executive Officer, director and co-founder, Christopher Brown, our Chief Technology Officer, director and co-founder, and J. Michael Ramsey, our director and co-founder, we or our assignees have a right to purchase shares of our capital stock that certain stockholders propose to sell to other parties. This right will terminate upon completion of this offering. Since January 1, 2017, we and our assignees have waived our right of first refusal in connection with the sale of certain shares of our capital stock, including sales by certain of our executive officers. See the section titled “Principal Stockholders” for additional information regarding beneficial ownership of our capital stock.
Registration Rights
We are party to a fourth amended and restated registration rights agreement, that provides, among other things, that certain holders of our capital stock, including ARCH Venture Fund VII, L.P., Razor’s Edge Funds, SAEV Guernsey Holdings Limited and UTEC 2 L.P., which each hold more than 5% of our outstanding capital stock, Kevin Knopp, our Chief Executive Officer, director and co-founder, and Kevin Hrusovsky, one of our directors, have the right to demand that we file a registration statement or request that their shares of our capital stock be included on a registration statement that we are otherwise filing.
Following the expiration of the lock-up period described below in “Shares Eligible For Future Sale—Lock-up Agreements,” pursuant to our registration rights agreement, the holders of shares of common stock, which includes shares of common stock outstanding as of , shares of common stock issuable upon conversion of our outstanding preferred stock, shares of common stock issuable upon the exercise of warrants outstanding as of and shares of our common stock issuable upon the exercise of options outstanding as of , are entitled to registration rights with respect to the shares of common stock held by them. These shares include all of the shares held (and shares issuable upon the exercise of warrants held) following this offering by our principal stockholders and their affiliates, except that such numbers of shares do not reflect the shares of common stock, if any, purchased by any holders of registration rights in this offering. See “Description of Capital Stock—Registration Rights” for a more detailed description of these registration rights.
Commercial Services Agreement
In 2015, we entered into a commercial services agreement with SAEV Guernsey, one of our preferred stock investors, under which the investor became eligible for payment upon the achievement of certain sales and marketing milestones by December 31, 2016. As described in Note 8 of the Financial Statements, the investor achieved milestones totaling $1.5 million, which will become payable only upon a Deemed Liquidation (as defined in our charter) prior to a qualified public offering. As a result, the investor’s rights to payment will terminate upon the completion of this offering.
Amended and Restated Exclusive License Agreement with The University of North Carolina at Chapel Hill
We entered into an Amended and Restated Exclusive License Agreement with The University of North Carolina at Chapel Hill, or UNC, on May 20, 2015, as amended, pursuant to which UNC licensed its rights to certain inventions developed by J. Michael Ramsey PhD, who holds faculty positions at the UNC and who is the Company’s scientific founder and a member of our board of directors since February 2012. See the section titled “Intellectual Property” for additional information regarding Dr. Ramsey’s intellectual property. Under the terms of a separate agreement between Dr. Ramsey and UNC, Dr. Ramsey receives a portion of the royalties paid to UNC. Dr. Ramsey received approximately $54,100 and $57,400 from UNC in 2019 and 2018, respectively.
Indemnification Agreements with Officers and Directors and Directors’ and Officers’ Liability Insurance
We have entered into indemnification agreements with each of our directors, which such agreements will be amended and restated in connection with this offering. We will also enter into indemnification agreements with each of our executive officers in connection with this offering. The indemnification agreements, our restated certificate of incorporation and our restated by-laws to be in effect upon completion of this offering will require us to indemnify our directors to the fullest extent not prohibited by Delaware law. Subject to certain limitations, our restated by-laws also require us to advance expenses incurred by our directors and officers.
In addition, pursuant to the terms of our fourth amended and restated stockholders agreement we have also agreed to indemnify each Investor (as defined in the stockholders agreement), as well as their respective affiliates, direct and indirect partners (including partners of partners and stockholders and members of partners), members, stockholders, directors, officers, employees, and agents and each person who controls any of them from any losses (including reasonable fees and expenses) based upon, arising out of, or by reason of any third party or governmental claims relating to the indemnified party’s status as a security holder, creditor, director, agent, representative or controlling person of the Company to the extent, and solely to the extent, that such losses are based upon, arise out of or are otherwise reasonably related to any action taken or omitted to be taken or alleged to have been taken or omitted to have been taken as security holder, director, agent, representative or controlling person of the Company or otherwise, alleging so called control person liability or securities law liability, except for losses arising from or based on (i) an untrue statement or omission or an alleged untrue statement or omission in a registration statement or prospectus made in reliance upon information furnished to the
Company by or on behalf of such indemnified party, or (ii) conduct by an indemnified party which constitutes fraud or willful misconduct.
Our stock option plan also provides that our directors will not be liability for any act, omission, interpretation, construction or determination made in good faith in connection with the plan, and the members of our board of directors and any committee administering the plan will be entitled to indemnification and reimbursement by us in respect of any claim, loss, damage or expense (including reasonable attorneys’ fees) arising or resulting therefrom to the fullest extent permitted by law and/or under our governing documents, including our certificate of incorporation or bylaws, or any directors’ and officers’ liability insurance coverage which may be in effect from time to time and/or any indemnification agreement between such individual and the Company.
We also maintain a general liability insurance policy which covers certain liabilities of directors and officers of our company arising out of claims based on acts or omissions in their capacities as directors or officers. Under our Fourth Amended and Restated Stockholders Agreement dated April 12, 2019, we also agreed to use our reasonable best efforts prior to this offering to increase our directors’ and officers’ liability insurance to at least $10 million per occurrence, including coverage of claims under the Securities Act and the Exchange Act.
Directed Share Program
At our request, the underwriters have reserved up to shares of our common stock offered by this prospectus for sale, at the initial public offering price per share, to our directors, officers, employees, business associates and other persons with whom we have a relationship. We do not currently know the extent to which these related persons will participate in the directed share program. The sales will be made by Empire Asset Management Co. as the directed share program administrator.
Related Person Transaction Policy
Our board of directors has adopted a written related person transaction policy providing that transactions with our directors, officers and holders of five percent or more of our voting securities and their affiliates, each a related person, must be approved by our audit committee. This policy will become effective on the date our registration statement for this offering becomes effective. Pursuant to this policy, the audit committee has the primary responsibility for reviewing and approving or disapproving “related person transactions,” which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest. For purposes of this policy, a related person is defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and their immediate family members.
As appropriate for the circumstances, the audit committee will review and consider:
•
the related person’s interest in the related person transaction;
•
the approximate dollar amount involved in the related person transaction;
•
the approximate dollar amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
•
whether the transaction was undertaken in the ordinary course of our business;
•
whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;
•
the purpose of, and the potential benefits to us of, the related-party transaction; and
•
any other information regarding the related-party transaction or the related person in the context of the proposed transaction that would be material to investors in light of the circumstances of the particular transaction.
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information known to us regarding beneficial ownership of our capital stock as of October 31, 2020, as adjusted to reflect the sale of common stock offered by us in this offering, for:
•
each person or group of affiliated persons known by us to be the beneficial owner of more than 5% of our capital stock;
•
each of our named executive officers;
•
each of our directors; and
•
all of our executive officers and directors as a group.
The following table does not reflect any shares of our common stock that may be purchased pursuant to our directed share program described under “Certain Relationships and Related Party Transactions—Directed Share Program” or any potential purchases of shares of our common stock made as part of this offering. If any shares of our common stock are purchased by our officers, directors, 5% stockholders or their affiliated entities, the number and percentage of our shares of common stock beneficially owned by them after this offering will differ from those set forth in the following table.
Beneficial ownership is determined in accordance with the rules of the SEC and generally includes voting or investment power with respect to securities. Under those rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power, and includes securities that the individual or entity has the right to acquire, such as through the exercise of stock options, within 60 days of October 31, 2020. Except as noted by footnote, and subject to community property laws where applicable, we believe, based on the information provided to us, that the persons and entities named in the table below have sole voting and investment power with respect to all common stock shown as beneficially owned by them.
The percentage of beneficial ownership prior to this offering in the table below is based on shares of common stock deemed to be outstanding as of October 31, 2020, assuming the conversion of all outstanding shares of our redeemable convertible preferred stock upon the completion of this offering into an aggregate of 23,905,267 shares of common stock upon the completion of this offering, and the percentage of beneficial ownership at this offering in the table below is based on shares of common stock assumed to be outstanding after the completion of the offering.
|
Name and Address of Beneficial Owner
|
|
|
Number of Shares
Beneficially Owned
Prior to Offering
|
|
|
Percentage of Shares
Beneficially Owned
|
|
|
|
Before Offering
|
|
|
After Offering
|
|
|
5% Stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ARCH Venture Fund VII, L.P.(1)
|
|
|
|
|
8,827,091
|
|
|
|
|
|
23.2%
|
|
|
|
|
|
%
|
|
|
|
Razor’s Edge Funds(2)
|
|
|
|
|
3,162,502
|
|
|
|
|
|
8.3%
|
|
|
|
|
|
%
|
|
|
|
SAEV Guernsey Holdings Limited(3)
|
|
|
|
|
2,043,715
|
|
|
|
|
|
5.4%
|
|
|
|
|
|
%
|
|
|
|
UTEC 2 L.P.(4)
|
|
|
|
|
1,955,160
|
|
|
|
|
|
5.1%
|
|
|
|
|
|
%
|
|
|
|
Named Executive Officers and Directors:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Christopher Brown(5)
|
|
|
|
|
2,046,801
|
|
|
|
|
|
5.4%
|
|
|
|
|
|
%
|
|
|
|
E. Kevin Hrusovsky(6)
|
|
|
|
|
743,713
|
|
|
|
|
|
2.0%
|
|
|
|
|
|
%
|
|
|
|
John Kenneweg(7)
|
|
|
|
|
365,667
|
|
|
|
|
|
1.0%
|
|
|
|
|
|
%
|
|
|
|
J. Michael Ramsey(8)
|
|
|
|
|
2,599,681
|
|
|
|
|
|
6.8%
|
|
|
|
|
|
%
|
|
|
|
Keith Crandell(9)
|
|
|
|
|
8,827,091
|
|
|
|
|
|
23.2%
|
|
|
|
|
|
%
|
|
|
|
Kevin Knopp(10)
|
|
|
|
|
2,496,150
|
|
|
|
|
|
6.6%
|
|
|
|
|
|
%
|
|
|
|
Mark Spoto(11)
|
|
|
|
|
3,162,502
|
|
|
|
|
|
8.3%
|
|
|
|
|
|
%
|
|
|
|
Nicolas Barthelemy(12)
|
|
|
|
|
119,129
|
|
|
|
|
|
*
|
|
|
|
|
|
%
|
|
|
|
Sharon Kedar(13)
|
|
|
|
|
1,589,826
|
|
|
|
|
|
4.2%
|
|
|
|
|
|
%
|
|
|
|
Name and Address of Beneficial Owner
|
|
|
Number of Shares
Beneficially Owned
Prior to Offering
|
|
|
Percentage of Shares
Beneficially Owned
|
|
|
|
Before Offering
|
|
|
After Offering
|
|
|
Executive officers and directors as a group (13 persons)(14)
|
|
|
|
|
22,957,615
|
|
|
|
|
|
60.5%
|
|
|
|
|
|
%
|
|
|
*
Indicates beneficial ownership of less than 1%.
(1)
Consists of 8,827,091 shares of common stock issuable upon the conversion of 4,763,149 shares of Series A preferred stock, 1,596,906 shares of Series B preferred stock, 1,090,120 shares of Series C preferred stock, 1,083,098 shares of Series D preferred stock and 293,818 shares of Series E preferred stock held by ARCH Venture Fund VII, L.P. (“ARCH Fund VII”). The managing directors of ARCH Fund VII are Keith L. Crandell, Clinton Bybee and Robert Nelsen, and they may be deemed to beneficially own the shares held by ARCH Fund VII. Messrs. Crandell, Bybee and Nelsen disclaim beneficial ownership of such shares, except to the extent of any pecuniary interest therein. The address of ARCH Fund VII is 8755 West Higgins Road, Suite 1025, Chicago, Illinois 60631.
(2)
Consists of (i) 2,336,710 shares of common stock issuable upon the conversion of 1,750,000 shares of Series A preferred stock and 586,710 shares of Series B preferred stock held by Razor’s Edge; (ii) 551,314 shares of common stock issuable upon the conversion of 400,514 shares of Series C preferred stock and 150,840 shares of Series D preferred stock held by RE Sidecar; and (iii) 274,438 shares of common stock issuable upon the conversion of 177,459 shares of Series D preferred stock and 96,979 shares of Series E preferred stock held by Yodabyte. The managing members of the Razor’s Edge Funds are Mark Spoto, Peggy Styer, Steven Pann, Richard Moxley and Jack Kerrigan, and they may be deemed to beneficially own the shares held by the Razor’s Edge Funds. Messrs. Spoto, Pann, Moxley and Kerrigan and Ms. Styer disclaim beneficial ownership of such shares, except to the extent of any pecuniary interest therein. The address of the Razor’s Edge Funds is 1875 Explorer Street, Suite 560, Reston, VA 20190.
(3)
Consists of 2,043,715 shares of common stock issuable upon the conversion of 1,159,420 shares of Series C preferred stock, 809,847 shares of Series D preferred stock and 74,448 shares of Series E preferred stock held by SAEV Guernsey Holdings Limited (“SAEV Guernsey”). The directors of SAEV Guernsey are Mahdi F. Aladel, Bruce D. Niven, and Salman K. Juma, and they may be deemed to beneficially own the shares held by SAEV Guernsey. Messrs. Aladel, Niven, and Juma disclaim beneficial ownership of such shares, except to the extent of any pecuniary interest therein. The registered address of SAEV Guerney is PO Box 255, Trafalgar Court, Les Bangues, St. Peter Port, Guernsey GY1 3QL.
(4)
Consists of 1,955,160 shares of common stock issuable upon the conversion of 1,250,000 shares of Series A preferred stock, 419,078 shares of Series B preferred stock and 286,082 shares of common stock issuable upon the conversion of shares of Series C preferred stock held by UTEC 2, L.P. (“UTEC L.P.”). The general partner of UTEC L.P. is The University of Tokyo Edge Capital Partners Co., Ltd. whose managing director is Tomotaka Goji, and he may be deemed to beneficially own the shares held by UTEC L.P. Mr. Tomotaka Goji disclaims beneficial ownership of such shares, except to the extent of any pecuniary interest therein. The address of UTEP L.P. is Hongo 7-3-1, Bunkyo-ku, Tokyo 113-8485, Japan.
(5)
Consists of the following: (i) 1,789,023 shares of common stock, (ii) 250,625 shares of common stock issuable upon the exercise of stock options exercisable within 60 days of October 31, 2020 and (iii) 7,153 shares of Series D preferred stock held by Dr. Brown.
(6)
Consists of the following: (i) 94,00 shares of common stock, (ii) 207,297 shares of common stock issuable upon the exercise of stock options exercisable within 60 days of October 31, 2020, (iii) 165,000 shares of Series A preferred stock and (iv) 277,416 shares of Series B preferred stock held by Mr. Hrusovsky.
(7)
Consists of the 365,667 shares of common stock issuable upon the exercise of stock options exercisable within 60 days of October 31, 2020 held by Mr. Kenneweg.
(8)
Consists of the following: (i) 2,526,243 shares of common stock, which is inclusive of shares
jointly owned with his spouse, and (ii) 73,438 shares of common stock issuable upon the exercise of stock options exercisable within 60 days of October 31, 2020 held by Dr. Ramsey.
(9)
Consists of securities held by ARCH Fund VII as set forth in footnote 1. Mr. Crandell disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein, if any.
(10)
Consists of the following: (i) 2,057,377 shares of common stock, (ii) 294,583 shares of common stock issuable upon the exercise of stock options exercisable within 60 days of October 31, 2020, (iii) 102,629 shares of Series A preferred stock, (iv) 34,408 shares of Series B preferred stock and (v) 7,153 shares of Series D preferred stock held by Dr. Knopp.
(11)
Consists of securities held by the Razor’s Edge Funds as set forth in footnote 2. Mr. Spoto disclaims beneficial ownership of such shares except to the extent of his pecuniary interest therein, if any.
(12)
Consists of 87,333 shares of common stock issuable upon the exercise of stock options exercisable within 60 days of October 31, 2020 held by Mr. Barthelemy. Also includes 31,796 shares of Series E preferred stock held by The Barthelemy 2001 Trust, of which his Nicolas and Lisa Barthelemy are trustees and have joint voting and investment power over the shares held by The Barthelemy 2001 Trust.
(13)
Consists of 1,589,826 shares of Series E preferred stock held by Northpond Ventures, LP where Ms. Kedar is a partner. Ms. Kedar disclaims beneficial ownership of such shares except to the extent of her pecuniary interest therein, if any. The address of Northpond Ventures, LP is 7500 Old Georgetown Rd, Suite 850, Bethesda, MD 20814.
(14)
See footnotes 5 through 13. Also includes the following: (i) 149,010 shares of common stock, 196,250 shares of common stock issuable upon the exercise of stock options exercisable within 60 days of October 31, 2020 and 28,986 shares of Series C preferred stock held by Mr. Griffith; (ii) 162,271 shares of common stock issuable upon the exercise of stock options exercisable within 60 days of October 31, 2020 held by Mr. McCallion; (iii) 455,435 shares of common stock issuable upon the exercise of stock options exercisable within 60 days of October 31, 2020 held by Dr. Basarsky; (iv) 10,937 shares of common stock issuable upon the exercise of stock options exercisable within 60 days of October 31, 2020 held by Ms. Fitzpatrick; and (v) 4,167 shares of common stock issuable upon the exercise of stock options exercisable within 60 days of October 31, 2020 held by Mr. Turner.
DESCRIPTION OF CAPITAL STOCK
The following descriptions are summaries of the material terms of our sixth amended and restated certificate of incorporation, which will be effective upon the completion of this offering and amended and restated by-laws, which will be effective upon the effectiveness of the registration statement of which this prospectus is a part. The descriptions of the common stock and redeemable convertible preferred stock give effect to changes to our capital structure that will occur immediately prior to the completion of this offering.
General
Upon completion of this offering, our authorized capital stock will consist of 100,000,000 shares of common stock, par value $0.001 per share, and 5,000,000 shares of preferred stock, par value $0.001 per share, all of which shares of preferred stock will be undesignated.
As of October 31, 2020, 8,149,908 shares of our common stock and 23,905,267 shares of redeemable convertible preferred stock were outstanding and held by stockholders of record. This amount does not take into account the conversion of all outstanding shares of our redeemable convertible preferred stock into common stock upon the completion of this offering.
Common Stock
The holders of our common stock are entitled to one vote for each share held on all matters submitted to a vote of the stockholders. The holders of our common stock do not have any cumulative voting rights. Holders of our common stock are entitled to receive ratably any dividends declared by our board of directors out of funds legally available for that purpose, subject to any preferential dividend rights of any outstanding redeemable convertible preferred stock. Our common stock has no preemptive rights, conversion rights or other subscription rights or redemption or sinking fund provisions.
In the event of our liquidation, dissolution or winding up, holders of our common stock will be entitled to share ratably in all assets remaining after payment of all debts and other liabilities and any liquidation preference of any outstanding redeemable convertible preferred stock. The shares to be issued by us in this offering will be, when issued and paid for, validly issued, fully paid and non-assessable.
Preferred Stock
Upon the completion of this offering, all outstanding shares of our redeemable convertible preferred stock will be converted into shares of our common stock. Upon the consummation of this offering, our board of directors will have the authority, without further action by our stockholders, to issue up to 5,000,000 shares of preferred stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof. These rights, preferences and privileges could include dividend rights, conversion rights, voting rights, terms of redemption, liquidation preferences, sinking fund terms and the number of shares constituting, or the designation of, such series, any or all of which may be greater than the rights of common stock. The issuance of our preferred stock could adversely affect the voting power of holders of common stock and the likelihood that such holders will receive dividend payments and payments upon our liquidation. In addition, the issuance of preferred stock could have the effect of delaying, deferring or preventing a change in control of our company or other corporate action. Immediately after consummation of this offering, no shares of preferred stock will be outstanding, and we have no present plan to issue any shares of preferred stock.
Stock Options
As of October 31, 2020, options to purchase 5,311,085 shares of our common stock were outstanding under our 2012 Stock Option and Incentive Plan, or 2012 Plan, of which were exercisable as of that date.
Registration Rights
Upon the completion of this offering, the holders of shares of our common stock, including those issuable upon the conversion of redeemable convertible preferred stock, which shares we refer to as “registrable securities,” will be entitled to rights with respect to the registration of these registrable
securities under the Securities Act. These rights are provided under the terms of an investors’ rights agreement between us and holders of our redeemable convertible preferred stock. The fourth amended and restated registration rights agreement includes demand registration rights, short-form registration rights and piggyback registration rights. All fees, costs and expenses of underwritten registrations under this agreement will be borne by us and all selling expenses, including underwriting discounts and selling commissions, will be borne by the holders of the shares being registered.
Demand Registration Rights
Beginning 180 days after the effective date of this registration statement, the holders of registrable securities are entitled to demand registration rights under certain conditions. Under the terms of the fourth amended and restated registration rights agreement, we will be required, upon the written request of holders of a majority of these registrable securities to file a registration statement and use best efforts to effect the registration of all or a portion of these registrable securities for public resale. We are required to effect only two registrations pursuant to this provision of the investors’ rights agreement.
Short-form Registration Rights
Pursuant to the fourth amended and restated registration rights agreement, if we are eligible to file a registration statement on Form S-3, upon the written request of holders of these registrable securities that would result in an aggregate offering price of at least $500,000, we will be required to effect a registration of such registrable securities. We are required to effect only two registrations in any twelve month period pursuant to this provision of the investors’ rights agreement. The right to have such shares registered on Form S-3 is further subject to other specified conditions and limitations.
Piggyback Registration Rights
Pursuant to the investors’ rights agreement, if we register any of our securities either for our own account or for the account of other security holders, subject to certain exceptions, the holders of these shares are entitled to include their shares in the registration. Subject to certain exceptions contained in the investors’ rights agreement, we and the underwriters may limit the number of shares included in the underwritten offering to the number of shares which we and the underwriters determine in our sole discretion will not jeopardize the success of the offering.
Indemnification
Our fourth amended and restated registration rights agreement contains customary cross-indemnification provisions, under which we are obligated to indemnify holders of registrable securities in the event of material misstatements or omissions in the registration statement attributable to us, and they are obligated to indemnify us for material misstatements or omissions attributable to them.
Expiration of Registration Rights
The demand registration rights and short form registration rights granted to any holder of registrable securities under the investors’ rights agreement will terminate upon the earliest to occur of (i) a deemed liquidation event (as defined in our certificate of incorporation), (ii) the fifth anniversary of the completion of this offering or (iii) such time after this offering when the holders’ shares may be sold without restriction pursuant to Rule 144 within a three month period.
Anti-Takeover Effects of our Sixth Amended and Restated Certificate of Incorporation and Amended and Restated By-Laws and Delaware Law
Our sixth amended and restated certificate of incorporation and amended and restated by-laws include a number of provisions that may have the effect of delaying, deferring or preventing another party from acquiring control of us and encouraging persons considering unsolicited tender offers or other unilateral takeover proposals to negotiate with our board of directors rather than pursue non-negotiated takeover attempts. These provisions include the items described below.
Board Composition and Filling Vacancies
Our sixth amended and restated certificate of incorporation provides for the division of our board of directors into three classes serving staggered three-year terms, with one class being elected each year. Our sixth amended and restated certificate of incorporation also provides that directors may be removed only for cause and then only by the affirmative vote of the holders of two-thirds or more of the shares then entitled to vote at an election of directors. Furthermore, any vacancy on our board of directors, however occurring, including a vacancy resulting from an increase in the size of our board,
may only be filled by the affirmative vote of a majority of our directors then in office even if less than a quorum. The classification of directors, together with the limitations on removal of directors and treatment of vacancies, has the effect of making it more difficult for stockholders to change the composition of our board of directors.
No Written Consent of Stockholders
Our sixth amended and restated certificate of incorporation provides that all stockholder actions are required to be taken by a vote of the stockholders at an annual or special meeting, and that stockholders may not take any action by written consent in lieu of a meeting. This limit may lengthen the amount of time required to take stockholder actions and would prevent the amendment of our amended and restated by-laws or removal of directors by our stockholders without holding a meeting of stockholders.
Meetings of Stockholders
Our sixth amended and restated certificate of incorporation and amended and restated by-laws provide that only a majority of the members of our board of directors then in office may call special meetings of stockholders and only those matters set forth in the notice of the special meeting may be considered or acted upon at a special meeting of stockholders. Our amended and restated by-laws limit the business that may be conducted at an annual meeting of stockholders to those matters properly brought before the meeting.
Advance Notice Requirements
Our amended and restated by-laws establish advance notice procedures with regard to stockholder proposals relating to the nomination of candidates for election as directors or new business to be brought before meetings of our stockholders. These procedures provide that notice of stockholder proposals must be timely given in writing to our corporate secretary prior to the meeting at which the action is to be taken. Generally, to be timely, notice must be received at our principal executive offices not less than 90 days nor more than 120 days prior to the first anniversary date of the annual meeting for the preceding year. Our by-laws specify the requirements as to form and content of all stockholders’ notices. These requirements may preclude stockholders from bringing matters before the stockholders at an annual or special meeting.
Amendment to our Sixth Amended and Restated certificate of incorporation and Amended and Restated By-Laws
Any amendment of our sixth amended and restated certificate of incorporation must first be approved by a majority of our board of directors, and if required by law or our sixth amended and restated certificate of incorporation, must thereafter be approved by a majority of the outstanding shares entitled to vote on the amendment and a majority of the outstanding shares of each class entitled to vote thereon as a class, except that the amendment of the provisions relating to stockholder action, board composition, limitation of liability and the amendment of our by-laws and certificate of incorporation must be approved by not less than two-thirds of the outstanding shares entitled to vote on the amendment, and not less than two-thirds of the outstanding shares of each class entitled to vote thereon as a class. Our amended and restated by-laws may be amended by the affirmative vote of a majority of the directors then in office, subject to any limitations set forth in the amended and restated by-laws, and may also be amended by the affirmative vote of at least two-thirds of the outstanding shares entitled to vote on the amendment, or, if our board of directors recommends that the stockholders approve the amendment, by the affirmative vote of the majority of the outstanding shares entitled to vote on the amendment, in each case voting together as a single class.
Undesignated Preferred Stock
Our sixth amended and restated certificate of incorporation provides for 5,000,000 authorized shares of preferred stock. The existence of authorized but unissued shares of preferred stock may enable our board of directors to discourage an attempt to obtain control of us by means of a merger, tender offer, proxy contest or otherwise. For example, if in the due exercise of its fiduciary obligations, our board of directors were to determine that a takeover proposal is not in the best interests of our stockholders, our board of directors could cause shares of preferred stock to be issued without stockholder approval in one or more private offerings or other transactions that might dilute the voting or other rights of the proposed acquirer or insurgent stockholder or stockholder group. In this regard, our
sixth amended and restated certificate of incorporation grants our board of directors broad power to establish the rights and preferences of authorized and unissued shares of preferred stock. The issuance of shares of preferred stock could decrease the amount of earnings and assets available for distribution to holders of shares of common stock. The issuance may also adversely affect the rights and powers, including voting rights, of these holders and may have the effect of delaying, deterring or preventing a change in control of us.
Choice of Forum
Our amended and restated by-laws that will become effective upon the closing of this offering will provide that, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for: (1) any derivative action or proceeding brought on our behalf; (2) any action asserting a claim of breach of a fiduciary duty or other wrongdoing by any of our directors, officers, employees or agents to us or our stockholders; (3) any action asserting a claim against us arising pursuant to any provision of the General Corporation Law of the State of Delaware or our certificate of incorporation or by-laws; (4) any action to interpret, apply, enforce or determine the validity of our certificate of incorporation or by-laws; or (5) any action asserting a claim governed by the internal affairs doctrine; provided, however, that the this provision shall not apply to any causes of action arising under the Securities Act or Exchange Act.
In addition, our amended and restated by-laws that will become effective upon the closing of this offering will contain a provision by virtue of which, unless we consent in writing to the selection of an alternative forum, the United States District Court for the District of Massachusetts will be the exclusive forum for any private action asserting violations by us or any of our directors or officers of the Securities Act, or the rules and regulations promulgated thereunder, and of all suits in equity and actions at law brought to enforce any liability or duty created by those statutes or the rules and regulations under such statutes. If any action the subject matter of which is within the scope of the preceding sentence is filed in a court other than the United States District Court for the District of Massachusetts, the plaintiff or plaintiffs shall be deemed by this provision of our amended and restated by-laws (i) to have consented to removal of the action by us to the United States District Court for the District of Massachusetts, in the case of an action filed in a state court, and (ii) to have consented to transfer of the action to the United States District Court for the District of Massachusetts.
Our amended and restated by-laws will also provide that any person or entity purchasing or otherwise acquiring any interest in shares of our capital stock will be deemed to have notice of and to have consented to this choice of forum provision. It is possible that a court of law could rule that the choice of forum provisions contained in our amended and restated by-laws are inapplicable or unenforceable if they are challenged in a proceeding or otherwise. The enforceability of similar choice of forum provisions in other companies’ certificates of incorporation and by-laws has been challenged in legal proceedings.
These forum provisions may impose additional costs on stockholders, may limit our stockholders’ ability to bring a claim in a forum they find favorable, and the designated courts may reach different judgments or results than other courts. In addition, there is uncertainty as to whether the federal forum provision for Securities Act claims will be enforced, which may impose additional costs on us and our stockholders.
Section 203 of the Delaware General Corporation Law
Upon completion of this offering, we will be subject to the provisions of Section 203 of the Delaware General Corporation Law. In general, Section 203 prohibits a publicly held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a three-year period following the time that this stockholder becomes an interested stockholder, unless the business combination is approved in a prescribed manner. Under Section 203, a business combination between a corporation and an interested stockholder is prohibited unless it satisfies one of the following conditions:
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before the stockholder became interested, our board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder;
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upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced, excluding for purposes of determining the voting stock outstanding, shares owned by persons who are directors and also officers, and employee stock plans, in some instances, but not the outstanding voting stock owned by the interested stockholder; or
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at or after the time the stockholder became interested, the business combination was approved by our board of directors and authorized at an annual or special meeting of the stockholders by the affirmative vote of at least two-thirds of the outstanding voting stock which is not owned by the interested stockholder.
Section 203 defines a business combination to include:
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any merger or consolidation involving the corporation and the interested stockholder;
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any sale, transfer, lease, pledge or other disposition involving the interested stockholder of 10% or more of the assets of the corporation;
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subject to exceptions, any transaction that results in the issuance or transfer by the corporation of any stock of the corporation to the interested stockholder;
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subject to exceptions, any transaction involving the corporation that has the effect of increasing the proportionate share of the stock of any class or series of the corporation beneficially owned by the interested stockholder; and
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the receipt by the interested stockholder of the benefit of any loans, advances, guarantees, pledges or other financial benefits provided by or through the corporation.
In general, Section 203 defines an interested stockholder as any entity or person beneficially owning 15% or more of the outstanding voting stock of the corporation and any entity or person affiliated with or controlling or controlled by the entity or person.
Nasdaq Global Market Listing
We intend to apply to list our common stock on the Nasdaq Global Market under the trading symbol “MASS.”
Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be . The transfer agent and registrar’s address is , and its telephone number is .
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there has been no public market for our shares. Future sales of our common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability to raise equity capital in the future.
Based on the number of shares outstanding as of October 31, 2020, upon the completion of this offering, shares of our common stock will be outstanding. Of the outstanding shares, all of the shares sold in this offering will be freely tradable, except that any shares held by our affiliates, as that term is defined in Rule 144 under the Securities Act, may only be sold in compliance with the limitations described below. All remaining shares of common stock held by existing stockholders immediately prior to the completion of this offering will be “restricted securities” as such term is defined in Rule 144. These restricted securities were issued and sold by us, or will be issued and sold by us, in private transactions and are eligible for public sale only if registered under the Securities Act or if they qualify for an exemption from registration under the Securities Act, including the exemptions provided by Rule 144 or Rule 701, summarized below.
Rule 144
In general, a person who has beneficially owned restricted stock for at least six months would be entitled to sell their securities provided that (i) such person is not deemed to have been one of our affiliates at the time of, or at any time during the 90 days preceding, a sale and (ii) we are subject to the Securities Exchange Act of 1934, as amended, or the Exchange Act, periodic reporting requirements for at least 90 days before the sale. Persons who have beneficially owned restricted shares for at least six months but who are our affiliates at the time of, or any time during the 90 days preceding, a sale, would be subject to additional restrictions, by which such person would be entitled to sell within any three-month period only a number of securities that does not exceed the greater of either of the following:
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1% of the number of shares then outstanding, which will equal approximately shares immediately after this offering, assuming no exercise of the underwriters’ option to purchase additional shares, based on the number of shares outstanding as of , 2020; or
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the average weekly trading volume of our common stock on the Nasdaq Global Market during the four calendar weeks preceding the filing of a notice on Form 144 with respect to the sale;
provided, in each case, that we are subject to the Exchange Act periodic reporting requirements for at least 90 days before the sale. Such sales by affiliates must also comply with the manner of sale, current public information and notice provisions of Rule 144.
Any person who is not an affiliate of ours at the time of, or at any time during the three months preceding, a sale and has held restricted securities for at least one year will be entitled to sell an unlimited number of restricted securities without regard to the length of time we have been subject to Exchange Act periodic reporting or whether we are current in our Exchange Act reporting.
Rule 701
Rule 701 under the Securities Act, as in effect on the date of this prospectus, permits resales of shares in reliance upon Rule 144 but without compliance with certain restrictions of Rule 144, including the holding period requirement. Most of our employees, executive officers or directors who purchased shares under a written compensatory plan or contract may be entitled to rely on the resale provisions of Rule 701, but all holders of Rule 701 shares are required to wait until 90 days after the date of this prospectus before selling their shares.
However, substantially all Rule 701 shares are subject to lock-up agreements as described below and under “Underwriting” included elsewhere in this prospectus and will become eligible for sale upon the expiration of the restrictions set forth in those agreements.
Lock-up Agreements
We, our directors and executive officers and holders of substantially all of our common stock have signed a lock-up agreement that prevent us and them from selling any of our common stock or any securities convertible into or exercisable or exchangeable for common stock for a period of not less than 180 days from the date of this prospectus without the prior written consent of the Cowen & Company, LLC and SVB Leerink LLC, subject to certain exceptions. See the section entitled “Underwriting” appearing elsewhere in this prospectus for more information.
Registration Rights
Upon completion of this offering, certain holders of our securities will be entitled to various rights with respect to registration of their shares under the Securities Act. Registration of these shares under the Securities Act would result in these shares becoming fully tradable without restriction under the Securities Act immediately upon the effectiveness of the registration. See the section entitled “Description of Capital Stock—Registration Rights” appearing elsewhere in this prospectus for more information.
Equity Incentive Plans
We intend to file one or more registration statements on Form S-8 under the Securities Act to register our shares issued or reserved for issuance under our equity incentive plans. The first such registration statement is expected to be filed soon after the date of this prospectus and will automatically become effective upon filing with the SEC. Accordingly, shares registered under such registration statement will be available for sale in the open market, unless such shares are subject to vesting restrictions with us or the lock-up restrictions described above. As of , 2020, we estimate that such registration statement on Form S-8 will cover approximately shares.
MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
The following discussion is a summary of the material U.S. federal income tax considerations applicable to non-U.S. holders (as defined below) with respect to their ownership and disposition of shares of our common stock issued pursuant to this offering. For purposes of this discussion, a non-U.S. holder means a beneficial owner of our common stock that is for U.S. federal income tax purposes:
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a non-resident alien individual;
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a foreign corporation or any other foreign organization taxable as a corporation for U.S. federal income tax purposes; or
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a foreign estate or trust, the income of which is not subject to U.S. federal income tax on a net income basis.
This discussion does not address the tax treatment of partnerships or other entities that are pass-through entities for U.S. federal income tax purposes or persons that hold their common stock through partnerships or other pass-through entities. A partner in a partnership or other pass-through entity that will hold our common stock should consult his, her or its tax advisor regarding the tax consequences of acquiring, holding and disposing of our common stock through a partnership or other pass-through entity, as applicable.
This discussion is based on current provisions of the U.S. Internal Revenue Code of 1986, as amended, or the Code, existing and proposed U.S. Treasury Regulations promulgated thereunder, current administrative rulings and judicial decisions, all as in effect as of the date of this prospectus and, all of which are subject to change or to differing interpretation, possibly with retroactive effect. Any such change or differing interpretation could alter the tax consequences to non-U.S. holders described in this prospectus. There can be no assurance that the Internal Revenue Service, which we refer to as the IRS, will not challenge one or more of the tax consequences described herein. We assume in this discussion that a non-U.S. holder holds shares of our common stock as a capital asset within the meaning of Section 1221 of the Code, which is generally property held for investment.
This discussion does not address all aspects of U.S. federal income taxation that may be relevant to a particular non-U.S. holder in light of that non-U.S. holder’s individual circumstances nor does it address any aspects of any U.S. federal tax other than the income tax, U.S. state, local or non-U.S. taxes, include the alternative minimum tax, or the Medicare tax on net investment income. This discussion also does not consider any specific facts or circumstances that may apply to a non-U.S. holder and does not address the special tax rules applicable to particular non-U.S. holders, such as:
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insurance companies;
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tax-exempt or governmental organizations;
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financial institutions;
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brokers or dealers in securities;
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regulated investment companies;
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pension plans;
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“controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;
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“qualified foreign pension funds,” or entities wholly owned by a “qualified foreign pension fund”;
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partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and partners and investors therein);
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persons deemed to sell our common stock under the constructive sale provisions of the Code;
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persons that hold our common stock as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment;
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persons who have elected to mark securities to market;
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persons who have a functional currency other than the U.S. dollar;
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persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation;
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persons for whom our stock constitutes “qualified small business stock” within the meaning of Section 1202 of the Code;
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certain U.S. expatriates; and
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persons subject to special tax accounting rules as a result of any item of gross income with respect to the common stock being taken into account in an applicable financial statement under Section 451(b) of the Code.
This discussion is for general information only and is not tax advice. Accordingly, all prospective non-U.S. holders of our common stock should consult their tax advisors with respect to the U.S. federal, state, local and non-U.S. tax consequences of the purchase, ownership and disposition of our common stock.
Distributions on our Common Stock
Distributions, if any, on our common stock will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. If a distribution exceeds our current and accumulated earnings and profits, the excess will be treated as a tax-free return of the non-U.S. holder’s investment, up to such holder’s tax basis in the common stock. Any remaining excess will be treated as capital gain, subject to the tax treatment described below in “Gain on Sale or Other Taxable Disposition of Our Common Stock.” Any such distributions will also be subject to the discussions below under the sections titled “Backup Withholding and Information Reporting” and “Withholding and Information Reporting Requirements—FATCA.”
Subject to the discussion in the following two paragraphs in this section, dividends paid to a non-U.S. holder generally will be subject to withholding of U.S. federal income tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence. If we or another withholding agent apply over-withholding or if a non-U.S. holder does not timely provide us with the required certification, the non-U.S. holder may be entitled to a refund or credit of any excess tax withheld by timely filing an appropriate claim with the IRS.
Dividends that are treated as effectively connected with a trade or business conducted by a non-U.S. holder within the United States and, if an applicable income tax treaty so provides, that are attributable to a permanent establishment or a fixed base maintained by the non-U.S. holder within the United States, are generally exempt from the 30% withholding tax if the non-U.S. holder satisfies applicable certification and disclosure requirements. However, such U.S. effectively connected income, net of specified deductions and credits, is taxed at the same graduated U.S. federal income tax rates applicable to United States persons (as defined in the Code). Any U.S. effectively connected income received by a non-U.S. holder that is a corporation may also, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence.
A non-U.S. holder of our common stock who claims the benefit of an applicable income tax treaty between the United States and such holder’s country of residence generally will be required to provide a properly executed IRS Form W-8BEN or W-8BEN-E (or successor form) to the applicable withholding agent and satisfy applicable certification and other requirements. Non-U.S. holders are urged to consult their tax advisors regarding their entitlement to benefits under a relevant income tax treaty. A non-U.S. holder that is eligible for a reduced rate of U.S. withholding tax under an income tax treaty may obtain a refund or credit of any excess amounts withheld by timely filing a U.S. tax return with the IRS.
Gain on Sale or Other Taxable Disposition of our Common Stock
Subject to the discussions below under “Backup Withholding and Information Reporting” and “Withholding and Information Reporting Requirements—FATCA,” a non-U.S. holder generally will not be subject to any U.S. federal income tax on any gain realized upon such holder’s sale or other taxable disposition of shares of our common stock unless:
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the gain is effectively connected with the non-U.S. holder’s conduct of a U.S. trade or business and, if an applicable income tax treaty so provides, is attributable to a permanent
establishment or a fixed-base maintained by such non-U.S. holder in the United States, in which case the non-U.S. holder generally will be taxed on a net income basis at the graduated U.S. federal income tax rates applicable to United States persons (as defined in the Code) and, if the non-U.S. holder is a foreign corporation, the branch profits tax described above in “Distributions on Our Common Stock” also may apply;
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the non-U.S. holder is a nonresident alien individual who is present in the United States for a period or periods aggregate 183 days or more in the taxable year of the disposition and certain other conditions are met, in which case the non-U.S. holder will be subject to a 30% tax (or such lower rate as may be specified by an applicable income tax treaty between the United States and such holder’s country of residence) on the net gain derived from the disposition, which may be offset by certain U.S. source capital losses of the non-U.S. holder, if any (even though the individual is not considered a resident of the United States), provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses; or
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we are, or have been, at any time during the five-year period preceding such sale or other taxable disposition (or the non-U.S. holder’s holding period, if shorter) a “U.S. real property holding corporation,” unless our common stock is regularly traded on an established securities market and the non-U.S. holder holds no more than 5% of our outstanding common stock, directly or indirectly, actually or constructively, during the shorter of the 5-year period ending on the date of the disposition or the period that the non-U.S. holder held our common stock. Generally, a corporation is a U.S. real property holding corporation only if the fair market value of its U.S. real property interests equals or exceeds 50% of the sum of the fair market value of its worldwide real property interests plus its other assets used or held for use in a trade or business. Although there can be no assurance, we do not believe that we are, or have been, a U.S. real property holding corporation, or that we are likely to become one in the future. No assurance can be provided that our common stock will be regularly traded on an established securities market for purposes of the rules described above.
Backup Withholding and Information Reporting
We must report annually to the IRS and to each non-U.S. holder the gross amount of the distributions on our common stock paid to such holder and the tax withheld, if any, with respect to such distributions. Non-U.S. holders may have to comply with specific certification procedures to establish that the holder is not a United States person (as defined in the Code) in order to avoid backup withholding at the applicable rate with respect to dividends on our common stock. Dividends paid to non-U.S. holders subject to withholding of U.S. federal income tax, as described above in “Distributions on Our Common Stock,” generally will be exempt from U.S. backup withholding.
Information reporting and backup withholding will generally apply to the proceeds of a disposition of our common stock by a non-U.S. holder effected by or through the U.S. office of any broker, U.S. or foreign, unless the holder certifies its status as a non-U.S. holder and satisfies certain other requirements, or otherwise establishes an exemption. Generally, information reporting and backup withholding will not apply to a payment of disposition proceeds to a non-U.S. holder where the transaction is effected outside the United States through a non-U.S. office of a broker. However, for information reporting purposes, dispositions effected through a non-U.S. office of a broker with substantial U.S. ownership or operations generally will be treated in a manner similar to dispositions effected through a U.S. office of a broker. Non-U.S. holders should consult their tax advisors regarding the application of the information reporting and backup withholding rules to them. Copies of information returns may be made available to the tax authorities of the country in which the non-U.S. holder resides or is incorporated under the provisions of a specific treaty or agreement. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules from a payment to a non-U.S. holder can be refunded or credited against the non-U.S. holder’s U.S. federal income tax liability, if any, provided that an appropriate claim is filed with the IRS in a timely manner.
Withholding and Information Reporting Requirements—FATCA
The Foreign Account Tax Compliance Act, or FATCA, generally imposes a U.S. federal withholding tax at a rate of 30% on payments of dividends on our common stock paid to a foreign entity unless (i) if
the foreign entity is a “foreign financial institution,” such foreign entity undertakes certain due diligence, reporting, withholding, and certification obligations, (ii) if the foreign entity is not a “foreign financial institution,” such foreign entity identifies certain of its U.S. investors, if any, or (iii) the foreign entity is otherwise exempt under FATCA. Under applicable U.S. Treasury regulations, withholding under FATCA currently applies to payments of dividends on our common stock. Currently proposed U.S. Treasury Regulations provide that FATCA withholding does not apply to gross proceeds from the disposition of property of a type that can produce U.S. source dividends or interest; however, prior versions of the rules would have made such gross proceeds subject to FATCA withholding. Taxpayers (including withholding agents) can generally rely on the proposed Treasury Regulations until final Treasury Regulations are issued. Under certain circumstances, a non-U.S. holder may be eligible for refunds or credits of this withholding tax. An intergovernmental agreement between the United States and an applicable foreign country may modify the requirements described in this paragraph. Non-U.S. holders should consult their tax advisors regarding the possible implications of this legislation on their investment in our common stock and the entities through which they hold our common stock, including, without limitation, the process and deadlines for meeting the applicable requirements to prevent the imposition of the 30% withholding tax under FATCA.
UNDERWRITING
We and the underwriters for the offering named below have entered into an underwriting agreement with respect to the common stock being offered. Subject to the terms and conditions of the underwriting agreement, each underwriter has severally agreed to purchase from us the number of shares of our common stock set forth opposite its name below. Cowen and Company, LLC and SVB Leerink LLC are the representatives of the underwriters.
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Underwriter
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Number of
Shares
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Cowen and Company, LLC
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SVB Leerink LLC
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Stifel, Nicolaus & Company, Incorporated
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William Blair & Company, L.L.C.
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Total
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The underwriting agreement provides that the obligations of the underwriters are subject to certain conditions precedent and that the underwriters have agreed, severally and not jointly, to purchase all of the shares sold under the underwriting agreement if any of these shares are purchased, other than those shares covered by the option to purchase additional shares described below. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.
We have agreed to indemnify the underwriters against specified liabilities, including liabilities under the Securities Act of 1933, and to contribute to payments the underwriters may be required to make in respect thereof.
The underwriters are offering the shares, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters by their counsel and other conditions specified in the underwriting agreement. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject orders in whole or in part.
Option to Purchase Additional Shares. We have granted to the underwriters an option to purchase up to additional shares of common stock at the public offering price, less the underwriting discounts and commissions. This option is exercisable for a period of 30 days. To the extent that the underwriters exercise this option, the underwriters will purchase additional shares from us in approximately the same proportion as shown in the table above.
Discounts and Commissions. The following table shows the public offering price, underwriting discounts and commissions and proceeds, before expenses to us. These amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase additional shares.
We estimate that the total expenses of the offering, excluding underwriting discounts and commissions, will be approximately $ and are payable by us. We have agreed to reimburse the underwriters for up to $ for their FINRA counsel fee. In accordance with FINRA Rule 5110, this reimbursed fee is deemed underwriting compensation for this offering.
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Total
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Per Share
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Without Option
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With Option
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Public offering price
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Underwriting discounts and commissions
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Proceeds, before expenses, to Company
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The underwriters propose to offer the shares of common stock to the public at the public offering price set forth on the cover of this prospectus. The underwriters may offer the shares of common stock
to securities dealers at the public offering price less a concession not in excess of $ per share. If all of the shares are not sold at the public offering price, the underwriters may change the offering price and other selling terms.
Discretionary Accounts. The underwriters do not intend to confirm sales of the shares to any accounts over which they have discretionary authority.
Market Information. Prior to this offering, there has been no public market for shares of our common stock. The initial public offering price will be determined by negotiations between us and the representatives of the underwriters. In addition to prevailing market conditions, the factors to be considered in these negotiations will include:
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the history of, and prospects for, our company and the industry in which we compete;
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our past and present financial information;
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an assessment of our management; its past and present operations, and the prospects for, and timing of, our future revenue;
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the present state of our development;
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the above factors in relation to market values and various valuation measures of other companies engaged in activities similar to ours.
An active trading market for the shares may not develop. It is also possible that after the offering the shares will not trade in the public market at or above the initial public offering price.
We intend to apply to have our common stock listed on the Nasdaq Global Market under the symbol “MASS“.
Stabilization. In connection with this offering, the underwriters may engage in stabilizing transactions, overallotment transactions, syndicate covering transactions, penalty bids and purchases to cover positions created by short sales.
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Stabilizing transactions permit bids to purchase shares of common stock so long as the stabilizing bids do not exceed a specified maximum, and are engaged in for the purpose of preventing or retarding a decline in the market price of the common stock while the offering is in progress.
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Overallotment transactions involve sales by the underwriters of shares of common stock in excess of the number of shares the underwriters are obligated to purchase. This creates a syndicate short position which may be either a covered short position or a naked short position. In a covered short position, the number of shares over-allotted by the underwriters is not greater than the number of shares that they may purchase in the option to purchase additional shares. In a naked short position, the number of shares involved is greater than the number of shares in the option to purchase additional shares. The underwriters may close out any short position by exercising their option to purchase additional shares and/or purchasing shares in the open market.
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Syndicate covering transactions involve purchases of common stock in the open market after the distribution has been completed in order to cover syndicate short positions. In determining the source of shares to close out the short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared with the price at which they may purchase shares through exercise of the option to purchase additional shares. If the underwriters sell more shares than could be covered by exercise of the option to purchase additional shares and, therefore, have a naked short position, the position can be closed out only by buying shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that after pricing there could be downward pressure on the price of the shares in the open market that could adversely affect investors who purchase in the offering.
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Penalty bids permit the representatives to reclaim a selling concession from a syndicate member when the common stock originally sold by that syndicate member is purchased in stabilizing or syndicate covering transactions to cover syndicate short positions.
These stabilizing transactions, syndicate covering transactions and penalty bids may have the effect of raising or maintaining the market price of our common stock or preventing or retarding a decline in the market price of our common stock. As a result, the price of our common stock in the open market may be higher than it would otherwise be in the absence of these transactions. Neither we nor the underwriters make any representation or prediction as to the effect that the transactions described above may have on the price of our common stock. These transactions may be effected on the Nasdaq Global Market, in the over-the-counter market or otherwise and, if commenced, may be discontinued at any time.
Lock-Up Agreements. Pursuant to certain “lock-up” agreements, we and our executive officers, directors and substantially all of our other stockholders, have agreed, subject to certain exceptions, not to and will not cause or direct any of its affiliates to offer, sell, assign, transfer, pledge, contract to sell, or otherwise dispose of or announce the intention to otherwise dispose of, or enter into, or announce the intention to enter into any swap, hedge or similar agreement or arrangement (including, without limitation, the purchase or sale of, or entry into, any put or call option, or combination thereof, forward, swap or any other derivative transaction or instrument, however described or defined) that transfers, is designed to transfer or reasonably could be expected to transfer (whether by the stockholder or someone other than the stockholder) that transfers, in whole or in part, directly or indirectly the economic consequence of ownership of, directly or indirectly, or make any demand or request or exercise any right with respect to the registration of, or file with the SEC a registration statement under the Securities Act relating to, any common stock or securities convertible into or exchangeable or exercisable for any common stock without the prior written consent of Cowen and Company, LLC and SVB Leerink LLC, for a period of 180 days after the date of the pricing of the offering.
This lock-up provision applies to common stock and to securities convertible into or exchangeable or exercisable for common stock. It also applies to common stock owned now or acquired later by the person executing the agreement or for which the person executing the agreement later acquires the power of disposition. The exceptions permit us, among other things and subject to restrictions, to: (a) issue common stock or options pursuant to employee benefit plans, (b) issue common stock upon exercise of outstanding options or warrants (c) issue securities in connection with acquisitions or similar transactions, or (d) file registration statements on Form S-8. The exceptions permit parties to the “lock-up” agreements, among other things and subject to restrictions, to: (a) convert outstanding convertible preferred stock into common stock in connection with the consummation of the offering, (b) if the party is a natural person, (i) make certain gifts or transfers to a trust for the benefit of such party’s family members, (ii) make transfers by will or intestate succession, and (iii) make transfers pursuant to a court or regulatory agency order or qualified domestic order or in connection with a divorce settlement, (c) if the party is a corporation, partnership, limited liability company or other business entity, make transfers to any stockholders, partners, members of, or owners of similar equity interests in, the party, or to an affiliate of the party, if such transfer is not for value, (d) if the party is a corporation, partnership, limited liability company or other business entity, make transfers (i) in connection with the sale or transfer of all of the party’s capital stock, partnership interests, membership interests or other similar equity interests, as the case may be, or all or substantially all of the party’s assets, in any such case not undertaken for the purpose of avoiding the restrictions imposed by the “lock-up” agreement or (ii) to such party’s affiliates, (e) make transfers pursuant to a tender offer, merger, consolidation or other similar transaction made to all holders of our securities involving a change of control, provided that in the event that the tender offer, merger, consolidation or other such transaction is not completed, any common stock or securities convertible into or exercisable or exchangeable for common stock held shall remain subject to the restrictions on transfer set for in the lock-up agreement, (f) participate in any transactions relating to common stock or other securities convertible into or exercisable or exchangeable for common stock acquired in this offering or in open market transactions after completion of the offering, provided that no such transaction is required to be, or is, publicly announced (whether Form 4, Form 5 or otherwise) during the lock-up period, (h) enter into any trading plan providing for the sale of common stock, which meets the requirements of Rule 10b5-1(c) under the Securities Exchange Act of 1934, provided that such plan does not provide for, or permit, the sale of any common stock during the lock-up period and no public announcement or filing is voluntarily made or required regarding such plan during the lock-up period, and (i) make transfers to us to satisfy tax withholding obligations pursuant to our equity incentive plans or arrangements disclosed in the prospectus.
Cowen and Company, LLC and SVB Leerink LLC, in their sole discretion, may release our common stock and other securities subject to the lock-up agreements described above in whole or in part at any time. When determining whether or not to release our common stock and other securities from lock-up agreements, Cowen and Company, LLC and SVB Leerink LLC will consider, among other factors, the holder’s reasons for requesting the release, the number of shares for which the release is being requested and market conditions at the time of the request. In the event of such a release or waiver for one of our directors or officers, Cowen and Company, LLC and SVB Leerink LLC shall provide us with notice of the impending release or waiver at least three business days before the effective date of such release or waiver and we will announce the impending release or waiver by issuing a press release at least two business days before the effective date of the release or waiver.
Directed Share Program. At our request, the underwriters have reserved up to shares of our common stock for sale, at the initial public offering price, through a directed share program to our directors, officers, employees, business associates and other persons with whom we have a relationship. The sales will be made by Empire Asset Management Co. as the directed share program administrator. There can be no assurance that any of the reserved shares will be so purchased. The number of shares available for sale to the general public in the offering will be reduced to the extent the reserved shares are purchased in the directed share program. Any reserved shares of common stock not purchased through the directed share program will be offered to the general public on the same basis as the other common stock offered hereby.
Selling Restrictions
Canada. The common stock may be sold only to purchasers purchasing, or deemed to be purchasing, as principal that are accredited investors, as defined in National Instrument 45-106 Prospectus Exemptions or subsection 73.3(1) of the Securities Act (Ontario), and are permitted clients, as defined in National Instrument 31-103 Registration Requirements, Exemptions and Ongoing Registrant Obligations. Any resale of the common stock must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies for rescission or damages if this prospectus (including any amendment thereto) contains a misrepresentation, provided that the remedies for rescission or damages are exercised by the purchaser within the time limit prescribed by the securities legislation of the purchaser’s province or territory. The purchaser should refer to any applicable provisions of the securities legislation of the purchaser’s province or territory for particulars of these rights or consult with a legal advisor.
Pursuant to section 3A.3 of National Instrument 33-105 Underwriting Conflicts (NI 33-105), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering. The securities will not be offered, directly or indirectly, to the public in Switzerland and this prospectus does not constitute a public offering prospectus as that term is understood pursuant to article 652a or 1156 of the Swiss Federal Code of Obligations.
European Economic Area and the United Kingdom. In relation to each Member State of the European Economic Area and the United Kingdom (each, a “Member State”), no shares have been offered or will be offered pursuant to the offering to the public in that Member State prior to the publication of a prospectus in relation to the shares which has been approved by the competent authority in that Member State or, where appropriate, approved in another Member State and notified to the competent authority in that Member State, all in accordance with the Prospectus Regulation, except that offers of shares may be made to the public in that Member State at any time under the following exemptions under the Prospectus Regulation:
A.
to any legal entity which is a qualified investor as defined under the Prospectus Regulation;
B.
to fewer than 150 natural or legal persons (other than qualified investors as defined under the Prospectus Regulation), subject to obtaining the prior consent of the underwriters; or
C.
in any other circumstances falling within Article 1(4) of the Prospectus Regulation,
provided that no such offer of shares shall require the Company or any underwriter to publish a prospectus pursuant to Article 3 of the Prospectus Regulation or supplement a prospectus pursuant to Article 23 of the Prospectus Regulation and each person who initially acquires any shares or to whom any offer is made will be deemed to have represented, acknowledged and agreed to and with each of the underwriters and the Company that it is a “qualified investor” within the meaning of Article 2(e) of the Prospectus Regulation.
In the case of any shares being offered to a financial intermediary as that term is used in Prospectus Regulation, each such financial intermediary will be deemed to have represented, acknowledged and agreed that the shares acquired by it in the offer have not been acquired on a non-discretionary basis on behalf of, nor have they been acquired with a view to their offer or resale to, persons in circumstances which may give rise to an offer of any shares to the public other than their offer or resale in a Member State to qualified investors as so defined or in circumstances in which the prior consent of the underwriters have been obtained to each such proposed offer or resale.
For the purposes of this provision, the expression an “offer to the public” in relation to shares in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares to be offered so as to enable an investor to decide to purchase or subscribe for any shares, and the expression “Prospectus Regulation” means Regulation (EU) 2017/1129.
References to the Prospectus Regulation includes, in relation to the United Kingdom, the Prospectus Regulation as it forms part of the United Kingdom domestic law by virtue of the European Union (Withdrawal) Act of 2018.
United Kingdom. In addition, in the United Kingdom, this document is being distributed only to, and is directed only at, and any offer subsequently made may only be directed at persons who are “qualified investors” (as defined in the Prospectus Regulation) (i) who have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the Order, and/or (ii) who are high net worth companies (or persons to whom it may otherwise be lawfully communicated) falling within Article 49(2)(a) to (d) of the Order and/or (iii) to whom it may otherwise be lawfully communicated (all such persons together being referred to as “relevant persons”) in circumstances which have not resulted and will not result in an offer to the public of the shares in the United Kingdom within the meaning of the Financial Services and Markets Act 2000.
Any person in the United Kingdom that is not a relevant person should not act or rely on the information included in this document or use it as basis for taking any action. In the United Kingdom, any investment or investment activity that this document relates to may be made or taken exclusively by relevant persons.
Hong Kong. The shares have not been offered or sold and will not be offered or sold in Hong Kong, by means of any document, other than (a) to “professional investors” as defined in the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong) (the “SFO”) of Hong Kong and any rules made thereunder; or (b) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32) of Hong Kong) (the “CO”), or which do not constitute an offer to the public within the meaning of the CO. No advertisement, invitation or document relating to the shares has been or may be issued or has been or may be in the possession of any person for the purposes of issue, whether in Hong Kong or elsewhere, which is directed at, or the contents of which are likely to be accessed or read by, the public of Hong Kong (except if permitted to do so under the securities laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” as defined in the SFO and any rules made thereunder.
Singapore. Each underwriter has acknowledged that this prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, each underwriter has represented and agreed that it has not offered or sold any shares or caused the shares to be made the subject of an invitation for subscription or purchase and will not offer or sell any shares or cause the shares to be
made the subject of an invitation for subscription or purchase, and has not circulated or distributed, nor will it circulate or distribute, this prospectus or any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares, whether directly or indirectly, to any person in Singapore other than:
A.
to an institutional investor (as defined in Section 4A of the Securities and Futures Act (Chapter 289) of Singapore, as modified or amended from time to time (the “SFA”)) pursuant to Section 274 of the SFA;
B.
to a relevant person (as defined in Section 275(2) of the SFA) pursuant to Section 275(1) of the SFA, or any person pursuant to Section 275(1A) of the SFA, and in accordance with the conditions specified in Section 275 of the SFA; or
C.
otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is:
A.
a corporation (which is not an accredited investor (as defined in Section 4A of the SFA)) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or
B.
a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary of the trust is an individual who is an accredited investor,
securities or securities-based derivatives contracts (each term as defined in Section 2(1) of the SFA) of that corporation or the beneficiaries’ rights and interest (however described) in that trust shall not be transferred within six months after that corporation or that trust has acquired the shares pursuant to an offer made under Section 275 of the SFA except:
(i)
to an institutional investor or to a relevant person, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;
(ii)
where no consideration is or will be given for the transfer;
(iii)
where the transfer is by operation of law;
(iv)
as specified in Section 276(7) of the SFA; or
(v)
as specified in Regulation 37A of the Securities and Futures (Offers of Investments) (Securities and Securities-based Derivatives Contracts) Regulations 2018.
Singapore SFA Product Classification—In connection with Section 309B of the SFA and the CMP Regulations 2018, unless otherwise specified before an offer of shares, we have determined, and hereby notify all relevant persons (as defined in Section 309A(1) of the SFA), that the shares are “prescribed capital markets products” (as defined in the CMP Regulations 2018) and Excluded Investment Products (as defined in MAS Notice SFA 04-N12: Notice on the Sale of Investment Products and MAS Notice FAA-N16: Notice on Recommendations on Investment Products).
Israel. In the State of Israel this prospectus shall not be regarded as an offer to the public to purchase shares of common stock under the Israeli Securities Law, 5728—1968, which requires a prospectus to be published and authorized by the Israel Securities Authority, if it complies with certain provisions of Section 15 of the Israeli Securities Law, 5728-1968, including, inter alia, if: (i) the offer is made, distributed or directed to not more than 35 investors, subject to certain conditions (the “Addressed Investors”); or (ii) the offer is made, distributed or directed to certain qualified investors defined in the First Addendum of the Israeli Securities Law, 5728—1968, subject to certain conditions (the “Qualified Investors”). The Qualified Investors shall not be taken into account in the count of the Addressed Investors and may be offered to purchase securities in addition to the 35 Addressed Investors. We have not and will not take any action that would require us to publish a prospectus in accordance with and subject to the Israeli Securities Law, 5728—1968. We have not and will not distribute
this prospectus or make, distribute or direct an offer to subscribe for our common stock to any person within the State of Israel, other than to Qualified Investors and up to 35 Addressed Investors.
Qualified Investors may have to submit written evidence that they meet the definitions set out in of the First Addendum to the Israeli Securities Law, 5728—1968. In particular, we may request, as a condition to be offered common stock, that Qualified Investors will each represent, warrant and certify to us and/or to anyone acting on our behalf: (i) that it is an investor falling within one of the categories listed in the First Addendum to the Israeli Securities Law, 5728—1968; (ii) which of the categories listed in the First Addendum to the Israeli Securities Law, 5728—1968 regarding Qualified Investors is applicable to it; (iii) that it will abide by all provisions set forth in the Israeli Securities Law, 5728—1968 and the regulations promulgated thereunder in connection with the offer to be issued common stock; (iv) that the shares of common stock that it will be issued are, subject to exemptions available under the Israeli Securities Law, 5728—1968: (a) for its own account; (b) for investment purposes only; and (c) not issued with a view to resale within the State of Israel, other than in accordance with the provisions of the Israeli Securities Law, 5728—1968; and (v) that it is willing to provide further evidence of its Qualified Investor status. Addressed Investors may have to submit written evidence in respect of their identity and may have to sign and submit a declaration containing, inter alia, the Addressed Investor’s name, address and passport number or Israeli identification number.
We have not authorized and do not authorize the making of any offer of securities through any financial intermediary on our behalf, other than offers made by the underwriters and their respective affiliates, with a view to the final placement of the securities as contemplated in this document. Accordingly, no purchaser of the shares, other than the underwriters, is authorized to make any further offer of shares on our behalf or on behalf of the underwriters.
Australia
No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission, or the ASIC, in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or Corporations Act, and does not purport to include the information required for a prospectus, product disclosure statement or other disclosure document under the Corporations Act.
Any offer in Australia of the securities may only be made to persons, or the Exempt Investors, who are “sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions contained in section 708 of the Corporations Act so that it is lawful to offer the securities without disclosure to investors under Chapter 6D of the Corporations Act.
The securities applied for by Exempt Investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring securities must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives and circumstances, and, if necessary, seek expert advice on those matters.
Electronic Offer, Sale and Distribution of Shares. A prospectus in electronic format may be made available on the websites maintained by one or more of the underwriters or selling group members, if any, participating in this offering and one or more of the underwriters participating in this offering may distribute prospectuses electronically. The representatives may agree to allocate a number of shares to underwriters and selling group members for sale to their online brokerage account holders. Internet distributions will be allocated by the underwriters and selling group members that will make internet
distributions on the same basis as other allocations. Other than the prospectus in electronic format, the information on these websites is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved or endorsed by us or any underwriter in its capacity as underwriter, and should not be relied upon by investors.
Other Relationships. Certain of the underwriters and their affiliates have provided, and may in the future provide, various investment banking, commercial banking and other financial services for us and our affiliates for which they have received, and may in the future receive, customary fees.
LEGAL MATTERS
The validity of the shares of common stock offered by this prospectus will be passed upon for us by Goodwin Procter LLP, Boston, Massachusetts. Cooley LLP is representing the underwriters in this offering.
EXPERTS
The financial statements as of December 31, 2019 and 2018 and for the years then ended included in this Prospectus have been so included in reliance on the report (which contains an explanatory paragraph relating to the Company’s ability to continue as a going concern as described in Note 1 to the financial statements) of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the SEC a registration statement on Form S-1 under the Securities Act with respect to the common stock we are offering by this prospectus. This prospectus does not contain all of the information included in the registration statement. For further information pertaining to us and our common stock, you should refer to the registration statement and to its exhibits. Whenever we make reference in this prospectus to any of our contracts, agreements or other documents, the references are not necessarily complete, and you should refer to the exhibits attached to the registration statement for copies of the actual contract, agreement or other document.
Upon the completion of the offering, we will be subject to the informational requirements of the Exchange Act and will file annual, quarterly and current reports, proxy statements and other information with the SEC. You can read our SEC filings, including the registration statement, at the SEC’s website at www.sec.gov. We also maintain a website at http://www.908devices.com. Upon completion of the offering, you may access, free of charge, our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendment to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC.
INDEX TO FINANCIAL STATEMENTS
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F-2
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F-3
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F-4
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F-5
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F-6
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F-7
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of 908 Devices Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of 908 Devices Inc. (the “Company”) as of December 31, 2019 and 2018, and the related statements of operations and comprehensive loss, of redeemable convertible preferred stock and stockholders’ deficit and of cash flows for the years then ended, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Substantial Doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the financial statements, the Company has incurred losses since inception and has an accumulated deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
October 2, 2020
We have served as the Company’s auditor since 2013.
908 Devices Inc.
Balance Sheets
(In thousands, except share and per share amounts)
|
|
|
|
December 31,
|
|
|
September 30,
2020
|
|
|
Pro Forma
September 30,
2020
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
7,072
|
|
|
|
|
$
|
17,913
|
|
|
|
|
$
|
19,712
|
|
|
|
|
$
|
19,712
|
|
|
|
Accounts receivable, net
|
|
|
|
|
4,132
|
|
|
|
|
|
5,005
|
|
|
|
|
|
9,312
|
|
|
|
|
|
9,312
|
|
|
|
Unbilled receivables
|
|
|
|
|
2,204
|
|
|
|
|
|
74
|
|
|
|
|
|
127
|
|
|
|
|
|
127
|
|
|
|
Inventory
|
|
|
|
|
3,523
|
|
|
|
|
|
5,237
|
|
|
|
|
|
4,835
|
|
|
|
|
|
4,835
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
272
|
|
|
|
|
|
351
|
|
|
|
|
|
430
|
|
|
|
|
|
430
|
|
|
|
Total current assets
|
|
|
|
|
17,203
|
|
|
|
|
|
28,580
|
|
|
|
|
|
34,416
|
|
|
|
|
|
34,416
|
|
|
|
Operating lease, right-of-use assets
|
|
|
|
|
8,180
|
|
|
|
|
|
7,245
|
|
|
|
|
|
6,467
|
|
|
|
|
|
6,467
|
|
|
|
Property and equipment, net
|
|
|
|
|
1,834
|
|
|
|
|
|
1,326
|
|
|
|
|
|
934
|
|
|
|
|
|
934
|
|
|
|
Deferred offerings costs
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
868
|
|
|
|
|
|
868
|
|
|
|
Other long-term assets
|
|
|
|
|
531
|
|
|
|
|
|
511
|
|
|
|
|
|
719
|
|
|
|
|
|
719
|
|
|
|
Total assets
|
|
|
|
$
|
27,748
|
|
|
|
|
$
|
37,662
|
|
|
|
|
$
|
43,404
|
|
|
|
|
$
|
43,404
|
|
|
|
Liabilities, Convertible Preferred Stock and Stockholders’ Equity (Deficit)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
645
|
|
|
|
|
$
|
577
|
|
|
|
|
$
|
612
|
|
|
|
|
$
|
612
|
|
|
|
Accrued expenses
|
|
|
|
|
2,853
|
|
|
|
|
|
2,909
|
|
|
|
|
|
4,882
|
|
|
|
|
|
4,882
|
|
|
|
Deferred revenue
|
|
|
|
|
951
|
|
|
|
|
|
1,490
|
|
|
|
|
|
2,227
|
|
|
|
|
|
2,227
|
|
|
|
Operating lease liabilities
|
|
|
|
|
310
|
|
|
|
|
|
1,078
|
|
|
|
|
|
1,124
|
|
|
|
|
|
1,124
|
|
|
|
Current portion of long-term debt
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
3,500
|
|
|
|
|
|
3,500
|
|
|
|
Total current liabilities
|
|
|
|
|
4,759
|
|
|
|
|
|
6,054
|
|
|
|
|
|
12,345
|
|
|
|
|
|
12,345
|
|
|
|
Long-term debt, net of discount and current portion
|
|
|
|
|
9,650
|
|
|
|
|
|
14,769
|
|
|
|
|
|
11,317
|
|
|
|
|
|
11,317
|
|
|
|
Operating lease liabilities, net of current portion
|
|
|
|
|
7,973
|
|
|
|
|
|
6,941
|
|
|
|
|
|
6,101
|
|
|
|
|
|
6,101
|
|
|
|
Deferred revenue, net of current portion
|
|
|
|
|
362
|
|
|
|
|
|
571
|
|
|
|
|
|
7,029
|
|
|
|
|
|
7,029
|
|
|
|
Commercial services agreement liability–related party
|
|
|
|
|
750
|
|
|
|
|
|
750
|
|
|
|
|
|
375
|
|
|
|
|
|
375
|
|
|
|
Preferred stock warrant liability
|
|
|
|
|
1,341
|
|
|
|
|
|
728
|
|
|
|
|
|
754
|
|
|
|
|
|
—
|
|
|
|
Total liabilities
|
|
|
|
|
24,835
|
|
|
|
|
|
29,813
|
|
|
|
|
|
37,921
|
|
|
|
|
|
37,167
|
|
|
|
Commitments and contingencies (Note 12)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock (Series A, B, C, D and E), $0.001
par value; 21,338,912 shares authorized at December 31, 2018 and
24,156,877 shares authorized at December 31, 2019 and September 30,
2020 (unaudited); 20,749,831 shares issued and outstanding at
December 31, 2018 and 23,905,267 shares issued and outstanding at
December 31, 2019 and September 30, 2020 (unaudited); liquidation
preference of $71,285 at December 31, 2019 and September 30, 2020
(unaudited); no shares issued or outstanding, pro forma at September 30,
2020 (unaudited)
|
|
|
|
|
53,089
|
|
|
|
|
|
71,017
|
|
|
|
|
|
71,091
|
|
|
|
|
|
—
|
|
|
|
Stockholders’ equity (deficit):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.001 par value; 32,803,254 shares and 36,976,630
shares authorized at December 31, 2018 and 2019, respectively, and
36,976,630 shares authorized at September 30, 2020 (unaudited);
8,119,699 shares and 8,120,399 shares issued and outstanding at
December 31, 2018 and 2019, respectively, and 8,137,669 shares
issued and outstanding at September 30, 2020 (unaudited); 32,042,936
shares issued and outstanding, pro forma at September 30, 2020
(unaudited)
|
|
|
|
|
8
|
|
|
|
|
|
8
|
|
|
|
|
|
8
|
|
|
|
|
|
32
|
|
|
|
Additional paid-in capital
|
|
|
|
|
2,092
|
|
|
|
|
|
2,473
|
|
|
|
|
|
2,626
|
|
|
|
|
|
74,447
|
|
|
|
Accumulated deficit
|
|
|
|
|
(52,276)
|
|
|
|
|
|
(65,649)
|
|
|
|
|
|
(68,242)
|
|
|
|
|
|
(68,242)
|
|
|
|
Total stockholders’ equity (deficit)
|
|
|
|
|
(50,176)
|
|
|
|
|
|
(63,168)
|
|
|
|
|
|
(65,608)
|
|
|
|
|
|
6,237
|
|
|
|
Total liabilities, redeemable convertible preferred stock and stockholders’ equity (deficit)
|
|
|
|
$
|
27,748
|
|
|
|
|
$
|
37,662
|
|
|
|
|
$
|
43,404
|
|
|
|
|
$
|
43,404
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
908 Devices Inc.
Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service revenue
|
|
|
|
$
|
13,738
|
|
|
|
|
$
|
15,344
|
|
|
|
|
$
|
8,292
|
|
|
|
|
$
|
18,844
|
|
|
|
License and contract revenue
|
|
|
|
|
8,316
|
|
|
|
|
|
2,628
|
|
|
|
|
|
1,332
|
|
|
|
|
|
2,333
|
|
|
|
Total revenue
|
|
|
|
|
22,054
|
|
|
|
|
|
17,972
|
|
|
|
|
|
9,624
|
|
|
|
|
|
21,177
|
|
|
|
Cost of revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Product and service cost of revenue
|
|
|
|
|
9,002
|
|
|
|
|
|
9,098
|
|
|
|
|
|
5,397
|
|
|
|
|
|
8,121
|
|
|
|
License and contract cost of revenue
|
|
|
|
|
659
|
|
|
|
|
|
731
|
|
|
|
|
|
418
|
|
|
|
|
|
712
|
|
|
|
Total cost of revenue
|
|
|
|
|
9,661
|
|
|
|
|
|
9,829
|
|
|
|
|
|
5,815
|
|
|
|
|
|
8,833
|
|
|
|
Gross profit
|
|
|
|
|
12,393
|
|
|
|
|
|
8,143
|
|
|
|
|
|
3,809
|
|
|
|
|
|
12,344
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
|
|
9,528
|
|
|
|
|
|
8,993
|
|
|
|
|
|
7,020
|
|
|
|
|
|
5,953
|
|
|
|
Selling, general and administrative
|
|
|
|
|
9,304
|
|
|
|
|
|
11,294
|
|
|
|
|
|
8,624
|
|
|
|
|
|
8,320
|
|
|
|
Total operating expenses
|
|
|
|
|
18,832
|
|
|
|
|
|
20,287
|
|
|
|
|
|
15,644
|
|
|
|
|
|
14,273
|
|
|
|
Loss from operations
|
|
|
|
|
(6,439)
|
|
|
|
|
|
(12,144)
|
|
|
|
|
|
(11,835)
|
|
|
|
|
|
(1,929)
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
|
|
(1,147)
|
|
|
|
|
|
(1,530)
|
|
|
|
|
|
(1,276)
|
|
|
|
|
|
(732)
|
|
|
|
Other income (expense), net
|
|
|
|
|
50
|
|
|
|
|
|
301
|
|
|
|
|
|
227
|
|
|
|
|
|
68
|
|
|
|
Total other expense, net
|
|
|
|
|
(1,097)
|
|
|
|
|
|
(1,229)
|
|
|
|
|
|
(1,049)
|
|
|
|
|
|
(664)
|
|
|
|
Net loss and comprehensive loss
|
|
|
|
|
(7,536)
|
|
|
|
|
|
(13,373)
|
|
|
|
|
|
(12,884)
|
|
|
|
|
|
(2,593)
|
|
|
|
Accretion of redeemable convertible preferred stock to redemption value
|
|
|
|
|
(76)
|
|
|
|
|
|
(109)
|
|
|
|
|
|
(79)
|
|
|
|
|
|
(74)
|
|
|
|
Net loss attributable to common
stockholders
|
|
|
|
$
|
(7,612)
|
|
|
|
|
$
|
(13,482)
|
|
|
|
|
$
|
(12,963)
|
|
|
|
|
$
|
(2,667)
|
|
|
|
Net loss per share attributable to common stockholders, basic and diluted
|
|
|
|
$
|
(0.95)
|
|
|
|
|
$
|
(1.66)
|
|
|
|
|
$
|
(1.60)
|
|
|
|
|
$
|
(0.33)
|
|
|
|
Weighted average common shares outstanding, basic and diluted
|
|
|
|
|
7,984,303
|
|
|
|
|
|
8,119,906
|
|
|
|
|
|
8,119,740
|
|
|
|
|
|
8,128,794
|
|
|
|
Pro forma net loss per share attributable to
common stockholders, basic and diluted
(unaudited)
|
|
|
|
|
|
|
|
|
|
$
|
(0.43)
|
|
|
|
|
|
|
|
|
|
|
$
|
(0.08)
|
|
|
|
Pro forma weighted average common shares outstanding, basic and diluted (unaudited)
|
|
|
|
|
|
|
|
|
|
|
30,887,389
|
|
|
|
|
|
|
|
|
|
|
|
32,034,061
|
|
|
The accompanying notes are an integral part of these financial statements.
908 Devices Inc.
Statements of Redeemable Convertible Preferred Stock and Stockholders’ Deficit
(In thousands, except share amounts)
|
|
|
|
Redeemable Convertible
Preferred Stock
|
|
|
|
Common Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Deficit
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Balances at December 31, 2017
|
|
|
|
|
20,039,996
|
|
|
|
|
$
|
49,091
|
|
|
|
|
|
|
7,911,547
|
|
|
|
|
$
|
8
|
|
|
|
|
$
|
1,880
|
|
|
|
|
$
|
(45,117)
|
|
|
|
|
$
|
(43,229)
|
|
|
|
Adjustment due to adoption of ASC 606
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
377
|
|
|
|
|
|
377
|
|
|
|
Issuance of Series D redeemable convertible preferred stock, net of issuance costs of $78
|
|
|
|
|
709,835
|
|
|
|
|
|
3,922
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Accretion of redeemable convertible preferred stock to redemption value
|
|
|
|
|
—
|
|
|
|
|
|
76
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(76)
|
|
|
|
|
|
—
|
|
|
|
|
|
(76)
|
|
|
|
Issuance of common stock upon exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
208,152
|
|
|
|
|
|
—
|
|
|
|
|
|
71
|
|
|
|
|
|
—
|
|
|
|
|
|
71
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
217
|
|
|
|
|
|
—
|
|
|
|
|
|
217
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(7,536)
|
|
|
|
|
|
(7,536)
|
|
|
|
Balances at December 31, 2018
|
|
|
|
|
20,749,831
|
|
|
|
|
|
53,089
|
|
|
|
|
|
|
8,119,699
|
|
|
|
|
|
8
|
|
|
|
|
|
2,092
|
|
|
|
|
|
(52,276)
|
|
|
|
|
|
(50,176)
|
|
|
|
Issuance of Series E redeemable convertible preferred stock, net of issuance costs of $185
|
|
|
|
|
2,782,194
|
|
|
|
|
|
17,315
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Preferred stock warrant exercises
|
|
|
|
|
373,242
|
|
|
|
|
|
504
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
222
|
|
|
|
|
|
—
|
|
|
|
|
|
222
|
|
|
|
Accretion of redeemable convertible preferred stock to redemption value
|
|
|
|
|
—
|
|
|
|
|
|
109
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(109)
|
|
|
|
|
|
—
|
|
|
|
|
|
(109)
|
|
|
|
Issuance of common stock upon exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
700
|
|
|
|
|
|
—
|
|
|
|
|
|
1
|
|
|
|
|
|
—
|
|
|
|
|
|
1
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
267
|
|
|
|
|
|
—
|
|
|
|
|
|
267
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(13,373)
|
|
|
|
|
|
(13,373)
|
|
|
|
Balances at December 31, 2019
|
|
|
|
|
23,905,267
|
|
|
|
|
|
71,017
|
|
|
|
|
|
|
8,120,399
|
|
|
|
|
|
8
|
|
|
|
|
|
2,473
|
|
|
|
|
|
(65,649)
|
|
|
|
|
|
(63,168)
|
|
|
|
Issuance of common stock upon exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
17,270
|
|
|
|
|
|
—
|
|
|
|
|
|
9
|
|
|
|
|
|
—
|
|
|
|
|
|
9
|
|
|
|
Accretion of redeemable convertible preferred stock to redemption value
|
|
|
|
|
—
|
|
|
|
|
|
74
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(74)
|
|
|
|
|
|
—
|
|
|
|
|
|
(74)
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
218
|
|
|
|
|
|
—
|
|
|
|
|
|
218
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,593)
|
|
|
|
|
|
(2,593)
|
|
|
|
Balances at September 30, 2020
(unaudited)
|
|
|
|
|
23,905,267
|
|
|
|
|
$
|
71,091
|
|
|
|
|
|
|
8,137,669
|
|
|
|
|
$
|
8
|
|
|
|
|
$
|
2,626
|
|
|
|
|
$
|
(68,242)
|
|
|
|
|
$
|
(65,608)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable Convertible
Preferred Stock
|
|
|
|
Common Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
Accumulated
Deficit
|
|
|
Total
Stockholders’
Deficit
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
|
Shares
|
|
|
Amount
|
|
|
Balances at December 31, 2018
|
|
|
|
|
20,749,831
|
|
|
|
|
$
|
53,089
|
|
|
|
|
|
|
8,119,699
|
|
|
|
|
$
|
8
|
|
|
|
|
$
|
2,092
|
|
|
|
|
$
|
(52,276)
|
|
|
|
|
$
|
(50,176)
|
|
|
|
Issuance of Series E redeemable convertible preferred stock, net of issuance costs of $185
|
|
|
|
|
2,782,194
|
|
|
|
|
|
17,315
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Issuance of common stock upon exercise of stock options
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
700
|
|
|
|
|
|
—
|
|
|
|
|
|
1
|
|
|
|
|
|
—
|
|
|
|
|
|
1
|
|
|
|
Accretion of redeemable convertible preferred stock to redemption value
|
|
|
|
|
—
|
|
|
|
|
|
79
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(79)
|
|
|
|
|
|
—
|
|
|
|
|
|
(79)
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
200
|
|
|
|
|
|
—
|
|
|
|
|
|
200
|
|
|
|
Net loss
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(12,884)
|
|
|
|
|
|
(12,884)
|
|
|
|
Balances at September 30, 2019 (unaudited)
|
|
|
|
|
23,532,025
|
|
|
|
|
$
|
70,483
|
|
|
|
|
|
|
8,120,399
|
|
|
|
|
$
|
8
|
|
|
|
|
$
|
2,214
|
|
|
|
|
$
|
(65,160)
|
|
|
|
|
$
|
(62,938)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
908 Devices Inc.
Statements of Cash Flows
(In thousands)
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Cash flows from operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
|
$
|
(7,536)
|
|
|
|
|
$
|
(13,373)
|
|
|
|
|
$
|
(12,884)
|
|
|
|
|
$
|
(2,593)
|
|
|
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
|
|
896
|
|
|
|
|
|
900
|
|
|
|
|
|
688
|
|
|
|
|
|
610
|
|
|
|
Stock-based compensation expense
|
|
|
|
|
217
|
|
|
|
|
|
267
|
|
|
|
|
|
200
|
|
|
|
|
|
218
|
|
|
|
Change in fair value of preferred stock warrant liability
|
|
|
|
|
91
|
|
|
|
|
|
(59)
|
|
|
|
|
|
(59)
|
|
|
|
|
|
26
|
|
|
|
Change in fair value of commercial services agreement liability – related party
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(375)
|
|
|
|
Noncash interest and loss on extinguishment of debt
|
|
|
|
|
208
|
|
|
|
|
|
370
|
|
|
|
|
|
355
|
|
|
|
|
|
48
|
|
|
|
Provision for inventory obsolescence
|
|
|
|
|
97
|
|
|
|
|
|
149
|
|
|
|
|
|
83
|
|
|
|
|
|
67
|
|
|
|
Loss on disposal of property and equipment
|
|
|
|
|
256
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable, net
|
|
|
|
|
2,531
|
|
|
|
|
|
(873)
|
|
|
|
|
|
(1,941)
|
|
|
|
|
|
(4,307)
|
|
|
|
Unbilled receivables
|
|
|
|
|
(2,130)
|
|
|
|
|
|
2,130
|
|
|
|
|
|
2,139
|
|
|
|
|
|
(53)
|
|
|
|
Inventory
|
|
|
|
|
(989)
|
|
|
|
|
|
(1,863)
|
|
|
|
|
|
(2,732)
|
|
|
|
|
|
126
|
|
|
|
Prepaid expenses and other current assets
|
|
|
|
|
128
|
|
|
|
|
|
(79)
|
|
|
|
|
|
(85)
|
|
|
|
|
|
(79)
|
|
|
|
Other long-term assets
|
|
|
|
|
(13)
|
|
|
|
|
|
20
|
|
|
|
|
|
20
|
|
|
|
|
|
(208)
|
|
|
|
Accounts payable and accrued expenses
|
|
|
|
|
(1,013)
|
|
|
|
|
|
(12)
|
|
|
|
|
|
387
|
|
|
|
|
|
1,140
|
|
|
|
Deferred revenue
|
|
|
|
|
(1,722)
|
|
|
|
|
|
748
|
|
|
|
|
|
1,899
|
|
|
|
|
|
7,195
|
|
|
|
Right-of-use operating assets
|
|
|
|
|
1,214
|
|
|
|
|
|
981
|
|
|
|
|
|
734
|
|
|
|
|
|
778
|
|
|
|
Operating lease liabilities
|
|
|
|
|
(1,133)
|
|
|
|
|
|
(310)
|
|
|
|
|
|
(57)
|
|
|
|
|
|
(794)
|
|
|
|
Net cash provided by (used in) operating activities
|
|
|
|
|
(8,898)
|
|
|
|
|
|
(11,004)
|
|
|
|
|
|
(11,253)
|
|
|
|
|
|
1,799
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
|
|
(727)
|
|
|
|
|
|
(392)
|
|
|
|
|
|
(278)
|
|
|
|
|
|
(9)
|
|
|
|
Lease deposit
|
|
|
|
|
(440)
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Net cash used in investing activities
|
|
|
|
|
(1,167)
|
|
|
|
|
|
(392)
|
|
|
|
|
|
(278)
|
|
|
|
|
|
(9)
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs
|
|
|
|
|
3,922
|
|
|
|
|
|
17,315
|
|
|
|
|
|
17,315
|
|
|
|
|
|
—
|
|
|
|
Proceeds from issuance of common stock upon option exercise
|
|
|
|
|
71
|
|
|
|
|
|
1
|
|
|
|
|
|
1
|
|
|
|
|
|
9
|
|
|
|
Proceeds from exercise of preferred stock warrants
|
|
|
|
|
—
|
|
|
|
|
|
4
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Proceeds from issuance of notes payable
|
|
|
|
|
—
|
|
|
|
|
|
15,000
|
|
|
|
|
|
15,000
|
|
|
|
|
|
—
|
|
|
|
Payments of debt issuance costs
|
|
|
|
|
—
|
|
|
|
|
|
(83)
|
|
|
|
|
|
(83)
|
|
|
|
|
|
—
|
|
|
|
Repayment of notes payable
|
|
|
|
|
—
|
|
|
|
|
|
(10,000)
|
|
|
|
|
|
(10,000)
|
|
|
|
|
|
—
|
|
|
|
Proceeds from Paycheck Protection Program loan
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
2,202
|
|
|
|
Repayment of Paycheck Protection Program loan
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(2,202)
|
|
|
|
Net cash provided by financing activities
|
|
|
|
|
3,993
|
|
|
|
|
|
22,237
|
|
|
|
|
|
22,233
|
|
|
|
|
|
9
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
|
|
(6,072)
|
|
|
|
|
|
10,841
|
|
|
|
|
|
10,702
|
|
|
|
|
|
1,799
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
|
|
13,144
|
|
|
|
|
|
7,072
|
|
|
|
|
|
7,072
|
|
|
|
|
|
17,913
|
|
|
|
Cash and cash equivalents at end of period
|
|
|
|
$
|
7,072
|
|
|
|
|
$
|
17,913
|
|
|
|
|
$
|
17,774
|
|
|
|
|
$
|
19,712
|
|
|
|
Supplemental disclosure of noncash investing and financing information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred offering costs included in accounts payable and accrued expenses
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
868
|
|
|
|
Transfers of inventory to property and equipment
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
209
|
|
|
|
Accretion of redeemable convertible preferred stock to redemption value
|
|
|
|
$
|
76
|
|
|
|
|
$
|
109
|
|
|
|
|
$
|
79
|
|
|
|
|
$
|
74
|
|
|
|
Issuance of preferred stock warrants in connection with notes payable
|
|
|
|
$
|
—
|
|
|
|
|
$
|
168
|
|
|
|
|
$
|
168
|
|
|
|
|
$
|
—
|
|
|
|
Issuance of preferred stock warrants in connection with lease agreement
|
|
|
|
$
|
317
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Exercise of preferred stock warrants
|
|
|
|
$
|
—
|
|
|
|
|
$
|
722
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
Supplemental disclosure of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for interest
|
|
|
|
$
|
889
|
|
|
|
|
$
|
1,155
|
|
|
|
|
$
|
720
|
|
|
|
|
$
|
685
|
|
|
The accompanying notes are an integral part of these financial statements.
908 Devices Inc.
Notes to Financial Statements
1. Nature of the Business and Basis of Presentation
908 Devices Inc. (the “Company”) was incorporated in the State of Delaware on February 10, 2012. The Company is a commercial-stage technology company providing a suite of purpose-built handheld and desktop mass spectrometry devices for the point-of-need to interrogate unknown and invisible materials in a broad array of markets including life sciences research, bioprocessing, industrial biotech, forensics and adjacent markets.
The Company is subject to risks and uncertainties common to technology companies in the device industry and of similar size, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, uncertainty of market acceptance of products, and the need to obtain additional financing to fund operations. Potential risks and uncertainties also include, without limitation, uncertainties regarding the duration and magnitude of the impact of the COVID-19 pandemic on the Company’s business and the economy generally. Products currently under development will require additional research and development efforts prior to commercialization and will require additional capital and adequate personnel and infrastructure. The Company’s research and development may not be successfully completed, adequate protection for the Company’s technology may not be obtained, the Company may not obtain necessary government regulatory approval, and approved products may not prove commercially viable. The Company operates in an environment of rapid change in technology and competition.
In March 2020, the World Health Organization declared the global novel coronavirus disease 2019 (“COVID-19”) outbreak a pandemic. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to the global economy, as well as businesses and capital markets around the world. The Company cannot at this time predict the specific extent, duration, or full impact that the COVID-19 pandemic will have on its future financial condition and operations. The impact of the COVID-19 coronavirus outbreak on the Company’s financial performance will depend on future developments, including the duration and spread of the pandemic and related governmental advisories and restrictions. These developments and the impact of COVID-19 on the financial markets and the overall economy are highly uncertain and cannot be predicted. If the financial markets and/or the overall economy are impacted for an extended period, the Company’s results may be materially adversely affected.
Future impacts to the Company’s business as a result of COVID-19 could include disruptions to the Company’s manufacturing operations and supply chain caused by facility closures, reductions in operating hours, staggered shifts and other social distancing efforts; labor shortages; decreased productivity and unavailability of materials or components; limitations on its employees’ and customers’ ability to travel, and delays in shipments to and from affected countries and within the United States. While the Company maintains an inventory of finished products and raw materials used in its products, a prolonged pandemic could lead to shortages in the raw materials necessary to manufacture its products. To address actual and expected reductions in revenue and cash flows, the Company reduced its discretionary spending and reduced payroll costs, including through temporary employee furloughs and salary reductions. Starting in July 2020, furloughed employees and pay rates were reinstated.
Basis of Presentation
The Company’s financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).
Going Concern
In accordance with ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are
908 Devices Inc.
Notes to Financial Statements (Continued)
1. Nature of the Business and Basis of Presentation (Continued)
conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
Since its inception, the Company has funded its operations primarily with proceeds from sales of redeemable convertible preferred stock and borrowings under loan agreements. The Company has incurred recurring losses since inception, including net losses of $7.5 million and $13.4 million for the years ended December 31, 2018 and 2019, respectively, and $2.6 million for the nine months ended September 30, 2020 (unaudited). In addition, as of December 31, 2019 and September 30, 2020 (unaudited), the Company had an accumulated deficit of $65.6 million and $68.2 million, respectively. The Company expects to continue to generate operating losses for the foreseeable future. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. Based on its losses from operations incurred since inception, expectation of continuing operating losses for the foreseeable future, and need to raise additional capital to finance its future operations, as of October 2, 2020, the issuance date of the financial statements for the year ended December 31, 2019, the Company has concluded that there is substantial doubt about its ability to continue as a going concern within one year after the date that these financial statements are issued. In addition, as of November 6, 2020, the issuance date of the interim financial statements for the nine months ended September 30, 2020 (unaudited), the Company has concluded that there is substantial doubt about its ability to continue as a going concern within one year after the date that these interim financial statements are issued.
The Company is seeking to complete an initial public offering (“IPO”) of its common stock. Upon the closing of a qualified public offering on specified terms, the Company’s outstanding redeemable convertible preferred stock will automatically convert into shares of common stock (see Note 8). In the event the Company does not complete an IPO, the Company expects to seek additional funding through private equity financings, debt financings, or other capital sources, including collaborations with other companies, government funding arrangements or other strategic transactions. The Company may not be able to obtain financing on acceptable terms, or at all, and the terms of any financing may adversely affect the holdings or the rights of the Company’s stockholders.
If the Company is unable to obtain funding, the Company will be required to delay, reduce or eliminate some or all of its research and development programs, product expansion or commercialization efforts, or the Company may be unable to continue operations. Although management continues to pursue these financing plans, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.
The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.
2. Summary of Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting periods. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, revenue recognition, the valuation of inventory, the valuation of common stock and stock-based awards, the valuation of the commercial services agreement liability and the valuation of the preferred stock warrant liability. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
it believes to be reasonable under the circumstances. Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets. The Company is not aware of any specific event or circumstance that would require an update to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of October 2, 2020, the date of issuance of these financial statements. These estimates may change, as new events occur and additional information is obtained. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results may differ from those estimates or assumptions.
Unaudited Interim Financial Information
The accompanying balance sheet as of September 30, 2020 and the statements of operations and comprehensive loss, of cash flows and of redeemable convertible preferred stock and stockholders’ deficit for the nine months ended September 30, 2019 and 2020 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2020 and the results of its operations and its cash flows for the nine months ended September 30, 2019 and 2020. The financial data and other information disclosed in these notes related to the nine months ended September 30, 2019 and 2020 are also unaudited. The results for the nine months ended September 30, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period.
Unaudited Pro Forma Information
The accompanying unaudited pro forma balance sheet as of September 30, 2020 has been prepared to give effect, upon the closing of a qualified IPO, to the conversion of all outstanding shares of redeemable convertible preferred stock of the Company into an aggregate of 23,905,267 shares of common stock and the conversion of all outstanding warrants to purchase shares of redeemable convertible preferred stock of the Company into warrants to purchase an aggregate of 251,610 shares of common stock as if the IPO had occurred on September 30, 2020.
In the accompanying statements of operations and comprehensive loss, the unaudited pro forma basic and diluted net loss per share attributable to common stockholders for the year ended December 31, 2019 and the nine months ended September 30, 2020 have been prepared to give effect, upon the closing of a qualified IPO, to the conversion of all outstanding shares of redeemable convertible preferred stock into shares of common stock and the conversion of all outstanding warrants to purchase shares of redeemable convertible preferred stock into warrants to purchase shares of common stock as if the proposed IPO had occurred on the later of January 1, 2019 or the issuance date of the convertible preferred stock or preferred stock warrants.
Risk of Concentrations of Credit, Significant Customers and Significant Suppliers
Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. The Company maintains its cash and cash equivalents with two financial institutions that management believes to be of high credit quality. The Company has not experienced any other-than-temporary losses with respect to its cash and cash equivalents and does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.
Significant customers are those that accounted for 10% or more of the Company’s total revenue or accounts receivable. During the year ended December 31, 2018, two customers represented 28% and 27%, respectively, of total revenue. During the year ended December 31, 2019, three customers represented 17%, 11% and 11%, respectively, of total revenue. During the nine months ended September 30, 2019 (unaudited), one customer represented 15% of total revenue. During the nine months ended September 30, 2020 (unaudited), one customer represented 41% of total revenue. As of
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
December 31, 2018, three customers accounted for 34%, 32% and 11%, respectively, of gross accounts receivable. As of December 31, 2019, one customer accounted for 38% of gross accounts receivable. As of September 30, 2020 (unaudited) two customers accounted for 25% and 21%, respectively, of gross accounts receivable.
Certain of the components included in the Company’s products are obtained from a sole source, a single source or a limited group of suppliers. Although the Company seeks to reduce dependence on those limited sources of suppliers and manufacturers, the partial or complete loss of certain of these sources, or the requirement to establish a new supplier for the components, could have a material adverse effect on the Company’s operating results, financial condition and cash flows and damage its customer relationships.
Deferred Offering Costs
The Company capitalizes certain legal, accounting and other third-party fees that are directly associated with in-process equity financings as deferred offering costs until such financings are consummated. After consummation of an equity financing, these costs are recorded in stockholders’ equity (deficit) as a reduction of additional paid-in capital generated as a result of the offering. Should the in-process equity financing be abandoned, the deferred offering costs will be expensed immediately as a charge to operating expenses in the statements of operations and comprehensive loss. The Company had no deferred offering costs recorded as of December 31, 2018 or 2019, and had $0.9 million of deferred offering costs as of September 30, 2020 (unaudited).
Deferred Financing Costs
Deferred financing costs related to a recognized debt liability are recorded as a reduction of the carrying amount of the debt liability and amortized to interest expense using the effective interest method over the repayment term of the debt.
Cash Equivalents
The Company considers all highly liquid investments with original maturities of three months or less at the date of purchase to be cash equivalents.
Accounts Receivable, net
Accounts receivable are presented net of a provision for doubtful accounts, which is an estimate of amounts that may not be collectible. The Company performs ongoing credit evaluations of its customers and, if necessary, provides an allowance for doubtful accounts and expected losses. The Company writes off accounts receivable against the allowance when it determines a balance is uncollectible and no longer actively pursues collection of the receivable. As of December 31, 2018 and 2019 and September 30, 2020 (unaudited), the Company’s allowance for doubtful accounts was less than $0.1 million. During the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020 (unaudited), the Company did not record any provisions for doubtful accounts and did not write off any accounts receivable balances.
Inventory
Inventory is valued at the lower of cost or net realizable value. Cost is computed using the first-in, first-out method. The Company regularly reviews inventory quantities on-hand for excess and obsolete inventory and, when circumstances indicate, records charges to write down inventories to their estimated net realizable value, after evaluating historical sales, future demand, market conditions and expected product life cycles. Such charges are classified as cost of revenue in the statements of operations and comprehensive loss. Any write-down of inventory to net realizable value creates a new cost basis.
Assets Recognized from Costs to Obtain a Contract with a Customer
The Company recognizes an asset for the incremental costs of obtaining a contract with a customer if the Company expects the benefit of those costs to be longer than one year. The Company has determined that certain sales incentive programs meet the requirements to be capitalized. Total
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
capitalized costs to obtain a contract were not significant during the periods presented and are included in other current assets and other long-term assets in the Company’s balance sheets.
Leases
The Company accounts for leases under ASC 842, Leases (“ASC 842”). In accordance with ASC 842, the Company accounts for a contract as a lease when it has the right to control the asset for a period of time while obtaining substantially all of the asset’s economic benefits. The Company determines if an arrangement is a lease or contains an embedded lease at inception. For arrangements that meet the definition of a lease, the Company determines the initial classification and measurement of its right-of-use asset and lease liability at the lease commencement date and thereafter if modified. The lease term includes any renewal options that the Company is reasonably assured to exercise. The present value of lease payments is determined by using the interest rate implicit in the lease, if that rate is readily determinable; otherwise, the Company uses its estimated secured incremental borrowing rate for that lease term. The Company’s policy is to not record leases with an original term of twelve months or less on its balance sheets and recognizes those lease payments in the statements of operations and comprehensive loss on a straight-line basis over the lease term. The Company’s existing leases are for office and laboratory space. In addition to rent, the leases may require the Company to pay additional costs, such as utilities, maintenance and other operating costs, which are generally referred to as non-lease components. The Company has elected to not separate lease and non-lease components. Only the fixed costs for lease components and their associated non-lease components are accounted for as a single lease component and recognized as part of a right-of-use asset and liability. Rent expense for operating leases is recognized on a straight-line basis over the reasonably assured lease term based on the total lease payments and is included in operating expense in the statements of operations and comprehensive loss.
Property and Equipment
Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization expense is recognized using the straight-line method over the estimated useful life of each asset as follows:
|
|
|
|
Estimated Useful Life
|
|
|
Laboratory and demonstration equipment
|
|
|
2 to 5 years
|
|
|
Computer equipment and software
|
|
|
3 years
|
|
|
Furniture and fixtures
|
|
|
7 years
|
|
|
Leasehold improvements
|
|
|
Shorter of remaining life of lease or useful life
|
|
Costs for capital assets not yet placed into service are capitalized as construction-in-progress and depreciated once placed into service. Upon retirement or sale, the cost of assets disposed of and the related accumulated depreciation and amortization are removed from the accounts and any resulting gain or loss is included in loss from operations. Expenditures for repairs and maintenance are charged to expense as incurred.
Impairment of Long-Lived Assets
Long-lived assets consist of operating lease right-of-use assets and property and equipment. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset group for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset group to its carrying value. An impairment loss can be recognized in loss from operations when
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount. The impairment loss is based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows. The Company did not record any impairment losses on long-lived assets during the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020 (unaudited).
Software Development Costs
The Company incurs costs to develop computer software that is embedded in the hardware components of the Company’s products. Research and development costs related to this software are expensed as incurred, except for costs of internally developed or externally purchased software that qualify for capitalization. Software development costs incurred subsequent to the establishment of technological feasibility, but prior to the general release of the product, are capitalized and, upon general release, are amortized based upon the pattern in which economic benefits related to such assets are realized. Due to the short time period between achieving technological feasibility and product release and the insignificant amount of costs incurred during such periods, the Company did not capitalize any software development costs during the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020 (unaudited).
Fair Value Measurements
Certain assets and liabilities are carried at fair value under GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:
•
Level 1 — Quoted prices in active markets for identical assets or liabilities.
•
Level 2 — Observable inputs (other than Level 1 quoted prices), such as quoted prices in active markets for similar assets or liabilities, quoted prices in markets that are not active for identical or similar assets or liabilities, or other inputs that are observable or can be corroborated by observable market data.
•
Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.
The Company’s cash equivalents and its preferred stock warrant liability and commercial services agreement liability are carried at fair value, determined according to the fair value hierarchy described above (see Note 3). The carrying values of the Company’s accounts receivable, unbilled receivables, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. The carrying value of the Company’s long-term debt approximates its fair value (a level 2 measurement) at each balance sheet date due to its variable interest rate, which approximates a market interest rate.
Product Warranties
The Company offers a one-year limited warranty on most products, which is included in the selling price. The Company’s standard limited warranty covers repair or replacement. The Company provides for estimated warranty expenses as a component of cost of revenue at the time product revenue is recognized. Warranty costs are estimated based on the current expected product replacement or repair cost and expected replacement or repair rates based on historical experience. The Company evaluates its warranty accrual at the end of each reporting period and makes adjustments as necessary.
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
Classification and Accretion of Redeemable Convertible Preferred Stock
The Company has classified redeemable convertible preferred stock outside of stockholders’ equity (deficit) because the shares contain certain redemption features that are not solely within the control of the Company. Costs incurred in connection with the issuance of each series of redeemable convertible preferred stock are recorded as a reduction of gross proceeds from issuance. The Company records periodic accretion to the values of its outstanding redeemable convertible preferred stock such that the carrying value of the redeemable convertible preferred stock will be equal to the redemption value at the earliest date of redemption. Adjustments to the carrying values of the redeemable convertible preferred stock at each reporting date result in an increase or decrease to net income (loss) attributable to common stockholders.
Preferred Stock Warrant Liability
The Company classifies warrants for the purchase of shares of its redeemable convertible preferred stock (see Notes 3 and 9) as a liability on its balance sheets as these warrants are freestanding financial instruments that may require the Company to transfer assets upon exercise. The warrant liability is initially recorded at fair value upon the date of issuance of each warrant and is subsequently remeasured to fair value at each reporting date. Changes in the fair value of the warrant liability are recognized as a component of other income (expense) in the statements of operations and comprehensive loss. Changes in the fair value of the preferred stock warrant liability will continue to be recognized until the warrants are exercised, expire or qualify for equity classification.
Segment Information
The Company manages its operations as a single segment for the purposes of assessing performance and making operating decisions. The Company provides a suite of purpose-built handheld and desktop mass spectrometry devices for use in a broad array of markets. Operating segments are defined as components of an enterprise for which separate financial information is regularly evaluated by the Company’s chief operating decision maker, or decision-making group, in deciding how to allocate resources and assess performance. The Company has determined that its chief operating decision maker is its Chief Executive Officer. All of the Company’s long-lived assets are held in the United States.
Revenue Recognition
The Company recognizes revenue from sales to customers under ASC 606, Revenue from Contracts with Customers (“ASC 606”), by applying the following five steps: (1) identification of the contract, or contracts, with a customer, (2) identification of the performance obligations in the contract, (3) determination of the transaction price, (4) allocation of the transaction price to the performance obligations in the contract and (5) recognition of revenue when, or as, performance obligations are satisfied.
Product and Service Revenue
The Company derives product and service revenue primarily from the sale of handheld and desktop products and related consumables and services. Revenue is recognized when control of the promised products, consumables or services is transferred to the Company’s customers, in an amount that reflects the consideration the Company expects to be entitled to in exchange for those products, consumables or services (the transaction price). A performance obligation is a promise in a contract to transfer a distinct product or service to a customer and is the unit of accounting under ASC 606. For devices and consumables sold by the Company, control transfers to the customer at a point in time. To indicate the transfer of control, the Company must have a present right to payment, legal title must have passed to the customer, the customer must have the significant risks and rewards of ownership, and where acceptance is other than perfunctory, the customer must have accepted the product or service. The Company’s principal terms of sale are freight on board (“FOB”) shipping point, or equivalent, and, as such, the Company primarily transfers control and records revenue for product sales upon shipment. Sales arrangements with delivery terms that are not FOB shipping point are not recognized upon shipment
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
and the transfer of control for revenue recognition is evaluated based on the associated shipping terms and customer obligations. If a performance obligation to the customer with respect to a sales transaction remains to be fulfilled following shipment (typically installation or acceptance by the customer), revenue recognition for that performance obligation is deferred until such commitments have been fulfilled. For extended warranty and support, control transfers to the customer over the term of the arrangement. Revenue for extended warranty and support is recognized based upon the period of time elapsed under the arrangement as this period represents the transfer of benefits or services under the agreement.
For a contract with multiple performance obligations, the Company allocates the contract’s transaction price to each performance obligation on a relative standalone selling price basis using the Company’s best estimate of the standalone selling price of each distinct product or service in the contract. The primary method used to estimate standalone selling price is the price observed in standalone sales to customers; however, when prices in standalone sales are not available the Company may use third-party pricing for similar products or services or estimate the standalone selling price, which is set by management. Allocation of the transaction price is determined at the contract’s inception.
The Company recognizes a receivable at the point in time at which it has an unconditional right to payment. Such receivables are not contract assets. Payment terms for customer orders, including for each of the Company’s primary performance obligations, are typically 30 to 90 days after the shipment or delivery of the product, and such payments typically do not include payments that are variable, dependent on specified factors or events. In limited circumstances, there exists a right of return for product if agreed to by the Company. Revenue is only recognized for those goods that are not expected to be returned such that it is probable that there will not be a significant reversal of cumulative revenue. Service arrangements commonly call for payments in advance of performing the work (e.g., extended warranty/service contracts), upon completion of the service or a mix of both. The Company does not enter into significant financing agreements or other forms of variable consideration.
Contract assets arise from unbilled amounts in customer arrangements when revenue recognized exceeds the amount billed to the customer and the Company’s right to payment is not only subject to the passage of time. The Company had no contract assets related to product or service revenue as of December 31, 2018 or 2019 or September 30, 2020 (unaudited).
Contract liabilities represent the Company’s obligation to transfer goods or services to a customer for which it has received consideration (or the amount is due) from the customer. The Company has determined that its only contract liability related to product and service revenue is deferred revenue, which consists of amounts that have been invoiced but that have not been recognized as revenue. Amounts expected to be recognized as revenue within 12 months of the balance sheet date are classified as current deferred revenue and amounts expected to be recognized as revenue beyond 12 months of the balance sheet date are classified as noncurrent deferred revenue.
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
The following is a summary of the activity of the Company’s deferred revenue related to product and service revenue (in thousands):
|
|
|
|
Year ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Balances at beginning of period
|
|
|
|
$
|
2,632
|
|
|
|
|
$
|
1,057
|
|
|
|
|
$
|
1,057
|
|
|
|
|
$
|
1,509
|
|
|
|
Recognition of revenue included in balance at beginning of the period
|
|
|
|
|
(2,076)
|
|
|
|
|
|
(446)
|
|
|
|
|
|
(872)
|
|
|
|
|
|
(1,059)
|
|
|
|
Revenue deferred during the period, net of revenue recognized
|
|
|
|
|
501
|
|
|
|
|
|
898
|
|
|
|
|
|
1,476
|
|
|
|
|
|
8,806
|
|
|
|
Balances at end of period
|
|
|
|
$
|
1,057
|
|
|
|
|
$
|
1,509
|
|
|
|
|
$
|
1,661
|
|
|
|
|
$
|
9,256
|
|
|
The amount of deferred revenue equals the transaction price allocated to unfulfilled performance obligations for the period presented. Such deferred revenue amounts related to product and service revenue are expected to be recognized in the future as follows (in thousands):
|
|
|
|
December 31,
2019
|
|
|
September 30,
2020
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Deferred revenue expected to be recognized in:
|
|
|
|
|
One year or less
|
|
|
|
$
|
937
|
|
|
|
|
$
|
2,227
|
|
|
|
One to two years
|
|
|
|
|
320
|
|
|
|
|
|
3,951
|
|
|
|
Three years and beyond
|
|
|
|
|
252
|
|
|
|
|
|
3,078
|
|
|
|
|
|
|
|
$
|
1,509
|
|
|
|
|
$
|
9,256
|
|
|
The Company has adjusted $0.4 million and $0.6 million for the years ended December 31, 2018 and 2019, respectively, from deferred revenue, current to deferred revenue, net of current portion in the accompanying balance sheet in order to be consistent with the current interim period’s classification.
License and Contract Revenue
The Company generates revenue from short and long-term contracts associated with the design and development and delivery of detection devices or related design and support services. To date, these contracts are primarily with the U.S. government or commercial entities contracting with the U.S. government, but the Company has also had such contracts with commercial partners. The Company’s contracts with the U.S. government typically are subject to the Federal Acquisition Regulation (“FAR”) and are priced based on estimated or actual costs of producing goods or providing services. The FAR provides guidance on the types of costs that are allowable in establishing prices for goods or services provided under U.S. government contracts. The pricing for non-U.S. government contracts is based on the specific negotiations with each customer.
Under the typical payment terms of U.S. government fixed-price contracts, the customer pays in accordance with the terms of the specific agreement, but generally through progress payments. If these progress payments are made in advance, these payments are recorded as a contract liability, classified as deferred revenue within the accompanying balance sheet, until the Company provides the underlying services. For U.S. government cost-type contracts, the customer generally pays for actual costs incurred within a short period of time. For contracts with commercial partners, payments are made in accordance with the terms of the specific agreement. For agreements which call for milestone payments, to the extent the Company does not conclude that it is probable that a significant reversal of
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
cumulative revenue will occur, a contract asset is generated until the Company is permitted to bill for costs incurred, which is classified as unbilled receivables in the accompanying balance sheet. In some cases, payments received in advance under license agreements are recorded as deferred revenue and recognized over the respective contract term, absent any other performance obligations.
Generally, revenue for long-term contracts is recognized based upon the cost-to-cost measure of progress, provided that the Company meets the criteria associated with transferring control of the good or service over time such as not creating an asset with an alternative use and having an enforceable right to payment for completed performance. However, the Company evaluates the proper revenue recognition on a contract by contract basis, as each contract generally contains terms specific to the underlying agreement which result in differing performance obligations and payment terms (cost plus, fixed price agreements among others). The Company includes the unconstrained amount of consideration in the transaction price. The amount included in the transaction price is constrained to the amount for which it is probable that a significant reversal of cumulative revenue recognized will not occur. At the end of each subsequent reporting period, as required under ASC 606, the Company re-evaluates the estimated consideration included in the transaction price and any related constraint, and if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis in the period of adjustment. For example, during the year ended December 31, 2018, the Company determined that $6.4 million of consideration under a contract with a commercial entity was no longer constrained and the Company recognized $5.3 million of contract revenue on a cumulative catch up basis that was determined based on the progress that had been made following the cost to cost model.
Contract assets arise from unbilled amounts in customer arrangements when revenue recognized exceeds the amount billed to the customer and the Company’s right to payment is not just subject to the passage of time. The Company includes contract assets within unbilled receivables in the accompanying balance sheet. As of December 31, 2018 and 2019, the Company had contract assets related to contract or license revenue totaling $2.2 million and $0.1 million, respectively. As of September 30, 2020 (unaudited), the Company had contract assets related to contract or license revenue totaling $0.1 million.
Contract liabilities represent the Company’s obligation to transfer goods or services to a customer for which it has received consideration (or the amount is due) from the customer. Contract liabilities arising from license agreements typically represent payments received for the license of symbolic intellectual property for a defined term. As of December 31, 2017, Company had contract liabilities totaling $0.5 million related to contract and license revenue which was recognized during the year ended December 31, 2018. As of December 31, 2018, the Company had contract liabilities totaling $0.3 million related to contract and license revenue which was recognized during the year ended December 31, 2019. As of December 31, 2019, the Company had contract liabilities totaling $0.6 million related to contract and license revenue, which was recognized during the nine months ended September 30, 2020 (unaudited). As of September 30, 2020 (unaudited), the Company had no deferred revenue related to contract and license revenue. The Company recognizes deferred revenue by first allocating from the beginning deferred revenue balance to the extent that the beginning deferred revenue balance exceeds the revenue to be recognized. Billings during the period are added to the deferred revenue balance to be recognized in future periods. As of December 31, 2019, the Company’s wholly- or partially-unsatisfied performance obligations totaled $2.4 million related to contract and license agreements entered into prior to year end, which the Company expects to recognize during the years ended December 31, 2020 and 2021. As of September 30, 2020 (unaudited), the Company’s wholly- or partially-unsatisfied performance obligations totaled $0.7 million related to contract and license agreements entered into prior to period end, which the Company expects to recognize over the remainder of 2020 and during the year ended December 31, 2021.
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
Distribution Channels
A majority of the Company’s revenue is generated by sales in conjunction with its distribution partners, such as its international distributors and, in the United States, for end customers where a government contract is required or a customer has a pre-existing relationship. When the Company transacts with a distribution partner, its contractual arrangement is with the partner and not with the end-use customer. Whether the Company transacts business with and receives the order from a distribution partner or directly from an end-use customer, its revenue recognition policy and resulting pattern of revenue recognition for the order are the same.
Disaggregated Revenue
The Company’s product and service revenue consists of sales of devices and consumables and the sale of service and extended warranty plans. The following table presents the Company’s revenue by revenue stream (in thousands):
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Product and service revenue:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Device sales revenue
|
|
|
|
$
|
12,094
|
|
|
|
|
$
|
13,038
|
|
|
|
|
$
|
6,819
|
|
|
|
|
$
|
16,766
|
|
|
|
Consumables and service revenue
|
|
|
|
|
1,644
|
|
|
|
|
|
2,306
|
|
|
|
|
|
1,473
|
|
|
|
|
|
2,078
|
|
|
|
Total product and service revenue
|
|
|
|
|
13,738
|
|
|
|
|
|
15,344
|
|
|
|
|
|
8,292
|
|
|
|
|
|
18,844
|
|
|
|
License and contract revenue
|
|
|
|
|
8,316
|
|
|
|
|
|
2,628
|
|
|
|
|
|
1,332
|
|
|
|
|
|
2,333
|
|
|
|
Total revenue
|
|
|
|
$
|
22,054
|
|
|
|
|
$
|
17,972
|
|
|
|
|
$
|
9,624
|
|
|
|
|
$
|
21,177
|
|
|
The following table presents the Company’s product and service revenue by device type (in thousands):
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Handheld
|
|
|
|
$
|
11,582
|
|
|
|
|
$
|
10,518
|
|
|
|
|
$
|
6,141
|
|
|
|
|
$
|
14,491
|
|
|
|
Desktop
|
|
|
|
|
2,156
|
|
|
|
|
|
4,826
|
|
|
|
|
|
2,151
|
|
|
|
|
|
4,353
|
|
|
|
Total product and service revenue
|
|
|
|
$
|
13,738
|
|
|
|
|
$
|
15,344
|
|
|
|
|
$
|
8,292
|
|
|
|
|
$
|
18,844
|
|
|
Revenue based on the end-user entity type for the Company’s product and service revenue are presented below (in thousands):
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Government
|
|
|
|
$
|
11,443
|
|
|
|
|
$
|
10,324
|
|
|
|
|
$
|
6,226
|
|
|
|
|
$
|
14,475
|
|
|
|
Pharmaceutical/Biotechnology
|
|
|
|
|
2,266
|
|
|
|
|
|
4,474
|
|
|
|
|
|
1,717
|
|
|
|
|
|
4,100
|
|
|
|
Academia
|
|
|
|
|
29
|
|
|
|
|
|
546
|
|
|
|
|
|
349
|
|
|
|
|
|
269
|
|
|
|
Total product and service revenue
|
|
|
|
$
|
13,738
|
|
|
|
|
$
|
15,344
|
|
|
|
|
$
|
8,292
|
|
|
|
|
$
|
18,844
|
|
|
|
|
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
The following table disaggregates the Company’s revenue from contracts with customers by geography, which are determined based on the customer location (in thousands):
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
North America
|
|
|
|
$
|
19,015
|
|
|
|
|
$
|
13,686
|
|
|
|
|
$
|
7,961
|
|
|
|
|
$
|
18,130
|
|
|
|
Europe, Middle East and Africa
|
|
|
|
|
2,425
|
|
|
|
|
|
2,954
|
|
|
|
|
|
668
|
|
|
|
|
|
1,591
|
|
|
|
Asia Pacific
|
|
|
|
|
614
|
|
|
|
|
|
1,332
|
|
|
|
|
|
995
|
|
|
|
|
|
1,456
|
|
|
|
|
|
|
|
$
|
22,054
|
|
|
|
|
$
|
17,972
|
|
|
|
|
$
|
9,624
|
|
|
|
|
$
|
21,177
|
|
|
International sales are comprised of product and service revenue, with all license and contract revenue being attributable to North America.
Shipping and Handling Fees and Costs
Shipping and handling fees billed to customers for product shipments are recorded in product and service revenue in the accompanying statements of operations and comprehensive loss. Shipping and handling costs incurred for inventory purchases and product shipments are recorded in cost of revenue in the accompanying statements of operations and comprehensive loss.
Cost of Revenue
Product cost of revenue primarily consists of costs for raw material parts and associated freight, shipping and handling costs, royalties, contract manufacturer costs, salaries and other personnel costs, overhead and other direct costs related to those sales recognized as product revenue in the period. Cost of revenue for services primarily consists of salaries and other personnel costs, travel related to services provided, facility costs associated with training, warranties and other costs of servicing equipment on a return-to-factory basis and at customer sites. License and contract cost of revenue primarily consists of salaries and other personnel costs, materials, travel and other direct costs related to those revenue recognized as license and contract in the period.
Research and Development Expenses
Research and development expenses consist primarily of employee-related expenses incurred for research activities, product development, hardware and software engineering, consultant services and other costs associated with the Company’s technology platform and products, research materials and facilities, depreciation and maintenance expense.
Advertising Expense
The Company expenses costs of advertising as incurred. Advertising costs were $0.5 million and $0.6 million during the years ended December 31, 2018 and 2019, respectively, and $0.5 million and $0.3 million during the nine months ended September 30, 2019 and 2020 (unaudited), respectively.
Patent Costs
All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.
Stock-Based Compensation
The Company measures stock-based option awards granted to employees, consultants and directors based on their fair value on the date of grant using the Black-Scholes option-pricing model. Compensation expense for those awards is recognized, net of estimated forfeitures, over the requisite service period, which is generally the vesting period of the respective award. The straight-line method of
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
expense recognition is applied to all awards with service-only conditions, while the graded vesting method is applied to all grants with both service and performance conditions.
The Company classifies stock-based compensation expense in its statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.
Comprehensive Loss
Comprehensive loss includes net loss as well as other changes in stockholders’ equity (deficit) that result from transactions and economic events other than those with stockholders. For the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020 (unaudited), there was no difference between net loss and comprehensive loss.
Net Income (Loss) per Share
The Company follows the two-class method when computing net income (loss) per share, as the Company has issued shares that meet the definition of participating securities. The two-class method determines net income (loss) per share for each class of common and participating securities according to dividends declared or accumulated and participation rights in undistributed earnings. The two-class method requires income available to common stockholders for the period to be allocated between common and participating securities based upon their respective rights to receive dividends as if all income for the period had been distributed.
Basic net income (loss) per share attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period. Diluted net income (loss) attributable to common stockholders is computed by adjusting net income (loss) attributable to common stockholders to reallocate undistributed earnings based on the potential impact of dilutive securities. Diluted net income (loss) per share attributable to common stockholders is computed by dividing the diluted net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of common stock equivalents.
The Company’s convertible preferred stock contractually entitles the holders of such shares to participate in dividends but does not contractually require the holders of such shares to participate in losses of the Company. Accordingly, in periods in which the Company reports a net loss, such losses are not allocated to such participating securities. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported a net loss attributable to common stockholders for the years ended December 31, 2018 and 2019 and for the nine months ended September 30, 2019 and 2020 (unaudited).
Income Taxes
The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined on the basis of the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.
The Company accounts for uncertainty in income taxes recognized in the financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued a new standard related to leases to increase transparency and comparability among organizations by requiring the recognition of right-of-use (“ROU”) assets and lease liabilities on the balance sheet. Most prominent among the changes in the standard is the recognition of ROU assets and lease liabilities by lessees for those leases classified as operating leases. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Company is also required to recognize and measure leases existing at, or entered into after, the beginning of the period of adoption, presented using a current-period adjustment approach, with certain practical expedients available. The Company elected to early adopt the standard effective January 1, 2018, using a modified retrospective method, by applying the transition approach as of the beginning of the period of adoption
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement which eliminates, modifies, and adds disclosure requirements on fair value measurements. The standard is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. The Company adopted this guidance as of January 1, 2020 and the adoption did not have a material impact on its financial statements.
Recently Issued Accounting Pronouncements
The Company qualifies as “emerging growth company” as defined in the Jumpstart Our Business Startups Act of 2012 and has elected not to “opt out” of the extended transition related to complying with new or revised accounting standards, which means that when a standard is issued or revised and it has different application dates for public and nonpublic companies, the Company will adopt the new or revised standard at the time nonpublic companies adopt the new or revised standard and will do so until such time that the Company either (i) irrevocably elects to “opt out” of such extended transition period or (ii) no longer qualifies as an emerging growth company.
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326). The new standard adjusts the accounting for assets held at amortized costs basis, including marketable securities accounted for as available for sale, and trade receivables. The standard eliminates the probable initial recognition threshold and requires an entity to reflect its current estimate of all expected credit losses. The allowance for credit losses is a valuation account that is deducted from the amortized cost basis of the financial assets to present the net amount expected to be collected. For public entities except smaller reporting companies, the guidance is effective for annual reporting periods beginning after December 15, 2019 and for interim periods within those fiscal years. For non-public entities and smaller reporting companies, the guidance was effective for annual reporting periods beginning after December 15, 2021. In November 2019, the FASB issued ASU No. 2019-10, which deferred the effective date for non-public entities to annual reporting periods beginning after December 15,
908 Devices Inc.
Notes to Financial Statements (Continued)
2. Summary of Significant Accounting Policies (Continued)
2022, including interim periods within those fiscal years. Early application is allowed. The Company is currently assessing the date of the adoption and the impact of the adoption of this guidance on its financial statements.
In December 2019, the FASB issued ASU 2019-12, Income Taxes (ASC 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”), which is intended to simplify various areas related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in ASC 740 and also clarifies and amends existing guidance to improve consistent application. For public entities the guidance is effective for annual reporting periods beginning after December 15, 2020 and for interim periods within those fiscal years. For non-public entities, the guidance is effective for annual reporting periods beginning after December 15, 2021 and for interim periods within years beginning after December 15, 2022, with early adoption permitted. The Company is currently evaluating the impact of this standard on its financial statements.
3. Fair Value Measurements
The following tables present the Company’s fair value hierarchy for its assets and liabilities that are measured at fair value on a recurring basis (in thousands):
|
|
|
|
Fair Value Measurements at
December 31, 2018 Using:
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
|
|
$
|
6,808
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
6,808
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock warrant liability
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
1,341
|
|
|
|
|
$
|
1,341
|
|
|
|
Commercial services agreement liability—related party
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
750
|
|
|
|
|
|
750
|
|
|
|
Totals
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
2,091
|
|
|
|
|
$
|
2,091
|
|
|
|
|
|
|
|
|
Fair Value Measurements at
December 31, 2019 Using:
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock warrant liability
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
728
|
|
|
|
|
$
|
728
|
|
|
|
Commercial services agreement liability—related party
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
750
|
|
|
|
|
|
750
|
|
|
|
Totals
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
1,478
|
|
|
|
|
$
|
1,478
|
|
|
|
|
|
|
|
|
Fair Value Measurements at September 30,
2020 (unaudited) Using:
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Preferred stock warrant liability
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
754
|
|
|
|
|
$
|
754
|
|
|
|
Commercial services agreement liability—related party
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
375
|
|
|
|
|
|
375
|
|
|
|
Totals
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
1,129
|
|
|
|
|
$
|
1,129
|
|
|
Money market funds were valued by the Company based on quoted market prices, which represent a Level 1 measurement within the fair value hierarchy. There were no transfers into or out of Level 3 during the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020 (unaudited).
908 Devices Inc.
Notes to Financial Statements (Continued)
3. Fair Value Measurements (Continued)
The preferred stock warrant liability in the table above consisted of the fair value of warrants to purchase the Company’s redeemable convertible preferred stock (see Note 9) and was based on significant inputs not observable in the market, which represent a Level 3 measurement within the fair value hierarchy. The Company’s valuation of the preferred stock warrants utilized the Black-Scholes option-pricing model, which incorporates assumptions and estimates to value the preferred stock warrants. The Company assesses these assumptions and estimates on a quarterly basis as additional information impacting the assumptions is obtained. Changes in the fair value of the preferred stock warrants are recognized as other income (expense) in the statements of operations and comprehensive loss.
The quantitative elements associated with the Company’s Level 3 inputs impacting the fair value measurement of the preferred stock warrant liability include the fair value per share of the underlying convertible preferred stock, the remaining contractual term of the warrants, risk-free interest rate, expected dividend yield and expected volatility of the price of the underlying preferred stock. The Company determines the fair value per share of the underlying preferred stock by taking into consideration the most recent sales of its convertible preferred stock, results obtained from third-party valuations and additional factors that the Company deems relevant. The Company historically has been a private company and lacks company-specific historical and implied volatility information of its stock. Therefore, it estimates its expected stock volatility based on the historical volatility of publicly traded peer companies for a term equal to the remaining contractual term of the warrants. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve for time periods approximately equal to the remaining contractual term of the warrants. The Company has estimated a 0% dividend yield based on the expected dividend yield and the fact that the Company has never paid or declared dividends.
The table below quantifies the weighted average of the most significant inputs used for the warrants:
|
|
|
|
December 31,
|
|
|
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Fair value of preferred stock
|
|
|
|
$
|
3.47
|
|
|
|
|
$
|
5.67
|
|
|
|
|
$
|
5.46
|
|
|
|
Risk-free interest rate
|
|
|
|
|
2.6%
|
|
|
|
|
|
1.9%
|
|
|
|
|
|
0.5%
|
|
|
|
Expected volatility
|
|
|
|
|
67%
|
|
|
|
|
|
51%
|
|
|
|
|
|
60%
|
|
|
|
Expected dividend yield
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Remaining contractual term (in years)
|
|
|
|
|
4
|
|
|
|
|
|
8
|
|
|
|
|
|
7
|
|
|
908 Devices Inc.
Notes to Financial Statements (Continued)
3. Fair Value Measurements (Continued)
The following table provides a roll-forward of the aggregate fair values of the Company’s preferred stock warrants for which fair value is determined by Level 3 inputs (in thousands):
|
|
|
|
Total
Preferred Stock
Warrant Liability
|
|
|
Fair value at December 31, 2017
|
|
|
|
$
|
933
|
|
|
|
Issuance of warrants
|
|
|
|
|
317
|
|
|
|
Change in fair value
|
|
|
|
|
91
|
|
|
|
Fair value at December 31, 2018
|
|
|
|
|
1,341
|
|
|
|
Issuance of warrants
|
|
|
|
|
168
|
|
|
|
Exercise of warrants
|
|
|
|
|
(722)
|
|
|
|
Change in fair value
|
|
|
|
|
(59)
|
|
|
|
Fair value at December 31, 2019
|
|
|
|
|
728
|
|
|
|
Change in fair value
|
|
|
|
|
26
|
|
|
|
Fair value at September 30, 2020 (unaudited)
|
|
|
|
$
|
754
|
|
|
The Company has a commercial services agreement entered into in 2015 with one of its preferred stock investors under which the investor became eligible for payment upon the achievement of certain sales and marketing milestones by December 31, 2016. Payment of the milestones is only upon the occurrence of a Deemed Liquidation Event as defined in the Company’s charter and described in Note 8. The investor achieved milestones totaling $1.5 million, which will become payable only upon a Deemed Liquidation prior to a qualified public offering as described in Note 8. The Company accounts for the commercial services agreement liability as a financial instrument that may require a transfer of assets because of the liquidation features. The liability is remeasured to fair value at each reporting period based on the probability of the occurrence of a Deemed Liquidation Event. As of December 31, 2018 and 2019, the Company assessed the probability of a Deemed Liquidation at 50%. Accordingly, the Company has recorded a liability for the fair value of the commercial services agreement of $0.8 million as of December 31, 2018 and 2019. As of September 30, 2020 (unaudited), the Company assessed the probability of a Deemed Liquidation at 25%, and, accordingly reduced its commercial services liability by $0.4 million.
4. Inventory
Inventory consisted of the following (in thousands):
|
|
|
|
December 31,
|
|
|
September 30,
2020
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Raw materials
|
|
|
|
$
|
1,965
|
|
|
|
|
$
|
2,013
|
|
|
|
|
$
|
2,148
|
|
|
|
Work-in-progress
|
|
|
|
|
250
|
|
|
|
|
|
412
|
|
|
|
|
|
1,418
|
|
|
|
Finished goods
|
|
|
|
|
1,308
|
|
|
|
|
|
2,812
|
|
|
|
|
|
1,269
|
|
|
|
|
|
|
|
$
|
3,523
|
|
|
|
|
$
|
5,237
|
|
|
|
|
$
|
4,835
|
|
|
908 Devices Inc.
Notes to Financial Statements (Continued)
5. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
|
|
|
|
December 31,
|
|
|
September 30,
2020
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Laboratory and demonstration equipment
|
|
|
|
$
|
3,664
|
|
|
|
|
$
|
4,056
|
|
|
|
|
$
|
4,257
|
|
|
|
Computer equipment and software
|
|
|
|
|
417
|
|
|
|
|
|
417
|
|
|
|
|
|
417
|
|
|
|
Furniture and fixtures
|
|
|
|
|
193
|
|
|
|
|
|
193
|
|
|
|
|
|
193
|
|
|
|
Leasehold improvements
|
|
|
|
|
21
|
|
|
|
|
|
21
|
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
4,295
|
|
|
|
|
|
4,687
|
|
|
|
|
|
4,888
|
|
|
|
Less: Accumulated depreciation and amortization
|
|
|
|
|
(2,461)
|
|
|
|
|
|
(3,361)
|
|
|
|
|
|
(3,954)
|
|
|
|
|
|
|
|
$
|
1,834
|
|
|
|
|
$
|
1,326
|
|
|
|
|
$
|
934
|
|
|
Depreciation expense amounted to $0.9 million in each of the years ended December 31, 2018 and 2019, and $0.7 million and $0.6 million in each of the nine months ended September 30, 2019 and 2020 (unaudited), respectively.
6. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
|
|
|
|
December 31,
|
|
|
September 30,
2020
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Accrued employee compensation and benefits
|
|
|
|
$
|
1,036
|
|
|
|
|
$
|
1,024
|
|
|
|
|
$
|
1,653
|
|
|
|
Accrued warranty
|
|
|
|
|
679
|
|
|
|
|
|
968
|
|
|
|
|
|
1,229
|
|
|
|
Accrued professional fees
|
|
|
|
|
246
|
|
|
|
|
|
307
|
|
|
|
|
|
1,817
|
|
|
|
Accrued end of term debt charge
|
|
|
|
|
425
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Accrued other
|
|
|
|
|
467
|
|
|
|
|
|
610
|
|
|
|
|
|
183
|
|
|
|
|
|
|
|
$
|
2,853
|
|
|
|
|
$
|
2,909
|
|
|
|
|
$
|
4,882
|
|
|
Changes in the Company’s product warranty obligation are as follows (in thousands):
|
|
|
|
Year ended
December 31,
|
|
|
Nine Months
Ended September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Accrual balance at beginning of period
|
|
|
|
$
|
366
|
|
|
|
|
$
|
679
|
|
|
|
|
$
|
679
|
|
|
|
|
$
|
968
|
|
|
|
Provision for new warranties
|
|
|
|
|
488
|
|
|
|
|
|
533
|
|
|
|
|
|
337
|
|
|
|
|
|
804
|
|
|
|
Settlements and adjustments made during the period
|
|
|
|
|
(175)
|
|
|
|
|
|
(244)
|
|
|
|
|
|
(181)
|
|
|
|
|
|
(543)
|
|
|
|
Accrual balance at end of period
|
|
|
|
$
|
679
|
|
|
|
|
$
|
968
|
|
|
|
|
$
|
835
|
|
|
|
|
$
|
1,229
|
|
|
908 Devices Inc.
Notes to Financial Statements (Continued)
7. Long-Term Debt
Long-term debt consisted of the following (in thousands):
|
|
|
|
December 31,
|
|
|
September 30,
2020
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Principal amount of long-term debt
|
|
|
|
$
|
10,000
|
|
|
|
|
$
|
15,000
|
|
|
|
|
$
|
15,000
|
|
|
|
Less: Current portion of long-term debt
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
(3,500)
|
|
|
|
Long-term debt, net of current portion
|
|
|
|
|
10,000
|
|
|
|
|
|
15,000
|
|
|
|
|
|
11,500
|
|
|
|
Debt discount, net of accretion
|
|
|
|
|
(350)
|
|
|
|
|
|
(231)
|
|
|
|
|
|
(183)
|
|
|
|
Long-term debt, net of discount and current portion
|
|
|
|
$
|
9,650
|
|
|
|
|
$
|
14,769
|
|
|
|
|
$
|
11,317
|
|
|
Loan and Security Agreements
As of December 31, 2018, the Company had outstanding borrowings of $10.0 million under a loan and security agreement entered into in 2017 (the “2017 Loan”). The borrowings under the 2017 Loan were repayable in monthly interest-only payments at the greater of (i) 8.25% plus the Wall Street Journal prime rate minus 4.25%, and (ii) 8.25% and, commencing May 1, 2019, in 17 monthly payments of equal principal plus interest. In addition, a final payment equal to 4.25% of any amounts drawn under the 2017 Loan was due upon the earlier of the maturity date, acceleration of the term loans or prepayment of all or part of the term loans. In April 2019, the Company amended the 2017 Loan to, among other things, extend the interest-only period through January 2020 and extend the maturity date to June 1, 2021. The Loan was secured by a lien on the Company’s assets.
In August 2019, the Company repaid the outstanding balance of the 2017 Loan of $10.0 million plus the end of term payment of $0.4 million and entered into a Loan and Security Agreement (the “2019 Loan”) with a new financial institution. Upon repayment of the outstanding amounts, the Company recorded a loss on extinguishment of debt of $0.3 million, which was included in interest expense in the statements of operations and comprehensive loss.
The 2019 Loan provides for up to $15.0 million in borrowings, of which the entire $15.0 million was borrowed in 2019. The 2019 Loan calls for monthly interest-only payments through February 28, 2021, followed by 30 monthly payments of principal and interest commencing March 1, 2021. The 2019 Loan matures on August 1, 2023. The 2019 Loan bears interest at a rate equal to the greater of (i) 0.5% plus the Wall Street Journal prime rate and (ii) 6.0%. The collateral for the 2019 Loan includes substantially all of the Company’s property (excluding intellectual property, which is subject to a negative pledge).
The 2019 Loan includes financial covenants requiring the Company to maintain a minimum liquidity ratio of unrestricted cash plus 50% of accounts receivable to debt outstanding under the 2019 Loan of at least 1.00 to 1.00. The Company is also required to maintain a balance of unrestricted cash at the lender in an amount not less than $3.0 million. Further, the Company and the lender agree to amend the 2019 Loan to set financial covenants for 2020 and beyond. The 2019 Loan also contains negative covenants restricting the Company’s activities, including limitations on dispositions, mergers or acquisitions; encumbering or granted in a security interest in its intellectual property; incurring indebtedness or liens; paying dividends; making certain investments; and certain other business transactions.
On March 15, 2020, the Company signed the first amendment to the 2019 Loan which set the covenants for the first half of 2020 and increased the balance of minimum unrestricted cash held at the lender to an amount not less than $4.0 million. On August 7, 2020, the Company signed the second amendment to the 2019 Loan which set the covenants for the second half of 2020 to the achievement of either a minimum revenue amount or a defined liquidity ratio. The second amendment also decreased
908 Devices Inc.
Notes to Financial Statements (Continued)
7. Long-Term Debt (Continued)
the balance of minimum unrestricted cash held at the lender to an amount not less than $3.0 million. As of December 31, 2019 and September 30, 2020 (unaudited), the Company was in compliance with all financial covenants under the 2019 Loan, as amended.
In connection with the 2019 Loan, the Company issued to the lender a warrant to purchase 35,771 shares of Series E Preferred Stock at a purchase price of $6.29 per share. The fair value of the warrant at issuance was estimated to be $0.2 million and was recorded as a debt discount and as a preferred stock warrant liability (see Notes 3 and 9).
As of December 31, 2019 and September 30, 2020 (unaudited), the interest rate applicable to borrowings under the 2019 Loan, as amended was 6.0%. During the nine months ended September 30, 2020 (unaudited), the weighted average effective interest rate on outstanding borrowings under the 2019 Loan was approximately 6.5%.
As of December 31, 2019, future principal payments are as follows (in thousands):
|
Year Ending December 31:
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
$
|
—
|
|
|
|
2021
|
|
|
|
|
5,000
|
|
|
|
2022
|
|
|
|
|
6,000
|
|
|
|
2023
|
|
|
|
|
4,000
|
|
|
|
|
|
|
|
$
|
15,000
|
|
|
Paycheck Protection Program Loan
On April 18, 2020, the Company issued a Promissory Note to Signature Bank, pursuant to which it received loan proceeds of $2.2 million (the “Loan”) provided under the Paycheck Protection Program established under the Coronavirus Aid, Relief, and Economic Security Act and guaranteed by the U.S. Small Business Administration (the “Paycheck Protection Program”). However, based on updated guidance related to this program, the Company repaid the Loan on May 4, 2020. The Loan was unsecured, was scheduled to mature on April 18, 2022, had a fixed interest rate of 1.0% per annum and was subject to the standard terms and conditions applicable to loans administered under the Paycheck Protection Program.
8. Redeemable Convertible Preferred Stock
The Company has issued Series A redeemable convertible preferred stock (the “Series A Preferred Stock”), Series B redeemable convertible preferred stock (the “Series B Preferred Stock”), Series C redeemable convertible preferred stock (the “Series C Preferred Stock”), Series D redeemable convertible preferred stock (the “Series D Preferred Stock”) and Series E redeemable convertible preferred stock (the “Series E Preferred Stock”). The Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock are collectively referred to as the “Preferred Stock”.
In September 2018, the Company issued and sold 709,835 shares of Series D Preferred Stock at a price of $5.6351 per share for gross proceeds of $4.0 million. The Company incurred issuance costs in connection with this transaction of $0.1 million.
In April 2019, the Company issued and sold 2,782,194 shares of Series E Preferred Stock to new and existing investors at a price of $6.29 per share for gross proceeds of $17.5 million. The Company incurred issuance costs in connection with this transaction of $0.2 million.
In November 2019, holders of warrants for the purchase of Series A Preferred Stock and Series B Preferred Stock at an exercise price of $0.01 per share exercised their warrants. Accordingly, the Company issued 210,000 shares of Series A Preferred Stock and 163,242 shares of Series B Preferred Stock (see Note 9).
908 Devices Inc.
Notes to Financial Statements (Continued)
8. Redeemable Convertible Preferred Stock (Continued)
Upon issuance of each class of Preferred Stock, the Company assessed the embedded conversion and liquidation features of the securities and determined that such features did not require the Company to separately account for these features. The Company also concluded that no beneficial conversion feature existed on the issuance date of each class of Preferred Stock.
As of December 31, 2018 and 2019 and September 30, 2020 (unaudited), Preferred Stock consisted of the following (in thousands, except share amounts):
|
|
|
|
December 31, 2018
|
|
|
|
|
|
Preferred
Stock
Authorized
|
|
|
Preferred
Stock Issued
and
Outstanding
|
|
|
Carrying
Value
|
|
|
Liquidation
Preference
|
|
|
Common Stock
Issuable Upon
Conversion
|
|
|
Series A Preferred Stock
|
|
|
|
|
8,490,778
|
|
|
|
|
|
8,280,778
|
|
|
|
|
$
|
8,281
|
|
|
|
|
$
|
8,281
|
|
|
|
|
|
8,280,778
|
|
|
|
Series B Preferred Stock
|
|
|
|
|
4,650,216
|
|
|
|
|
|
4,441,974
|
|
|
|
|
|
8,000
|
|
|
|
|
|
8,000
|
|
|
|
|
|
4,441,974
|
|
|
|
Series C Preferred Stock
|
|
|
|
|
3,788,068
|
|
|
|
|
|
3,768,068
|
|
|
|
|
|
12,949
|
|
|
|
|
|
13,000
|
|
|
|
|
|
3,768,068
|
|
|
|
Series D Preferred Stock
|
|
|
|
|
4,409,850
|
|
|
|
|
|
4,259,011
|
|
|
|
|
|
23,859
|
|
|
|
|
|
24,000
|
|
|
|
|
|
4,259,011
|
|
|
|
|
|
|
|
|
21,338,912
|
|
|
|
|
|
20,749,831
|
|
|
|
|
$
|
53,089
|
|
|
|
|
$
|
53,281
|
|
|
|
|
|
20,749,831
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
Preferred
Stock
Authorized
|
|
|
Preferred Stock
Issued and
Outstanding
|
|
|
Carrying
Value
|
|
|
Liquidation
Preference
|
|
|
Common Stock
Issuable Upon
Conversion
|
|
|
Series A Preferred Stock
|
|
|
|
|
8,490,778
|
|
|
|
|
|
8,490,778
|
|
|
|
|
$
|
8,491
|
|
|
|
|
$
|
8,491
|
|
|
|
|
|
8,490,778
|
|
|
|
Series B Preferred Stock
|
|
|
|
|
4,650,216
|
|
|
|
|
|
4,605,216
|
|
|
|
|
|
8,294
|
|
|
|
|
|
8,294
|
|
|
|
|
|
4,605,216
|
|
|
|
Series C Preferred Stock
|
|
|
|
|
3,788,068
|
|
|
|
|
|
3,768,068
|
|
|
|
|
|
12,987
|
|
|
|
|
|
13,000
|
|
|
|
|
|
3,768,068
|
|
|
|
Series D Preferred Stock
|
|
|
|
|
4,409,850
|
|
|
|
|
|
4,259,011
|
|
|
|
|
|
23,904
|
|
|
|
|
|
24,000
|
|
|
|
|
|
4,259,011
|
|
|
|
Series E Preferred Stock
|
|
|
|
|
2,817,965
|
|
|
|
|
|
2,782,194
|
|
|
|
|
|
17,341
|
|
|
|
|
|
17,500
|
|
|
|
|
|
2,782,194
|
|
|
|
|
|
|
|
|
24,156,877
|
|
|
|
|
|
23,905,267
|
|
|
|
|
$
|
71,017
|
|
|
|
|
$
|
71,285
|
|
|
|
|
|
23,905,267
|
|
|
|
|
|
|
|
|
September 30, 2020 (unaudited)
|
|
|
|
|
|
Preferred
Stock
Authorized
|
|
|
Preferred Stock
Issued and
Outstanding
|
|
|
Carrying
Value
|
|
|
Liquidation
Preference
|
|
|
Common Stock
Issuable Upon
Conversion
|
|
|
Series A Preferred Stock
|
|
|
|
|
8,490,778
|
|
|
|
|
|
8,490,778
|
|
|
|
|
$
|
8,491
|
|
|
|
|
$
|
8,491
|
|
|
|
|
|
8,490,778
|
|
|
|
Series B Preferred Stock
|
|
|
|
|
4,650,216
|
|
|
|
|
|
4,605,216
|
|
|
|
|
|
8,294
|
|
|
|
|
|
8,294
|
|
|
|
|
|
4,605,216
|
|
|
|
Series C Preferred Stock
|
|
|
|
|
3,788,068
|
|
|
|
|
|
3,768,068
|
|
|
|
|
|
12,999
|
|
|
|
|
|
13,000
|
|
|
|
|
|
3,768,068
|
|
|
|
Series D Preferred Stock
|
|
|
|
|
4,409,850
|
|
|
|
|
|
4,259,011
|
|
|
|
|
|
23,938
|
|
|
|
|
|
24,000
|
|
|
|
|
|
4,259,011
|
|
|
|
Series E Preferred Stock
|
|
|
|
|
2,817,965
|
|
|
|
|
|
2,782,194
|
|
|
|
|
|
17,369
|
|
|
|
|
|
17,500
|
|
|
|
|
|
2,782,194
|
|
|
|
|
|
|
|
|
24,156,877
|
|
|
|
|
|
23,905,267
|
|
|
|
|
$
|
71,091
|
|
|
|
|
$
|
71,285
|
|
|
|
|
|
23,905,267
|
|
|
The holders of Preferred Stock have the following rights and preferences:
Voting
The holders of the Preferred Stock are entitled to vote, together with the holders of common stock as a single class, on all matters submitted to stockholders for a vote. Each holder of Preferred Stock is entitled to the number of votes equal to the number of shares of common stock into which each share of Preferred Stock is convertible as of the record date for determining stockholders entitled to vote on such matter.
908 Devices Inc.
Notes to Financial Statements (Continued)
8. Redeemable Convertible Preferred Stock (Continued)
The holders of Series A Preferred Stock, Series B Preferred Stock and Series E Preferred Stock, voting exclusively and as a separate class, are each entitled to elect one director of the Company.
Conversion
Each share of Preferred Stock is convertible into shares of common stock at the option of the holder at any time after the date of issuance. Each share of Preferred Stock will be automatically converted into shares of common stock, at the applicable conversion ratio then in effect, upon either (i) the closing of a firm commitment public offering with at least $40.0 million of gross proceeds to the Company and at a price of at least $7.86 per share, subject to appropriate adjustment in the event of any stock split, stock dividend, combination or other similar recapitalization, or (ii) the vote or written consent of the holders of at least a majority of the then-outstanding shares of Preferred Stock and a majority of the then-outstanding shares of Series E Preferred Stock.
The conversion ratio of each series of Preferred Stock is determined by dividing the Original Issue Price of each series by the Conversion Price of each series. The Original Issue Price per share is $1.00 for Series A Preferred Stock, $1.801 for Series B Preferred Stock, $3.45 for Series C Preferred Stock, $5.6351 for Series D Preferred Stock and $6.29 for Series E Preferred Stock. The Conversion Price per share is $1.00 for Series A Preferred Stock, $1.801 for Series B Preferred Stock, $3.45 for Series C Preferred Stock, $5.6351 for Series D Preferred Stock and $6.29 for Series E Preferred Stock, each subject to appropriate adjustment in the event of any stock split, stock dividend, combination or other similar recapitalization and other adjustments as set forth in the Company’s certificate of incorporation, as amended and restated.
Dividends
The holders of the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall be entitled to receive, when, as and if declared by the board of directors, noncumulative cash dividends at the rate of 8% per annum of the respective Original Issue Price on each outstanding share of that series of Preferred Stock. The dividends on Series E Preferred Stock are payable in preference and priority to any payment of any dividend on Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock and common stock. The dividends on Series D Preferred Stock are payable in preference and priority to any payment of any dividend on Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock and common stock. The dividends on Series C Preferred Stock are payable in preference and priority to any payment of any dividend on Series B Preferred Stock, Series A Preferred Stock and common stock. The dividends on Series B Preferred Stock and Series A Preferred Stock are payable in preference and priority to any payment of any dividend on common stock. After the foregoing dividends have been paid, the holders of the Preferred Stock and common stock may be paid pro rata based on the number of shares of common stock held by each, determined on an as-if-converted basis.
Through December 31, 2018 and 2019 and September 30, 2020 (unaudited), no dividends have been declared on any series or class of shares.
Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or winding-up of the Company or Deemed Liquidation Event (as described below), the holders of Preferred Stock then outstanding will be entitled to receive, in preference to any distribution to the holders of common stock, an amount per share equal to the Original Issue Price per share of each respective series of Preferred Stock plus any dividends declared but unpaid thereon. In the event that the assets available for distribution to the stockholders are insufficient to pay the holders of Preferred Stock the full amount to which they are entitled, then the holders of Series E Preferred Stock will be paid in full, prior to payments to the holders of Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock and common stock. The holders of Series D Preferred Stock will be paid in full, prior to payments to the holders of Series C Preferred Stock, Series B Preferred Stock, Series A Preferred
908 Devices Inc.
Notes to Financial Statements (Continued)
8. Redeemable Convertible Preferred Stock (Continued)
Stock and common stock. The holders of Series C Preferred Stock will be paid in full, prior to payments to the holders of Series B Preferred Stock, Series A Preferred Stock and common stock. The holders of Series A Preferred Stock and Series B Preferred Stock will be paid in full, prior to payments to the holders of common stock. After payment of all preferential amounts to the holders of Preferred Stock, the remaining assets available for distribution to the Company’s stockholders shall be distributed among the holders of Preferred Stock and common stock, pro rata based on the number of shares held by each holder, treating for this purpose all such securities as if they had been converted to common stock immediately prior to such dissolution, liquidation, winding up of the Company or Deemed Liquidation Event up to a maximum defined amount per each Series and thereafter, to holders of common stock. The maximum defined amount for Series E redeemable convertible preferred stock is two and one half times the sum of the Series E Original Issue Price per share plus any dividends declared but unpaid thereon. The maximum defined amount for Series D redeemable convertible preferred stock is two times the sum of the Series D Original Issue Price per share plus any dividends declared but unpaid thereon. The maximum defined amount for Series C and Series B redeemable convertible preferred stock is three times the Original Issue Price per share for each series plus any dividends declared but unpaid thereon. The maximum defined amount for Series A redeemable convertible preferred stock is four times the sum of the Series A Original Issue Price per share plus any dividends declared but unpaid thereon.
Unless the holders of at least a majority of the then-outstanding shares Preferred Stock voting together as a single class on an as-converted basis, a majority of the Series E Preferred Stock and, in certain cases the holders of at least 60% of the then-outstanding shares of Series D Preferred Stock, elect otherwise, a Deemed Liquidation Event shall include a merger or consolidation (other than one in which the stockholders of the Company own a majority by voting power of the outstanding shares of the surviving or acquiring corporation) or a sale, lease, transfer, exclusive license or other disposition of all or substantially all the assets of the Company.
Redemption Rights
At any time after April 11, 2024, the holders of a majority of the then-outstanding shares of Preferred Stock may elect to redeem all (but not less than all) of the then outstanding shares of the Series A, B, C, D and E redeemable convertible preferred stock. The holders are entitled to receive, commencing 15 days after written notice, an amount equal to the Original Issuance Price of the respective series of redeemable convertible preferred stock plus accrued and declared but unpaid dividends (subject to adjustment to reflect subsequent stock dividends, stock splits or recapitalizations).
Common Stock Reserved
The Company is required, at all times, to reserve a sufficient number of shares of common stock to effect the conversion of all outstanding shares of the Series A, B, C, D and E redeemable convertible preferred stock.
9. Warrants to Purchase Preferred Stock
The Company classifies all of its Preferred Stock warrants as a liability on its balance sheet because the warrants are freestanding financial instruments that may require the Company to transfer assets upon exercise. The liability associated with each of these warrants was initially recorded at fair value upon the issuance date of each warrant and is subsequently remeasured to fair value at each reporting date. Fair value of these warrants was determined using the Black-Scholes option-pricing model (see Note 3), and the resulting change in fair value of the warrant liability was recorded in other income (expense) in the Company’s statements of operations and comprehensive loss (see Note 3). Changes in the fair value of each warrant comprising the Preferred Stock warrant liability will continue to be recognized until each respective warrant is exercised, expires or qualifies for equity classification.
In connection with the Company’s lease agreement entered into in January 2018 (see Note 11), the Company issued to its landlord a warrant to purchase 70,983 shares of Series D Preferred Stock,
908 Devices Inc.
Notes to Financial Statements (Continued)
9. Warrants to Purchase Preferred Stock (Continued)
at an exercise price of $5.6351 per share. The warrant was immediately exercisable and expires ten years from date of issuance. The fair value of the warrant on the issuance date of $0.3 million was recorded as part of the Company’s operating lease right-of-use asset and as a component of the preferred stock warrant liability.
In connection with the 2019 Loan (see Note 7), the Company issued to the lender a warrant to purchase 35,771 shares of Series E Preferred Stock at an exercise price of $6.29 per share. The warrant was immediately exercisable upon issuance and expires ten years from date of issuance. The fair value of the warrant on the issuance date of $0.2 million was recorded as deferred financing costs and as a component of the preferred stock warrant liability.
During the year ended December 31, 2019, outstanding warrants to purchase 210,000 shares of Series A Preferred Stock and 163,242 shares of Series B Preferred Stock were exercised. Immediately prior to exercise, the warrants were revalued with the change in the fair value of the outstanding warrant liability recorded in other income (expense) in the statements of operations and comprehensive loss as the warrants are recorded at fair value at each reporting period. Upon exercise of the warrant for preferred stock, the liability was reclassed to the carrying value of redeemable convertible preferred stock for the redemption value and the difference between the fair value of the preferred stock warrant liability and the carrying value of the preferred stock of $0.2 million recorded to additional paid in capital as a deemed contribution of capital.
The Company also has outstanding warrants to purchase shares of Preferred Stock issued in connection with previous debt agreements.
As of each balance sheet date, the Company’s outstanding preferred stock warrants consisted of the following:
|
December 31, 2018
|
|
|
Issuance Date
|
|
|
Contractual
Term
|
|
|
Series of
Preferred
Stock
|
|
|
Number of
Preferred Shares
Issuable
under Warrant
|
|
|
Exercise
Price
|
|
|
Warrant
Fair Value
|
|
|
|
|
|
(in years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
December 6, 2012
|
|
|
7
|
|
|
Series A
|
|
|
|
|
210,000
|
|
|
|
|
$
|
0.01
|
|
|
|
|
$
|
369
|
|
|
|
December 6, 2012
|
|
|
7
|
|
|
Series B
|
|
|
|
|
163,242
|
|
|
|
|
$
|
0.01
|
|
|
|
|
|
353
|
|
|
|
March 6, 2014
|
|
|
10
|
|
|
Series B
|
|
|
|
|
45,000
|
|
|
|
|
$
|
1.801
|
|
|
|
|
|
54
|
|
|
|
June 23, 2015
|
|
|
10
|
|
|
Series C
|
|
|
|
|
20,000
|
|
|
|
|
$
|
3.45
|
|
|
|
|
|
37
|
|
|
|
March 15, 2017
|
|
|
10
|
|
|
Series D
|
|
|
|
|
79,856
|
|
|
|
|
$
|
5.6351
|
|
|
|
|
|
264
|
|
|
|
September 7, 2018
|
|
|
10
|
|
|
Series D
|
|
|
|
|
70,983
|
|
|
|
|
$
|
5.6351
|
|
|
|
|
|
264
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
589,081
|
|
|
|
|
|
|
|
|
|
|
$
|
1,341
|
|
|
|
|
|
December 31, 2019
|
|
|
Issuance Date
|
|
|
Contractual
Term
|
|
|
Series of
Preferred
Stock
|
|
|
Number of
Preferred Shares
Issuable
under Warrant
|
|
|
Exercise
Price
|
|
|
Warrant
Fair Value
|
|
|
|
|
|
(in years)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands)
|
|
|
March 6, 2014
|
|
|
10
|
|
|
Series B
|
|
|
|
|
45,000
|
|
|
|
|
$
|
1.801
|
|
|
|
|
$
|
50
|
|
|
|
June 23, 2015
|
|
|
10
|
|
|
Series C
|
|
|
|
|
20,000
|
|
|
|
|
$
|
3.450
|
|
|
|
|
|
34
|
|
|
|
March 15, 2017
|
|
|
10
|
|
|
Series D
|
|
|
|
|
79,856
|
|
|
|
|
$
|
5.6351
|
|
|
|
|
|
244
|
|
|
|
September 7, 2018
|
|
|
10
|
|
|
Series D
|
|
|
|
|
70,983
|
|
|
|
|
$
|
5.6351
|
|
|
|
|
|
236
|
|
|
|
August 29, 2019
|
|
|
10
|
|
|
Series E
|
|
|
|
|
35,771
|
|
|
|
|
$
|
6.290
|
|
|
|
|
|
164
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
251,610
|
|
|
|
|
|
|
|
|
|
|
$
|
728
|
|
|
|
|
908 Devices Inc.
Notes to Financial Statements (Continued)
9. Warrants to Purchase Preferred Stock (Continued)
|
September 30, 2020 (unaudited)
|
|
|
Issuance Date
|
|
|
Contractual
Term
(in years)
|
|
|
Series of
Preferred
Stock
|
|
|
Number of
Preferred Shares
Issuable
under Warrant
|
|
|
Exercise
Price
|
|
|
Warrant
Fair Value
(in thousands)
|
|
|
March 6, 2014
|
|
|
10
|
|
|
Series B
|
|
|
|
|
45,000
|
|
|
|
|
$
|
1.801
|
|
|
|
|
$
|
81
|
|
|
|
June 23, 2015
|
|
|
10
|
|
|
Series C
|
|
|
|
|
20,000
|
|
|
|
|
$
|
3.450
|
|
|
|
|
|
43
|
|
|
|
March 15, 2017
|
|
|
10
|
|
|
Series D
|
|
|
|
|
79,856
|
|
|
|
|
$
|
5.6351
|
|
|
|
|
|
241
|
|
|
|
September 7, 2018
|
|
|
10
|
|
|
Series D
|
|
|
|
|
70,983
|
|
|
|
|
$
|
5.6351
|
|
|
|
|
|
229
|
|
|
|
August 29, 2019
|
|
|
10
|
|
|
Series E
|
|
|
|
|
35,771
|
|
|
|
|
$
|
6.290
|
|
|
|
|
|
160
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
251,610
|
|
|
|
|
|
|
|
|
|
|
$
|
754
|
|
|
10. Stock-Based Compensation
2012 Stock Option and Grant Plan
The Company’s 2012 Stock Option and Grant Plan (the “2012 Plan”) provides for the Company to sell or issue incentive stock options or nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards to employees, directors and non-employee consultants of the Company. The 2012 Plan is administered by the board of directors or, at the discretion of the board of directors, by a committee of the board of directors. The exercise prices, vesting and other restrictions are determined at the discretion of the board of directors, or its committee if so delegated.
Stock options granted under the 2012 Plan with service-based vesting conditions typically vest over three or four years and expire after ten years. The total number of shares of common stock that may be issued under the 2012 Plan was 5,119,702 as of December 31, 2019, of which 1,042,019 shares remained available for future issuance as of December 31, 2019. The total number of shares of common stock that may be issued under the 2012 Plan was 6,119,702 as of September 30, 2020 (unaudited), of which 358,498 shares remained available for future issuance as of September 30, 2020 (unaudited). Shares that are expired, terminated, surrendered or canceled without having been fully exercised will be available for future grant under the 2012 Plan.
The exercise price for stock options granted is not less than the fair value of common shares as determined by the board of directors as of the date of grant. The Company’s board of directors values the Company’s common stock, taking into consideration its most recently available valuation of common stock performed by third parties as well as additional factors which may have changed since the date of the most recent contemporaneous valuation through the date of grant.
Stock Option Valuation
The fair value of stock option grants is estimated using the Black-Scholes option-pricing model. The Company historically has been a private company and lacks company-specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based on the historical volatility of a publicly traded set of peer companies and expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price. For options with service-based vesting conditions, the expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future.
908 Devices Inc.
Notes to Financial Statements (Continued)
10. Stock-Based Compensation (Continued)
The following table presents, on a weighted average basis, the assumptions used in the Black-Scholes option-pricing model to determine the grant-date fair value of stock options granted:
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Risk-free interest rate
|
|
|
|
|
2.8%
|
|
|
|
|
|
2.5%
|
|
|
|
|
|
2.5%
|
|
|
|
|
|
0.4%
|
|
|
|
Expected volatility
|
|
|
|
|
47%
|
|
|
|
|
|
52%
|
|
|
|
|
|
52%
|
|
|
|
|
|
60%
|
|
|
|
Expected dividend yield
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
|
|
—
|
|
|
|
Expected term (in years)
|
|
|
|
|
6
|
|
|
|
|
|
6
|
|
|
|
|
|
6
|
|
|
|
|
|
6
|
|
|
The following table summarizes the Company’s option activity since December 31, 2018:
|
|
|
|
Number
of Shares
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Weighted
Average
Contractual
Term
|
|
|
Aggregate
Intrinsic
Value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(in years)
|
|
|
(in thousands)
|
|
|
Outstanding as of December 31, 2018
|
|
|
|
|
3,087,751
|
|
|
|
|
$
|
0.70
|
|
|
|
|
|
7.2
|
|
|
|
|
$
|
924
|
|
|
|
Granted
|
|
|
|
|
638,500
|
|
|
|
|
|
0.99
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
(700)
|
|
|
|
|
|
1.07
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
(68,217)
|
|
|
|
|
|
1.03
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of December 31, 2019
|
|
|
|
|
3,657,334
|
|
|
|
|
|
0.75
|
|
|
|
|
|
6.7
|
|
|
|
|
$
|
1,282
|
|
|
|
Granted
|
|
|
|
|
1,710,500
|
|
|
|
|
|
1.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
|
|
(17,270)
|
|
|
|
|
|
0.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Forfeited
|
|
|
|
|
(26,979)
|
|
|
|
|
|
0.87
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding as of September 30, 2020 (unaudited)
|
|
|
|
|
5,323,585
|
|
|
|
|
$
|
1.05
|
|
|
|
|
|
7.2
|
|
|
|
|
$
|
4,988
|
|
|
|
Vested and expected to vest as of December 31, 2019
|
|
|
|
|
3,597,682
|
|
|
|
|
$
|
0.75
|
|
|
|
|
|
6.6
|
|
|
|
|
$
|
1,275
|
|
|
|
Options exercisable as of December 31, 2019
|
|
|
|
|
2,464,268
|
|
|
|
|
$
|
0.64
|
|
|
|
|
|
5.9
|
|
|
|
|
$
|
1,135
|
|
|
|
Vested and expected to vest as of September 30, 2020
(unaudited)
|
|
|
|
|
5,200,685
|
|
|
|
|
$
|
1.04
|
|
|
|
|
|
7.2
|
|
|
|
|
$
|
4,926
|
|
|
|
Options exercisable as of September 30, 2020 (unaudited)
|
|
|
|
|
2,865,586
|
|
|
|
|
$
|
0.69
|
|
|
|
|
|
5.5
|
|
|
|
|
$
|
3,736
|
|
|
The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2018 and 2019 was $0.1 million and less than $0.1 million, respectively. The aggregate intrinsic value of stock options exercised during the nine months ended September 30, 2019 and 2020 (unaudited) was less than $0.1 million each.
The weighted average grant-date fair value of stock options granted during the years ended December 31, 2018 and 2019 was $0.47 per share and $0.52 per share, respectively. The weighted average grant-date fair value of stock options granted during the nine months ended September 30, 2019 and 2020 (unaudited) was $0.52 per share and $1.15 per share, respectively.
908 Devices Inc.
Notes to Financial Statements (Continued)
10. Stock-Based Compensation (Continued)
Stock-Based Compensation
The Company recorded stock-based compensation expense in the following expense categories of its statements of operations and comprehensive loss (in thousands):
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Cost of revenue
|
|
|
|
$
|
6
|
|
|
|
|
$
|
9
|
|
|
|
|
$
|
6
|
|
|
|
|
$
|
12
|
|
|
|
Research and development expenses
|
|
|
|
|
69
|
|
|
|
|
|
78
|
|
|
|
|
|
60
|
|
|
|
|
|
52
|
|
|
|
Selling, general and administrative expenses
|
|
|
|
|
142
|
|
|
|
|
|
180
|
|
|
|
|
|
134
|
|
|
|
|
|
154
|
|
|
|
|
|
|
|
$
|
217
|
|
|
|
|
$
|
267
|
|
|
|
|
$
|
200
|
|
|
|
|
$
|
218
|
|
|
As of December 31, 2019, total unrecognized compensation cost related to unvested stock-based awards was $0.5 million, which is expected to be recognized over a weighted average period of 1.7 years. As of September 30, 2020 (unaudited), total unrecognized compensation cost related to unvested employee and director stock-based awards was $2.1 million, which is expected to be recognized over a weighted average period of 2.3 years.
11. Leases
The Company has leases for office space and certain equipment. All of the leases recorded on the balance sheets as ROU assets are operating leases. The Company’s leases have remaining lease terms ranging from less than one year to approximately six years. Some of the leases include options to extend the lease for up to two years and these options were not included for the purpose of determining the right-of-use assets and associated lease liabilities as the Company determined that the renewal of these leases is not reasonably certain. The leases do not include any restrictions or covenants that had to be accounted for under the lease guidance.
On January 2, 2018, the Company entered a new operating lease in Boston, Massachusetts (the “Lease”), for 37,500 rentable square feet of office space and is considered the Company’s corporate headquarters. A security deposit of $0.5 million was paid to the landlord and the Company issued a warrant to purchase 70,983 shares of Series D preferred stock at a purchase price of $5.6351 per share. The initial fair value of the warrants of $0.3 million was recorded as additional rent payments, increasing the value of the ROU asset and preferred stock warrant liability (see Notes 3 and 9).
The initial term of the lease is through July 2025 and has additional renewal options. The annualized base rent will increase by 2.5% annually on the anniversary of the commencement date. The Company is obligated to pay its portion of real estate taxes and costs related to the premise, including costs of operations, maintenance, repair, replacement and management of the new leased premises.
The Company has a facility lease in California for approximately 1,500 square feet that expires in February 2021. The Company also has a facility lease in North Carolina for approximately 2,000 square feet that had an expiration date of November 2020. In October 2020 (unaudited), the Company entered into an extension agreement for the North Carolina lease to extend it for an additional two years until November 2022. Future lease payments will increase by approximately $0.1 million over the next two years as a result of this extension.
908 Devices Inc.
Notes to Financial Statements (Continued)
11. Leases (Continued)
The components of lease expense under ASC 842 were as follows (in thousands):
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Operating lease cost
|
|
|
|
$
|
858
|
|
|
|
|
$
|
1,763
|
|
|
|
|
$
|
1,322
|
|
|
|
|
$
|
1,322
|
|
|
|
Short-term lease cost
|
|
|
|
|
15
|
|
|
|
|
|
12
|
|
|
|
|
|
8
|
|
|
|
|
|
10
|
|
|
|
Variable lease cost
|
|
|
|
|
133
|
|
|
|
|
|
268
|
|
|
|
|
|
171
|
|
|
|
|
|
158
|
|
|
|
|
|
|
|
$
|
1,006
|
|
|
|
|
$
|
2,043
|
|
|
|
|
$
|
1,501
|
|
|
|
|
$
|
1,490
|
|
|
Supplemental disclosure of cash flow information related to leases was as follows (in thousands):
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Cash paid for amounts included in the measurement of operating lease liabilities
|
|
|
|
$
|
645
|
|
|
|
|
$
|
1,092
|
|
|
|
|
$
|
646
|
|
|
|
|
$
|
1,338
|
|
|
|
Operating lease liabilities arising from obtaining right-of-use assets
|
|
|
|
$
|
8,162
|
|
|
|
|
$
|
46
|
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
The weighted-average remaining lease term and discount rate were as follows:
|
|
|
|
December 31,
|
|
|
September 30,
2020
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Weighted-average remaining lease term—operating leases (in years)
|
|
|
|
|
6.6
|
|
|
|
|
|
5.6
|
|
|
|
|
|
5.0
|
|
|
|
Weighted-average discount rate—operating leases
|
|
|
|
|
9.5%
|
|
|
|
|
|
9.5%
|
|
|
|
|
|
9.5%
|
|
|
The interest rate implicit in lease contracts is typically not readily determinable and as such, the Company uses its incremental borrowing rate based on information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment.
Future annual minimum lease payments under operating leases as of December 31, 2019 were as follows (in thousands):
|
|
Year Ending December 31,
|
|
|
|
|
|
|
|
|
|
2020
|
|
|
|
$
|
1,792
|
|
|
|
|
2021
|
|
|
|
|
1,752
|
|
|
|
|
2022
|
|
|
|
|
1,788
|
|
|
|
|
2023
|
|
|
|
|
1,833
|
|
|
|
|
2024
|
|
|
|
|
1,878
|
|
|
|
|
Thereafter
|
|
|
|
|
1,435
|
|
|
|
|
Total future minimum lease payments
|
|
|
|
|
10,478
|
|
|
|
|
Less: imputed interest
|
|
|
|
|
(2,459)
|
|
|
|
|
Total operating lease liabilities
|
|
|
|
$
|
8,019
|
|
|
908 Devices Inc.
Notes to Financial Statements (Continued)
12. Commitments and Contingencies
Leases
The Company’s commitments under its leases are described in Note 11.
Royalty Arrangements
The Company has entered into royalty arrangements with two parties whereby the Company owes low- to mid-single digit royalty percentages related to revenue that is derived pursuant to in-licensed technologies. Royalty obligations are expensed when incurred or over the minimum royalty periods and have not been material. Some of the arrangements include minimum royalties over a defined term. The future minimum royalty payments are $0.1 million per year in 2020 and beyond, through the end of the patents’ lives. The Company has the right to terminate the agreements with written notice.
401(k) Savings Plan
The Company has a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code. This plan covers substantially all employees who meet minimum age and service requirements and allows participants to defer a portion of their annual compensation on a pre-tax basis. Company contributions to the plan may be made at the discretion of the board of directors. As of December 31, 2018 and 2019 and September 30, 2020 (unaudited), the Company had not made any contributions to the plan.
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters including, but not limited to, losses arising out of breach of such agreements or from intellectual property infringement claims made by third parties. In addition, the Company has entered into indemnification agreements with members of its board of directors that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or services as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not currently aware of any indemnification claims and had not accrued any liabilities related to such obligations in its financial statements as of December 31, 2018 and 2019 or September 30, 2020 (unaudited).
Legal Proceedings
The Company is not currently party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses as incurred the costs related to such legal proceedings.
13. Net Loss per Share and Unaudited Pro Forma Net Loss per Share
Net Loss per Share
Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts):
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Numerator:
|
|
|
|
|
|
|
Net loss and comprehensive loss
|
|
|
|
$
|
(7,536)
|
|
|
|
|
$
|
(13,373)
|
|
|
|
|
$
|
(12,884)
|
|
|
|
|
$
|
(2,593)
|
|
|
|
Accretion of redeemable convertible preferred
stock to redemption value
|
|
|
|
|
(76)
|
|
|
|
|
|
(109)
|
|
|
|
|
|
(79)
|
|
|
|
|
|
(74)
|
|
|
|
Net loss attributable to common
stockholders
|
|
|
|
$
|
(7,612)
|
|
|
|
|
$
|
(13,482)
|
|
|
|
|
$
|
(12,963)
|
|
|
|
|
$
|
(2,667)
|
|
|
|
|
908 Devices Inc.
Notes to Financial Statements (Continued)
13. Net Loss per Share and Unaudited Pro Forma Net Loss per Share (Continued)
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding basic and diluted
|
|
|
|
|
7,984,303
|
|
|
|
|
|
8,119,906
|
|
|
|
|
|
8,119,740
|
|
|
|
|
|
8,128,794
|
|
|
|
Net loss per share attributable to common stockholders, basic and diluted
|
|
|
|
$
|
(0.95)
|
|
|
|
|
$
|
(1.66)
|
|
|
|
|
$
|
(1.60)
|
|
|
|
|
$
|
(0.33)
|
|
|
|
|
The Company’s potential dilutive securities have been excluded from the computation of diluted net loss per share as the effect would be to reduce the net loss per share. Therefore, the weighted average number of common shares outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated because including them would have had an anti-dilutive effect:
|
|
|
|
Year Ended December 31,
|
|
|
Nine Months Ended
September 30,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
2019
|
|
|
2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Redeemable convertible preferred stock (as converted to common stock)
|
|
|
|
|
20,749,831
|
|
|
|
|
|
23,905,267
|
|
|
|
|
|
23,905,267
|
|
|
|
|
|
23,905,267
|
|
|
|
Warrants for the purchase of redeemable
convertible preferred stock (as converted to
common stock)
|
|
|
|
|
589,081
|
|
|
|
|
|
251,610
|
|
|
|
|
|
624,852
|
|
|
|
|
|
251,610
|
|
|
|
Stock options to purchase common stock
|
|
|
|
|
3,087,751
|
|
|
|
|
|
3,657,334
|
|
|
|
|
|
3,650,085
|
|
|
|
|
|
5,323,585
|
|
|
|
|
|
|
|
|
24,426,663
|
|
|
|
|
|
27,814,211
|
|
|
|
|
|
28,180,204
|
|
|
|
|
|
29,480,462
|
|
|
Unaudited Pro Forma Net Loss per Share
Unaudited pro forma basic and diluted net loss per share attributable to common stockholders for the year ended December 31, 2019 and the nine months ended September 30, 2020 have been prepared to give effect to adjustments arising from the Company’s IPO. The unaudited pro forma net loss attributable to common stockholders used in the calculation of unaudited pro forma basic and diluted net loss per share attributable to common stockholders does not include the change in the fair value of the preferred stock warrant liability or the accretion of redeemable convertible preferred stock to redemption value because the calculation gives effect to the IPO, including the conversion of all warrants to purchase shares of convertible preferred stock into warrants to purchase shares of common stock as if the IPO had occurred on the later of January 1, 2019 or the issuance date of the Preferred Stock or preferred stock warrants.
Unaudited pro forma basic and diluted weighted average common shares outstanding used in the calculation of unaudited pro forma basic and diluted net loss per share attributable to common stockholders for the year ended December 31, 2019 and the nine months ended September 30, 2020 have been prepared to give effect upon the closing of a qualified IPO, to the conversion of all outstanding shares of redeemable convertible preferred stock shares of common stock as if the IPO had occurred on the later of January 1, 2019 or the issuance date of the redeemable convertible preferred stock.
908 Devices Inc.
Notes to Financial Statements (Continued)
13. Net Loss per Share and Unaudited Pro Forma Net Loss per Share (Continued)
Unaudited pro forma basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share amounts):
|
|
|
|
Year Ended
December 31, 2019
|
|
|
Nine Months Ended
September 30, 2020
|
|
|
|
|
|
(unaudited)
|
|
|
(unaudited)
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss attributable to common stockholders
|
|
|
|
$
|
(13,482)
|
|
|
|
|
$
|
(2,667)
|
|
|
|
Plus: Change in fair value of preferred stock warrant liability
|
|
|
|
|
(59)
|
|
|
|
|
|
26
|
|
|
|
Plus: Accretion of redeemable convertible preferred stock to redemption value
|
|
|
|
|
109
|
|
|
|
|
|
74
|
|
|
|
Pro forma net loss attributable to common stockholders
|
|
|
|
$
|
(13,432)
|
|
|
|
|
$
|
(2,567)
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic and diluted
|
|
|
|
|
8,119,906
|
|
|
|
|
|
8,128,794
|
|
|
|
Pro forma adjustment to reflect automatic conversion of redeemable convertible preferred stock to common stock upon the completion of the proposed IPO
|
|
|
|
|
22,767,483
|
|
|
|
|
|
23,905,267
|
|
|
|
Pro forma weighted average common shares outstanding, basic and diluted
|
|
|
|
|
30,887,389
|
|
|
|
|
|
32,034,061
|
|
|
|
Pro forma net loss per share attributable to common stockholders, basic and diluted
|
|
|
|
$
|
(0.43)
|
|
|
|
|
$
|
(0.08)
|
|
|
14. Income Taxes
During the years ended December 31, 2018 and 2019 and the nine months ended September 30, 2019 and 2020 (unaudited), the Company did not record income tax benefits for the net operating losses incurred or for the research and development tax credits generated in each year, due to its uncertainty of realizing a benefit from those items. The Company does not have any foreign operations and therefore, has not provided for any foreign taxes.
A reconciliation of the U.S. federal statutory income tax rate to the Company’s effective income tax rate is as follows:
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
Federal statutory income tax rate
|
|
|
|
|
(21.0)%
|
|
|
|
|
|
(21.0)%
|
|
|
|
State income taxes, net of federal benefit
|
|
|
|
|
(3.1)
|
|
|
|
|
|
(3.7)
|
|
|
|
Federal and state research and development tax credits
|
|
|
|
|
(12.7)
|
|
|
|
|
|
(5.7)
|
|
|
|
Nondeductible items
|
|
|
|
|
1.2
|
|
|
|
|
|
0.6
|
|
|
|
Other
|
|
|
|
|
0.8
|
|
|
|
|
|
(0.4)
|
|
|
|
Change in valuation allowance
|
|
|
|
|
34.8
|
|
|
|
|
|
30.2
|
|
|
|
Effective income tax rate
|
|
|
|
|
0.0%
|
|
|
|
|
|
0.0%
|
|
|
908 Devices Inc.
Notes to Financial Statements (Continued)
14. Income Taxes (Continued)
Net deferred tax assets consisted of the following (in thousands):
|
|
|
|
December 31,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net operating loss carryforwards
|
|
|
|
$
|
10,143
|
|
|
|
|
$
|
13,123
|
|
|
|
Research and development tax credit carryforwards
|
|
|
|
|
4,945
|
|
|
|
|
|
5,706
|
|
|
|
Lease liability
|
|
|
|
|
2,008
|
|
|
|
|
|
1,986
|
|
|
|
Capitalized start up costs
|
|
|
|
|
154
|
|
|
|
|
|
140
|
|
|
|
Capitalized research and development costs
|
|
|
|
|
445
|
|
|
|
|
|
333
|
|
|
|
Accrued expenses and other
|
|
|
|
|
1,206
|
|
|
|
|
|
1,426
|
|
|
|
Total deferred tax assets
|
|
|
|
|
18,901
|
|
|
|
|
|
22,714
|
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Right-of-use asset
|
|
|
|
|
(1,983)
|
|
|
|
|
|
(1,794)
|
|
|
|
Depreciation and amortization
|
|
|
|
|
(57)
|
|
|
|
|
|
(17)
|
|
|
|
Total deferred tax liabilities
|
|
|
|
|
(2,040)
|
|
|
|
|
|
(1,811)
|
|
|
|
Valuation allowance
|
|
|
|
|
(16,861)
|
|
|
|
|
|
(20,903)
|
|
|
|
Net deferred tax assets
|
|
|
|
$
|
—
|
|
|
|
|
$
|
—
|
|
|
As of December 31, 2019, the Company had U.S. federal and state net operating loss carryforwards of $53.0 million and $31.7 million, respectively, which may be available to offset future taxable income and begin to expire in 2032 and 2025, respectively. As of December 31, 2019, the Company also had U.S. federal and state research and development tax credit carryforwards of $4.0 million and $2.1 million, respectively, which may be available to offset future tax liabilities and begin to expire in 2032 and 2029, respectively. During the nine months ended September 30, 2020 (unaudited), gross deferred tax assets, before valuation allowance, increased by approximately $0.9 million due to the operating loss incurred by the Company during that period.
Utilization of the U.S. federal and state net operating loss carryforwards and research and development tax credit carryforwards may be subject to a substantial annual limitation under Sections 382 and 383 of the Internal Revenue Code of 1986, and corresponding provisions of state law, due to ownership changes that have occurred previously or that could occur in the future. These ownership changes may limit the amount of carryforwards that can be utilized annually to offset future taxable income or tax liabilities. In general, an ownership change, as defined by Section 382, results from transactions increasing the ownership of certain stockholders or public groups in the stock of a corporation by more than 50% over a three-year period. The Company has not conducted a study to assess whether a change of control has occurred or whether there have been multiple changes of control since inception due to the significant complexity and cost associated with such a study. If the Company has experienced a change of control, as defined by Section 382, at any time since inception, utilization of the net operating loss carryforwards or research and development tax credit carryforwards would be subject to an annual limitation under Section 382, which is determined by first multiplying the value of the Company’s stock at the time of the ownership change by the applicable long-term tax-exempt rate, and then could be subject to additional adjustments, as required. Any limitation may result in expiration of a portion of the net operating loss carryforwards or research and development tax credit carryforwards before utilization. Further, until a study is completed by the Company and any limitation is known, no amounts are being presented as an uncertain tax position.
908 Devices Inc.
Notes to Financial Statements (Continued)
14. Income Taxes (Continued)
The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net operating losses incurred since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of December 31, 2018 and 2019 and September 30, 2020 (unaudited). Management reevaluates the positive and negative evidence at each reporting period.
Changes in the valuation allowance for deferred tax assets related primarily to the increase in net operating loss carryforwards and research and development tax credit carryforwards and were as follows (in thousands):
|
|
|
|
Year Ended December 31,
|
|
|
|
|
|
2018
|
|
|
2019
|
|
|
Valuation allowance as of beginning of year
|
|
|
|
$
|
14,325
|
|
|
|
|
$
|
16,861
|
|
|
|
Increases recorded to income tax provision
|
|
|
|
|
2,536
|
|
|
|
|
|
4,042
|
|
|
|
Valuation allowance as of end of year
|
|
|
|
$
|
16,861
|
|
|
|
|
$
|
20,903
|
|
|
As of December 31, 2018 and 2019 and September 30, 2020 (unaudited), the Company had not recorded any amounts for unrecognized tax benefits. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. As of December 31, 2018 and December 30, 2019 and September 30, 2020 (unaudited), the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s statements of operations and comprehensive loss. The Company files income tax returns as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. The Company is open to future tax examination under statute from 2017 to the present; however, carryforward attributes that were generated prior to 2016 may still be adjusted upon examination by federal, state or local tax authorities if they either have been or will be used in a future period. The Company is currently under examination by the Internal Revenue Service for the year ending December 31, 2018. No adjustments have been proposed to date. The Company has not received notice of examination by any other jurisdictions for any other tax year open under statute.
15. Related Party Transactions
Commercial Services Agreement
As described in Note 3, in 2015, the Company entered into a commercial services agreement with one of its preferred stock investors. The Company will pay up to $1.5 million to the investor for the milestones previously achieved upon the occurrence of a Deemed Liquidation event. The Company has recorded a liability for the fair value of the commercial services agreement of $0.8 million as of December 31, 2018 and 2019, and $0.4 million as of September 30, 2020 (unaudited).
16. Subsequent Events
For its financial statements as of December 31, 2019 and for the year then ended, the Company evaluated subsequent events through October 2, 2020, the date on which those financial statements were issued.
Grant of Stock Options under the 2012 Plan
During the third quarter of 2020, the Company granted options for the purchase of an aggregate of 1,609,500 shares of common stock with a weighted average exercise price of $1.74 per share. The aggregate grant-date fair value of these options was $1.9 million, which is expected to be recognized as stock-based compensation expense over a period of approximately four years.
908 Devices Inc.
Notes to Financial Statements (Continued)
16. Subsequent Events (Continued)
Increase in Shares Authorized for Issuance under the 2012 Plan
In September 2020, the Company increased the number of shares available under the 2012 Plan from 5,119,702 shares to 6,119,702 shares.
17. Subsequent Events (Unaudited)
For its interim financial statements as of September 30, 2020 and for the nine months then ended, the Company evaluated subsequent events through November 25, 2020, the date of the submission of this registration statement.
Grant of Stock Options under the 2012 Plan
On November 3, 2020, the Company granted options for the purchase of an aggregate of 204,000 shares of common stock with a weighted average exercise price of $4.86 per share. The aggregate grant-date fair value of these options was $0.6 million, which is expected to be recognized as stock-based compensation expense over a period of approximately four years.
2020 Stock Option and Incentive Plan
On November 23, 2020, the Company’s board of directors adopted, subject to stockholders approval, the 2020 Stock Option and Incentive Plan (the “2020 Stock Plan”), which will become effective as of the date immediately preceding the effectiveness of the registration statement on Form S-1 related to the Company’s initial public offering. The 2020 Stock Plan provides for the grant of incentive stock options, nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, unrestricted stock, unrestricted stock units, dividend equivalent rights and cash-based awards to employees, directors and consultants of the Company. The number of shares of common stock of the Company available for issuance under the 2020 Stock Plan is 3,000,000 shares, plus the number of shares underlying awards under the 2012 Plan that expire or are terminated, surrendered or cancelled without the delivery of shares, are forfeited to or repurchased by the Company or otherwise become available again for grant under the 2012 Plan. The 2020 Stock Plan provides that the number of shares reserved and available for issuance under the 2020 Stock Plan will automatically increase on January 1, 2022 and each January 1 thereafter, by 4% of the outstanding number of shares of our common stock on the immediately preceding December 31 or such lesser number of shares as determined by the administrator of the 2020 Stock Plan.
2020 Employee Stock Purchase Plan
On November 23, 2020, the Company’s board of directors adopted, subject to stockholders approval, the 2020 Employee Stock Purchase Plan (the “2020 ESPP”), which will become effective as of the date immediately preceding the effectiveness of the registration statement on Form S-1 related to the Company’s initial public offering. A total of 470,000 shares of common stock of the Company are reserved for issuance under the 2020 ESPP. The 2020 ESPP provides that the number of shares reserved and available for issuance will automatically increase on January 1, 2022 and each January 1 thereafter through January 1, 2030, by the least of (i) 500,000 shares of our common stock, (ii) 1% of the outstanding number of shares of common stock on the immediately preceding December 31, or (iii) such lesser number of shares of common stock as determined by the administrator of the 2020 ESPP.
Shares
908 Devices Inc.
Common Stock
PRELIMINARY PROSPECTUS
COWENSVB LEERINKWILLIAM BLAIRSTIFEL
, 2020
Until , 2020 (25 days after the date of this prospectus), all dealers that effect transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the fees and expenses, other than underwriting discounts and commissions, payable in connection with the registration of the common stock hereunder. All amounts are estimates except the SEC registration fee, the FINRA filing fee and the Nasdaq Global Market listing fee.
|
|
|
|
Amount
to be Paid
|
|
|
SEC registration fee
|
|
|
|
$
|
8,183
|
|
|
|
FINRA filing fee
|
|
|
|
|
*
|
|
|
|
Nasdaq Global Market listing fee
|
|
|
|
|
*
|
|
|
|
Printing and mailing
|
|
|
|
|
*
|
|
|
|
Legal fees and expenses
|
|
|
|
|
*
|
|
|
|
Accounting fees and expenses
|
|
|
|
|
*
|
|
|
|
Transfer agent and registrar fees and expenses
|
|
|
|
|
*
|
|
|
|
Miscellaneous
|
|
|
|
|
*
|
|
|
|
Total
|
|
|
|
$
|
*
|
|
|
*
To be completed by amendment.
Item 14. Indemnification of Directors and Officers.
Section 145 of the Delaware General Corporation Law or the DGCL, authorizes a corporation to indemnify its directors and officers against liabilities arising out of actions, suits and proceedings to which they are made or threatened to be made a party by reason of the fact that they have served or are currently serving as a director or officer to a corporation. The indemnity may cover expenses (including attorneys’ fees) judgments, fines and amounts paid in settlement actually and reasonably incurred by the director or officer in connection with any such action, suit or proceeding. Section 145 permits corporations to pay expenses (including attorneys’ fees) incurred by directors and officers in advance of the final disposition of such action, suit or proceeding. In addition, Section 145 provides that a corporation has the power to purchase and maintain insurance on behalf of its directors and officers against any liability asserted against them and incurred by them in their capacity as a director or officer, or arising out of their status as such, whether or not the corporation would have the power to indemnify the director or officer against such liability under Section 145.
We have adopted provisions in our sixth amended and restated certificate of incorporation to be in effect upon the completion of this offering and amended and restated by-laws to be in effect upon the effectiveness of this registration statement that limit or eliminate the personal liability of our directors to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended. Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:
•
any breach of the director’s duty of loyalty to us or our stockholders; any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law; any unlawful payments related to dividends or unlawful stock purchases, redemptions or other distributions; or any transaction from which the director derived an improper personal benefit.
These limitations of liability do not alter director liability under the federal securities laws and do not affect the availability of equitable remedies such as an injunction or rescission.
In addition, our by-laws provide that:
•
we will indemnify our directors, officers and, in the discretion of our board of directors, certain employees to the fullest extent permitted by the DGCL, as it now exists or may in the future be amended; and
•
we will advance reasonable expenses, including attorneys’ fees, to our directors and, in the discretion of our board of directors, to our officers and certain employees, in connection with legal proceedings relating to their service for or on behalf of us, subject to limited exceptions.
We have entered into indemnification agreements with each of our directors and intend to enter into such agreements with certain of our executive officers. These agreements provide that we will indemnify each of our directors, certain of our executive officers and, at times, their affiliates to the fullest extent permitted by Delaware law. We will advance expenses, including attorneys’ fees (but excluding judgments, fines and settlement amounts), to each indemnified director, executive officer or affiliate in connection with any proceeding in which indemnification is available and we will indemnify our directors and officers for any action or proceeding arising out of that person’s services as a director or officer brought on behalf of us or in furtherance of our rights. Additionally, certain of our directors or officers may have certain rights to indemnification, advancement of expenses or insurance provided by their affiliates or other third parties, which indemnification relates to and might apply to the same proceedings arising out of such director’s or officer’s services as a director referenced herein. Nonetheless, we have agreed in the indemnification agreements that our obligations to those same directors or officers are primary and any obligation of such affiliates or other third parties to advance expenses or to provide indemnification for the expenses or liabilities incurred by those directors are secondary.
We also maintain general liability insurance which covers certain liabilities of our directors and officers arising out of claims based on acts or omissions in their capacities as directors or officers, including liabilities under the Securities Act of 1933, as amended, or the Securities Act.
The underwriting agreement filed as Exhibit 1.1 to this registration statement provides for indemnification of us and our directors and officers by the underwriters against certain liabilities under the Securities Act and the Securities Exchange Act of 1934.
Item 15. Recent Sales of Unregistered Securities.
The following list sets forth information regarding all unregistered securities sold by us since January 1, 2017. No underwriters were involved in the sales and the certificates representing the securities issued and sold contain legends restricting transfer of the securities without registration under the Securities Act or an applicable exemption from registration.
(a)
In March 2017 and September 2018, we issued and sold an aggregate of 4,259,011 shares of our Series D redeemable convertible preferred stock at a purchase price of $5.6351 per share for aggregate proceeds of $23,999,952 to a total of eleven (11) accredited investors.
(b)
In April 2019, we issued and sold an aggregate of 2,782,194 shares of our Series E redeemable convertible preferred stock at a purchase price of $6.29 per share for aggregate proceeds of approximately $17,500,000 to twelve (12) accredited investors.
(c)
From January 2017 through the date hereof, we granted to our employees, directors, consultants and other service providers stock options to purchase an aggregate of 4,021,399 shares of common stock under our 2012 Stock Option and Grant Plan, as amended, or 2012 Plan, at exercise prices per share ranging from $0.64 to $4.86. The grants were as follows:
•
On April 26, 2017, June 22, 2017 and September 21, 2017, we granted stock options to purchase 597,339, 484,000 and 4,000 shares, respectively, of common stock under our 2012 Stock Option and Grant Plan, as amended, or 2012 Plan, at an exercise price of $1.07.
•
On March 20, 2018, April 24, 2018, June 14, 2018, July 24, 2018, September 26, 2018, November 13, 2018, December 13, 2018 and January 21, 2019, we granted stock options
to purchase 204,500, 121,500, 18,000, 2,000, 21,000, 7,000, 9,000 and 516,000 shares, respectively, of common stock under our 2012 Plan, at an exercise price of $0.97.
•
On April 24, 2019, June 20, 2019, September 10, 2019, November 13, 2019, December 12, 2019, January 31, 2020 and March 25, 2020, we granted stock options to purchase 42,000, 26,000, 30,500, 20,000, 4,000, 46,000, and 11,000 shares, respectively, of common stock under our 2012 Plan, at an exercise price of $1.10.
•
On June 16, 2020, July 28, 2020 and August 27, 2020, we granted stock options to purchase 44,000, 4,000 and 289,500 shares, respectively, of common stock under our 2012 Plan, at an exercise price of $0.64.
•
On September 14, 2020, September 21, 2020 and September 30, 2020 we granted stock options to purchase 629,000, 512,000 and 175,000 shares, respectively, of common stock under our 2012 Plan, at an exercise price of $1.99.
•
On November 3, 2020, we granted stock options to purchase 204,000 shares of common stock under our 2012 Plan, at an exercise price of $4.86
(d)
During the period from January 1, 2017 through the date hereof, an aggregate of 265,892 shares were issued upon the exercise of stock options, at exercise prices between $0.21 and $1.07 per share, for aggregate proceeds of $95,592. The exercises were as follows:
•
On March 6, 2017, 2,500 shares were issued upon the exercise of stock options, at exercise prices of $0.57 per share, for proceeds of $1,425.00.
•
On September 26, 2017, 14,375 shares were issued upon the exercise of stock options, at exercise prices of $0.32 per share, for proceeds of $4,600.00.
•
On October 11, 2017, 3,000, 3,000 and 2,000 shares were issued upon the exercise of stock options, at exercise prices of $0.21, $0.32 and $0.57 per share, respectively, for proceeds of $2,730.00.
•
On November 15, 2017, 2,656 shares were issued upon the exercise of stock options, at exercise prices of $0.57 per share, for proceeds of $1,513.92.
•
On February 5, 2018, 4,708 shares were issued upon the exercise of stock options, at exercise prices of $0.59 per share, for proceeds of $2,777.72.
•
On February 27, 2018, 15,000 and 2,031 shares were issued upon the exercise of stock options, at exercise prices of $0.21 and $0.59 per share, respectively, for proceeds of $4,348.29.
•
On April 4, 2018, 15,000 shares were issued upon the exercise of stock options, at exercise prices of $0.32 per share, for proceeds of $4,800.00.
•
On April 9, 2018, 2,083 shares were issued upon the exercise of stock options, at exercise prices of $0.59 per share, for proceeds of $1,228.97.
•
On April 13, 2018, 2,395 shares were issued upon the exercise of stock options, at exercise prices of $0.32 per share, for proceeds of $766.40.
•
On August 2, 2018, 1,416 shares were issued upon the exercise of stock options, at exercise prices of $1.07 per share, for proceeds of $1,515.12.
•
On August 6, 2018, 3,500 and 312 shares were issued upon the exercise of stock options, at exercise prices of $0.21 and $1.07 per share, respectively, for proceeds of $1,068.84.
•
On October 2, 2018, 149,010 shares were issued upon the exercise of stock options, at exercise prices of $0.32 per share, for proceeds of $47,683.20.
•
On November 12, 2018 2,125 shares were issued upon the exercise of stock options, at exercise prices of $1.07 per share, for proceeds of $2,273.75.
•
On November 19, 2018, 989 shares were issued upon the exercise of stock options, at exercise prices of $1.07 per share, for proceeds of $1,058.23.
•
On December 10, 2018, 9,583 shares were issued upon the exercise of stock options, at exercise prices of $0.38 per share, for proceeds of $3,641.54.
•
On September 14, 2019, 700 shares were issued upon the exercise of stock options, at exercise prices of $1.07 per share, for proceeds of $727.50.
•
On January 13, 2020, 3,854 shares were issued upon the exercise of stock options, at exercise prices of $0.59 per share, for proceeds of $2,273.86.
•
On January 27, 2020, 1,041 shares were issued upon the exercise of stock options, at exercise prices of $1.07 per share, for proceeds of $1,113.87.
•
On April 9, 2020, 750 shares were issued upon the exercise of stock options, at exercise prices of $0.97 per share, for proceeds of $727.50.
•
On July 14, 2020, 10,000 and 1,625 shares were issued upon the exercise of stock options, at exercise prices of $0.32 and $0.97 per share, respectively, for proceeds of $4,776.25.
•
On October 9, 2020, 10,000 and 2,239 shares were issued upon the exercise of stock options, at exercise prices of $0.32 and $0.59 per share, respectively, for proceeds of $4,521.01.
(e)
In connection with the March 2017 loan, the Company issued to the lender a warrant to purchase 79,856 shares of Series D Preferred Stock at a purchase price of $5.6351 per share.
(f)
In connection with the Company’s lease agreement entered into in January 2018, the Company issued to its landlord a warrant to purchase 70,983 shares of Series D Preferred Stock, at an exercise price of $5.6351 per share
(g)
In connection with the 2019 Loan (in August 2019), the Company issued to the lender a warrant to purchase 35,771 shares of Series E Preferred Stock at an exercise price of $6.29 per share.
The offers, sales and issuances of the securities described in paragraphs (a), (b), (d), (e) and (f) were exempt from registration under the Securities Act under Section 4(a)(2) of the Securities Act or Regulation D promulgated thereunder as transactions by an issuer not involving a public offering. The recipients of securities in each of these transactions acquired the securities for investment only and not with a view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions. Each of the recipients of securities in these transactions was an accredited person and had adequate access, through employment, business or other relationships, to information about the registrant.
The offers, sales and issuances of the securities described in paragraph (c) were exempt from registration under the Securities Act under either (i) Rule 701 in that the transactions were under compensatory benefit plans and contracts relating to compensation as provided under Rule 701 or (ii) Section 4(a)(2) of the Securities Act as transactions by an issuer not involving any public offering. The recipients of such securities were the registrant’s employees, consultants or directors and received the securities under our 2012 Plan. The recipients of securities in each of these transactions represented their intention to acquire the securities for investment only and not with view to or for sale in connection with any distribution thereof and appropriate legends were affixed to the securities issued in these transactions.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits.
EXHIBIT
NUMBER
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EXHIBIT TABLE
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1.1*
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Form of Underwriting Agreement
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3.1*
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Fifth Amended and Restated Certificate of Incorporation of the Registrant, as currently in effect
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3.2*
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Certificate of Amendment to the Fifth Amended and Restated Certificate of Incorporation of the Registrant
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3.3
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Form of Sixth Amended and Restated Certificate of Incorporation of the Registrant, to be in effect upon the closing of this offering
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3.4*
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By-laws of the Registrant, as currently in effect
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3.5
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Form of Amended and Restated By-laws of the Registrant, to be in effect upon the closing of this offering.
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4.1
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Fourth Amended and Restated Stockholders Agreement among the Registrant, certain of its stockholders and its investors, dated April 12, 2019
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4.2
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Fourth Amended and Restated Registration Rights Agreement among the Registrant, certain of its stockholders and its investors, dated April 12, 2019
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4.3*
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Form of Specimen Common Stock Certificate
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5.1*
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Opinion of Goodwin Procter LLP
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10.1*#
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2012 Stock Option and Grant Plan, as amended and forms of award agreements thereunder
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10.2#
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2020 Stock Option and Incentive Plan and forms of award agreements thereunder
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10.3#
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Form of Director Indemnification Agreement
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10.4#
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Form of Executive Officer Indemnification Agreement
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10.5#
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Form of Executive Officer Employment Agreement
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10.6*†
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Amended and Restated Exclusive License Agreement between the Registrant and The University of North Carolina at Chapel Hill, dated May 20, 2015, as amended
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10.7*†
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Limited Exclusive Commercial Field of Use Patent License Agreement between the Registrant and UT-Battle LLC, dated June 13, 2012, as amended (PLA-1670)
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10.8*†
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Limited Exclusive Commercial Field of Use Patent License Agreement between the Registrant and UT-Battle LLC, dated June 13, 2012, as amended (PLA-1699)
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10.9†
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Loan and Security Agreement between the Registrant and Signature Bank, dated August 29, 2019
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10.10†
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First Amendment to Loan and Security Agreement between the Registrant and Signature Bank, dated March 15, 2020
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10.11†
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Second Amendment to Loan and Security Agreement between the Registrant and Signature Bank, dated August 7, 2020
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10.12
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Lease by Harbor Industrial Development LLC to the Registrant, dated January 2, 2018, as amended
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21.1*
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Subsidiaries of the Registrant
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23.1
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23.2*
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Consent of Goodwin Procter LLP (included in Exhibit 5.1)
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24.1
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Power of Attorney (included on signature page to this registration statement)
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*
To be filed by amendment.
#
Indicates a management contract or any compensatory plan, contract or arrangement.
†
Portions of this exhibit (indicated by asterisks) will be omitted in accordance with the rules of the Securities and Exchange Commission.
(b) Financial Statements Schedules:
All schedules are omitted because the required information is either not present, not present in material amounts or is presented within the financial statements included in the prospectus that is part of this registration statement.
Item 17. Undertakings.
Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, or the Act, may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue.
The Registrant hereby undertakes that:
(a) The Registrant will provide to the underwriter at the closing as specified in the underwriting agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
(b) For purposes of determining any liability under the Securities Act of 1933, as amended, the information omitted from a form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in the form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933, as amended, shall be deemed to be part of this registration statement as of the time it was declared effective.
(c) For the purpose of determining any liability under the Securities Act of 1933, as amended, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant has duly caused this Registration Statement on Form S-1 to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Boston, Massachusetts, on the day of November 25, 2020.
908 DEVICES INC.
By:
/s/ Kevin J. Knopp, Ph.D.
Name: Kevin J. Knopp, Ph.D.
Title: Chief Executive Officer and Director
POWER OF ATTORNEY AND SIGNATURES
Each individual whose signature appears below hereby constitutes and appoints each of Kevin J. Knopp, Ph.D. and Joseph H. Griffith IV as such person’s true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person in such person’s name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement (or any Registration Statement for the same offering that is to be effective upon filing pursuant to Rule 462(b) under the Securities Act of 1933), and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission granting unto each said attorney-in-fact and agent full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that any said attorney-in-fact and agent, or any substitute or substitutes of any of them, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement and Power of Attorney has been signed by the following person in the capacities on November 25, 2020.
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Signature
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Title
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/s/ Kevin J. Knopp, Ph.D.
Kevin J. Knopp, Ph.D.
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Chief Executive Officer and Director
(Principal Executive Officer)
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/s/ Joseph H. Griffith IV
Joseph H. Griffith IV
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Chief Financial Officer
(Principal Financial and Accounting Officer)
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/s/ Nicolas Barthelemy
Nicolas Barthelemy
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Director
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/s/ Keith L. Crandell
Keith L. Crandell
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Director
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/s/ E. Kevin Hrusovsky
E. Kevin Hrusovsky
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Director
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/s/ Sharon Kedar
Sharon Kedar
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Director
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/s/ J. Michael Ramsey, Ph.D.
J. Michael Ramsey, Ph.D.
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Director
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/s/ Mark Spoto
Mark Spoto
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Director
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Exhibit 3.3
SIXTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
908 DEVICES INC.
908 Devices Inc., a corporation organized
and existing under the laws of the State of Delaware (the “Corporation”), hereby certifies as follows:
1. The
name of the Corporation is 908 Devices Inc. The date of the filing of its original Certificate of Incorporation with the Secretary
of State of the State of Delaware was June 15, 2012 (the “Original Certificate”).
2. This
Sixth Amended and Restated Certificate of Incorporation (the “Certificate”) amends, restates and integrates the provisions
of the Sixth Amended and Restated Certificate of Incorporation that was filed with the Secretary of State of the State of Delaware
on [date] (the “Amended and Restated Certificate”), and was duly adopted in accordance with the provisions of Sections
242 and 245 of the General Corporation Law of the State of Delaware (the “DGCL”).
3. The
text of the Amended and Restated Certificate is hereby amended and restated in its entirety to provide as herein set forth in full.
ARTICLE I
The name of the Corporation is 908 Devices
Inc.
ARTICLE II
The address of the Corporation’s registered
office in the State of Delaware is c/o The Corporation Trust Company, 1209 Orange Street in the City of Wilmington, County of New
Castle. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the Corporation is to engage
in any lawful act or activity for which corporations may be organized under the DGCL.
ARTICLE IV
CAPITAL STOCK
The total number of shares of capital stock
which the Corporation shall have authority to issue is one hundred and five million (105,000,000), of which (i) one hundred
million (100,000,000) shares shall be a class designated as common stock, par value $0.001 per share (the “Common Stock”),
and (ii) five million (5,000,000) shares shall be a class designated as undesignated preferred stock, par value $0.001 per
share (the “Undesignated Preferred Stock”).
Except as otherwise provided in any certificate
of designations of any series of Undesignated Preferred Stock, the number of authorized shares of the class of Common Stock or
Undesignated Preferred Stock may from time to time be increased or decreased (but not below the number of shares of such class
outstanding) by the affirmative vote of the holders of a majority in voting power of the outstanding shares of capital stock of
the Corporation irrespective of the provisions of Section 242(b)(2) of the DGCL.
The powers, preferences and rights of, and
the qualifications, limitations and restrictions upon, each class or series of stock shall be determined in accordance with, or
as set forth below in, this Article IV.
A. COMMON STOCK
Subject to all the rights, powers and preferences
of the Undesignated Preferred Stock and except as provided by law or in this Certificate (or in any certificate of designations
of any series of Undesignated Preferred Stock):
(a) the
holders of the Common Stock shall have the exclusive right to vote for the election of directors of the Corporation (the “Directors”)
and on all other matters requiring stockholder action, each outstanding share entitling the holder thereof to one vote on each
matter properly submitted to the stockholders of the Corporation for their vote; provided, however, that, except
as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Certificate
(or on any amendment to a certificate of designations of any series of Undesignated Preferred Stock) that alters or changes the
powers, preferences, rights or other terms of one or more outstanding series of Undesignated Preferred Stock if the holders of
such affected series of Undesignated Preferred Stock are entitled to vote, either separately or together with the holders of one
or more other such series, on such amendment pursuant to this Certificate (or pursuant to a certificate of designations of any
series of Undesignated Preferred Stock) or pursuant to the DGCL;
(b) dividends
may be declared and paid or set apart for payment upon the Common Stock out of any assets or funds of the Corporation legally available
for the payment of dividends, but only when and as declared by the Board of Directors or any authorized committee thereof; and
(c) upon
the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation shall
be distributed pro rata to the holders of the Common Stock.
B. UNDESIGNATED PREFERRED STOCK
The Board of Directors or any authorized committee
thereof is expressly authorized, to the fullest extent permitted by law, to provide by resolution or resolutions for, out of the
unissued shares of Undesignated Preferred Stock, the issuance of the shares of Undesignated Preferred Stock in one or more series
of such stock, and by filing a certificate of designations pursuant to applicable law of the State of Delaware, to establish or
change from time to time the number of shares of each such series, and to fix the designations, powers, including voting powers,
full or limited, or no voting powers, preferences and the relative, participating, optional or other special rights of the shares
of each series and any qualifications, limitations and restrictions thereof.
ARTICLE V
STOCKHOLDER ACTION
1. Action
without Meeting. Any action required or permitted to be taken by the stockholders of the Corporation at any annual or special
meeting of stockholders of the Corporation must be effected at a duly called annual or special meeting of stockholders and may
not be taken or effected by a written consent of stockholders in lieu thereof. Notwithstanding anything herein to the contrary,
the affirmative vote of not less than two-thirds (2/3) of the outstanding shares of capital stock entitled to vote thereon, and
the affirmative vote of not less than two-thirds (2/3) of the outstanding shares of each class entitled to vote thereon as a class,
shall be required to amend or repeal any provision of this Article V, Section 1.
2. Special
Meetings. Except as otherwise required by statute and subject to the rights, if any, of the holders of any series of Undesignated
Preferred Stock, special meetings of the stockholders of the Corporation may be called only by the Board of Directors acting pursuant
to a resolution approved by the affirmative vote of a majority of the Directors then in office, and special meetings of stockholders
may not be called by any other person or persons. Only those matters set forth in the notice of the special meeting may be considered
or acted upon at a special meeting of stockholders of the Corporation.
ARTICLE VI
DIRECTORS
1. General.
The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors except as otherwise
provided herein or required by law.
2. Election
of Directors. Election of Directors need not be by written ballot unless the By-laws of the Corporation (the “By-laws”)
shall so provide.
3. Number
of Directors; Term of Office. The number of Directors of the Corporation shall be fixed solely and exclusively by resolution
duly adopted from time to time by the Board of Directors. The Directors, other than those who may be elected by the holders of
any series of Undesignated Preferred Stock, shall be classified, with respect to the term for which they severally hold office,
into three classes. The initial Class I Directors of the Corporation shall be Sharon Kedar and Michael Ramsey; the initial
Class II Directors of the Corporation shall be Nicolas Barthelemy, Kevin Knopp and Mark Spoto; and the initial Class III
Directors of the Corporation shall be Keith Crandell and Kevin Hrusovsky. The initial Class I Directors shall serve for a
term expiring at the annual meeting of stockholders to be held in 2021, the initial Class II Directors shall serve for a term
expiring at the annual meeting of stockholders to be held in 2022, and the initial Class III Directors shall serve for a term
expiring at the annual meeting of stockholders to be held in 2023. At each annual meeting of stockholders, Directors elected to
succeed those Directors whose terms expire shall be elected for a term of office to expire at the third succeeding annual meeting
of stockholders after their election. Notwithstanding the foregoing, the Directors elected to each class shall hold office until
their successors are duly elected and qualified or until their earlier resignation, death or removal.
Notwithstanding the foregoing, whenever,
pursuant to the provisions of Article IV of this Certificate, the holders of any one or more series of Undesignated Preferred
Stock shall have the right, voting separately as a series or together with holders of other such series, to elect Directors at
an annual or special meeting of stockholders, the election, term of office, filling of vacancies and other features of such directorships
shall be governed by the terms of this Certificate and any certificate of designations applicable to such series.
Notwithstanding anything herein to the contrary,
the affirmative vote of not less than two-thirds (2/3) of the outstanding shares of capital stock entitled to vote thereon, and
the affirmative vote of not less than two-thirds (2/3) of the outstanding shares of each class entitled to vote thereon as a class,
shall be required to amend or repeal any provision of this Article IV, Section 3.
4. Vacancies.
Subject to the rights, if any, of the holders of any series of Undesignated Preferred Stock to elect Directors and to fill vacancies
in the Board of Directors relating thereto, any and all vacancies in the Board of Directors, however occurring, including, without
limitation, by reason of an increase in the size of the Board of Directors, or the death, resignation, disqualification or removal
of a Director, shall be filled solely and exclusively by the affirmative vote of a majority of the remaining Directors then in
office, even if less than a quorum of the Board of Directors, and not by the stockholders. Any Director appointed in accordance
with the preceding sentence shall hold office for the remainder of the full term of the class of Directors in which the new directorship
was created or the vacancy occurred and until such Director’s successor shall have been duly elected and qualified or until
his or her earlier resignation, death or removal. Subject to the rights, if any, of the holders of any series of Undesignated Preferred
Stock to elect Directors, when the number of Directors is increased or decreased, the Board of Directors shall, subject to Article VI.3
hereof, determine the class or classes to which the increased or decreased number of Directors shall be apportioned; provided,
however, that no decrease in the number of Directors shall shorten the term of any incumbent Director. In the event of a
vacancy in the Board of Directors, the remaining Directors, except as otherwise provided by law, shall exercise the powers of the
full Board of Directors until the vacancy is filled.
5. Removal.
Subject to the rights, if any, of any series of Undesignated Preferred Stock to elect Directors and to remove any Director whom
the holders of any such series have the right to elect, any Director (including persons elected by Directors to fill vacancies
in the Board of Directors) may be removed from office (i) only with cause and (ii) only by the affirmative vote of the
holders not less than two-thirds (2/3) of the outstanding shares of capital stock then entitled to vote at an election of Directors.
At least forty-five (45) days prior to any annual or special meeting of stockholders at which it is proposed that any Director
be removed from office, written notice of such proposed removal and the alleged grounds thereof shall be sent to the Director whose
removal will be considered at the meeting.
ARTICLE VII
LIMITATION OF LIABILITY
A Director of the Corporation shall not
be personally liable to the Corporation or its stockholders for monetary damages for breach of his or her fiduciary duty as a Director,
except for liability (a) for any breach of the Director’s duty of loyalty to the Corporation or its stockholders, (b) for
acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section 174
of the DGCL or (d) for any transaction from which the Director derived an improper personal benefit. If the DGCL is amended
after the effective date of this Certificate to authorize corporate action further eliminating or limiting the personal liability
of Directors, then the liability of a Director of the Corporation shall be eliminated or limited to the fullest extent permitted
by the DGCL, as so amended.
Any amendment, repeal or modification of
this Article VII by either of (i) the stockholders of the Corporation or (ii) an amendment to the DGCL, shall not
adversely affect any right or protection existing at the time of such amendment, repeal or modification with respect to any acts
or omissions occurring before such amendment, repeal or modification of a person serving as a Director at the time of such amendment,
repeal or modification.
Notwithstanding anything herein to the contrary,
the affirmative vote of not less than two-thirds (2/3) of the outstanding shares of capital stock entitled to vote thereon, and
the affirmative vote of not less than two-thirds (2/3) of the outstanding shares of each class entitled to vote thereon as a class,
shall be required to amend or repeal any provision of this Article VII.
ARTICLE VIII
AMENDMENT OF BY-LAWS
1. Amendment
by Directors. Except as otherwise provided by law, the By-laws of the Corporation may be amended or repealed by the Board of
Directors by the affirmative vote of a majority of the Directors then in office.
2. Amendment
by Stockholders. Except as otherwise provided therein, the By-laws of the Corporation may be amended or repealed at any annual
meeting of stockholders, or special meeting of stockholders called for such purpose, by the affirmative vote of at least not less
than two-thirds (2/3) of the outstanding shares of capital stock entitled to vote on such amendment or repeal, voting together
as a single class.
ARTICLE IX
AMENDMENT OF CERTIFICATE OF INCORPORATION
The Corporation reserves the right to amend
or repeal this Certificate in the manner now or hereafter prescribed by statute and this Certificate, and all rights conferred
upon stockholders herein are granted subject to this reservation. Except as otherwise required by this Certificate or by law, whenever
any vote of the holders of capital stock of the Corporation is required to amend or repeal any provision of this Certificate, such
amendment or repeal shall require the affirmative vote of the majority of the outstanding shares of capital stock entitled to vote
on such amendment or repeal, and the affirmative vote of the majority of the outstanding shares of each class entitled to vote
thereon as a class, at a duly constituted meeting of stockholders called expressly for such purpose.
[End of Text]
THIS SIXTH AMENDED AND RESTATED CERTIFICATE
OF INCORPORATION is executed as of this ____ day of __________, ____.
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908 DEVICES INC.
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By:
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Name:
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Title:
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Exhibit 3.5
AMENDED AND RESTATED
BY-LAWS
OF
908 DEVICES INC.
(the “Corporation”)
ARTICLE I
Stockholders
SECTION 1. Annual
Meeting. The annual meeting of stockholders (any such meeting being referred to in these By-laws as an “Annual Meeting”)
shall be held at the hour, date and place within or without the United States which is fixed by the Board of Directors, which time,
date and place may subsequently be changed at any time by vote of the Board of Directors. If no Annual Meeting has been held for
a period of thirteen (13) months after the Corporation’s last Annual Meeting, a special meeting in lieu thereof may be held,
and such special meeting shall have, for the purposes of these By-laws or otherwise, all the force and effect of an Annual Meeting.
Any and all references hereafter in these By-laws to an Annual Meeting or Annual Meetings also shall be deemed to refer to any
special meeting(s) in lieu thereof.
SECTION 2. Notice
of Stockholder Business and Nominations.
(a) Annual
Meetings of Stockholders.
(1) Nominations
of persons for election to the Board of Directors of the Corporation and the proposal of other business to be considered by the
stockholders may be brought before an Annual Meeting (i) by or at the direction of the Board of Directors or (ii) by
any stockholder of the Corporation who was a stockholder of record at the time of giving of notice provided for in this By-law,
who is entitled to vote at the meeting, who is present (in person or by proxy) at the meeting and who complies with the notice
procedures set forth in this By-law as to such nomination or business. For the avoidance of doubt, the foregoing clause (ii) shall
be the exclusive means for a stockholder to bring nominations or business properly before an Annual Meeting (other than matters
properly brought under Rule 14a-8 (or any successor rule) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), and such stockholder must comply with the notice and other procedures set forth in Article I, Section 2(a)(2) and
(3) of this By-law to bring such nominations or business properly before an Annual Meeting. In addition to the other requirements
set forth in this By-law, for any proposal of business to be considered at an Annual Meeting, it must be a proper subject for action
by stockholders of the Corporation under Delaware law.
(2) For
nominations or other business to be properly brought before an Annual Meeting by a stockholder pursuant to clause (ii) of
Article I, Section 2(a)(1) of this By-law, the stockholder must (i) have given Timely Notice (as defined below)
thereof in writing to the Secretary of the Corporation, (ii) have provided any updates or supplements to such notice at the
times and in the forms required by this By-law and (iii) together with the beneficial owner(s), if any, on whose behalf the
nomination or business proposal is made, have acted in accordance with the representations set forth in the Solicitation Statement
(as defined below) required by this By-law. To be timely, a stockholder’s written notice shall be received by the Secretary
at the principal executive offices of the Corporation not later than the close of business on the ninetieth (90th) day nor earlier
than the close of business on the one hundred twentieth (120th) day prior to the one-year anniversary of the preceding year’s
Annual Meeting; provided, however, that in the event the Annual Meeting is first convened more than thirty (30) days
before or more than sixty (60) days after such anniversary date, or if no Annual Meeting were held in the preceding year, notice
by the stockholder to be timely must be received by the Secretary of the Corporation not later than the close of business on the
later of the ninetieth (90th) day prior to the scheduled date of such Annual Meeting or the tenth (10th) day following the day
on which public announcement of the date of such meeting is first made (such notice within such time periods shall be referred
to as “Timely Notice”). Notwithstanding anything to the contrary provided herein, for the first Annual Meeting following
the initial public offering of common stock of the Corporation, a stockholder’s notice shall be timely if received by the
Secretary at the principal executive offices of the Corporation not later than the close of business on the later of the ninetieth
(90th) day prior to the scheduled date of such Annual Meeting or the tenth (10th) day following the day on which public announcement
of the date of such Annual Meeting is first made or sent by the Corporation. Such stockholder’s Timely Notice shall set forth:
(A) as
to each person whom the stockholder proposes to nominate for election or reelection as a director, all information relating to
such person that is required to be disclosed in solicitations of proxies for election of directors in an election contest, or is
otherwise required, in each case pursuant to Regulation 14A under the Exchange Act (including such person’s written consent
to being named in the proxy statement as a nominee and to serving as a director if elected);
(B) as
to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to
be brought before the meeting, the reasons for conducting such business at the meeting, and any material interest in such business
of each Proposing Person (as defined below);
(C) (i) the
name and address of the stockholder giving the notice, as they appear on the Corporation’s books, and the names and addresses
of the other Proposing Persons (if any) and (ii) as to each Proposing Person, the following information: (a) the class
or series and number of all shares of capital stock of the Corporation which are, directly or indirectly, owned beneficially or
of record by such Proposing Person or any of its affiliates or associates (as such terms are defined in Rule 12b-2 promulgated
under the Exchange Act), including any shares of any class or series of capital stock of the Corporation as to which such Proposing
Person or any of its affiliates or associates has a right to acquire beneficial ownership at any time in the future, (b) all
Synthetic Equity Interests (as defined below) in which such Proposing Person or any of its affiliates or associates, directly or
indirectly, holds an interest including a description of the material terms of each such Synthetic Equity Interest, including without
limitation, identification of the counterparty to each such Synthetic Equity Interest and disclosure, for each such Synthetic Equity
Interest, as to (x) whether or not such Synthetic Equity Interest conveys any voting rights, directly or indirectly, in such
shares to such Proposing Person, (y) whether or not such Synthetic Equity Interest is required to be, or is capable of being,
settled through delivery of such shares and (z) whether or not such Proposing Person and/or, to the extent known, the counterparty
to such Synthetic Equity Interest has entered into other transactions that hedge or mitigate the economic effect of such Synthetic
Equity Interest, (c) any proxy (other than a revocable proxy given in response to a public proxy solicitation made pursuant
to, and in accordance with, the Exchange Act), agreement, arrangement, understanding or relationship pursuant to which such Proposing
Person has or shares a right to, directly or indirectly, vote any shares of any class or series of capital stock of the Corporation,
(d) any rights to dividends or other distributions on the shares of any class or series of capital stock of the Corporation,
directly or indirectly, owned beneficially by such Proposing Person that are separated or separable from the underlying shares
of the Corporation, and (e) any performance-related fees (other than an asset based fee) that such Proposing Person, directly
or indirectly, is entitled to based on any increase or decrease in the value of shares of any class or series of capital stock
of the Corporation or any Synthetic Equity Interests (the disclosures to be made pursuant to the foregoing clauses (a) through
(e) are referred to, collectively, as “Material Ownership Interests”) and (iii) a description of the material
terms of all agreements, arrangements or understandings (whether or not in writing) entered into by any Proposing Person or any
of its affiliates or associates with any other person for the purpose of acquiring, holding, disposing or voting of any shares
of any class or series of capital stock of the Corporation;
(D) (i) a
description of all agreements, arrangements or understandings by and among any of the Proposing Persons, or by and among any Proposing
Persons and any other person (including with any proposed nominee(s)), pertaining to the nomination(s) or other business proposed
to be brought before the meeting of stockholders (which description shall identify the name of each other person who is party to
such an agreement, arrangement or understanding), and (ii) identification of the names and addresses of other stockholders
(including beneficial owners) known by any of the Proposing Persons to support such nominations or other business proposal(s),
and to the extent known the class and number of all shares of the Corporation’s capital stock owned beneficially or of record
by such other stockholder(s) or other beneficial owner(s); and
(E) a
statement whether or not the stockholder giving the notice and/or the other Proposing Person(s), if any, will deliver a proxy statement
and form of proxy to holders of, in the case of a business proposal, at least the percentage of voting power of all of the shares
of capital stock of the Corporation required under applicable law to approve the proposal or, in the case of a nomination or nominations,
at least the percentage of voting power of all of the shares of capital stock of the Corporation reasonably believed by such Proposing
Person to be sufficient to elect the nominee or nominees proposed to be nominated by such stockholder (such statement, the “Solicitation
Statement”).
For purposes of this Article I
of these By-laws, the term “Proposing Person” shall mean the following persons: (i) the stockholder of record
providing the notice of nominations or business proposed to be brought before a stockholders’ meeting, and (ii) the
beneficial owner(s), if different, on whose behalf the nominations or business proposed to be brought before a stockholders’
meeting is made. For purposes of this Section 2 of Article I of these By-laws, the term “Synthetic Equity Interest”
shall mean any transaction, agreement or arrangement (or series of transactions, agreements or arrangements), including, without
limitation, any derivative, swap, hedge, repurchase or so-called “stock borrowing” agreement or arrangement, the purpose
or effect of which is to, directly or indirectly: (a) give a person or entity economic benefit and/or risk similar to ownership
of shares of any class or series of capital stock of the Corporation, in whole or in part, including due to the fact that such
transaction, agreement or arrangement provides, directly or indirectly, the opportunity to profit or avoid a loss from any increase
or decrease in the value of any shares of any class or series of capital stock of the Corporation, (b) mitigate loss to, reduce
the economic risk of or manage the risk of share price changes for, any person or entity with respect to any shares of any class
or series of capital stock of the Corporation, (c) otherwise provide in any manner the opportunity to profit or avoid a loss
from any decrease in the value of any shares of any class or series of capital stock of the Corporation, or (d) increase or
decrease the voting power of any person or entity with respect to any shares of any class or series of capital stock of the Corporation.
(3) A
stockholder providing Timely Notice of nominations or business proposed to be brought before an Annual Meeting shall further update
and supplement such notice, if necessary, so that the information (including, without limitation, the Material Ownership Interests
information) provided or required to be provided in such notice pursuant to this By-law shall be true and correct as of the record
date for the meeting and as of the date that is ten (10) business days prior to such Annual Meeting, and such update and supplement
shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on
the fifth (5th) business day after the record date for the Annual Meeting (in the case of the update and supplement required to
be made as of the record date), and not later than the close of business on the eighth (8th) business day prior to the date of
the Annual Meeting (in the case of the update and supplement required to be made as of ten (10) business days prior to the
meeting).
(4) Notwithstanding
anything in the second sentence of Article I, Section 2(a)(2) of this By-law to the contrary, in the event that
the number of directors to be elected to the Board of Directors of the Corporation is increased and there is no public announcement
naming all of the nominees for director or specifying the size of the increased Board of Directors made by the Corporation at least
ten (10) days before the last day a stockholder may deliver a notice of nomination in accordance with the second sentence
of Article I, Section 2(a)(2), a stockholder’s notice required by this By-law shall also be considered timely,
but only with respect to nominees for any new positions created by such increase, if it shall be received by the Secretary of the
Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is
first made by the Corporation.
(b) General.
(1) Only
such persons who are nominated in accordance with the provisions of this By-law shall be eligible for election and to serve as
directors and only such business shall be conducted at an Annual Meeting as shall have been brought before the meeting in accordance
with the provisions of this By-law or in accordance with Rule 14a-8 under the Exchange Act. The Board of Directors or a designated
committee thereof shall have the power to determine whether a nomination or any business proposed to be brought before the meeting
was made in accordance with the provisions of this By-law. If neither the Board of Directors nor such designated committee makes
a determination as to whether any stockholder proposal or nomination was made in accordance with the provisions of this By-law,
the presiding officer of the Annual Meeting shall have the power and duty to determine whether the stockholder proposal or nomination
was made in accordance with the provisions of this By-law. If the Board of Directors or a designated committee thereof or the presiding
officer, as applicable, determines that any stockholder proposal or nomination was not made in accordance with the provisions of
this By-law, such proposal or nomination shall be disregarded and shall not be presented for action at the Annual Meeting.
(2) Except
as otherwise required by law, nothing in this Article I, Section 2 shall obligate the Corporation or the Board of Directors
to include in any proxy statement or other stockholder communication distributed on behalf of the Corporation or the Board of Directors
information with respect to any nominee for director or any other matter of business submitted by a stockholder.
(3) Notwithstanding
the foregoing provisions of this Article I, Section 2, if the nominating or proposing stockholder (or a qualified representative
of the stockholder) does not appear at the Annual Meeting to present a nomination or any business, such nomination or business
shall be disregarded, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes
of this Article I, Section 2, to be considered a qualified representative of the proposing stockholder, a person must
be authorized by a written instrument executed by such stockholder or an electronic transmission delivered by such stockholder
to act for such stockholder as proxy at the meeting of stockholders and such person must produce such written instrument or electronic
transmission, or a reliable reproduction of the written instrument or electronic transmission, to the presiding officer at the
meeting of stockholders.
(4) For
purposes of this By-law, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News
Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities
and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.
(5) Notwithstanding
the foregoing provisions of this By-law, a stockholder shall also comply with all applicable requirements of the Exchange Act and
the rules and regulations thereunder with respect to the matters set forth in this By-law. Nothing in this By-law shall be
deemed to affect any rights of (i) stockholders to have proposals included in the Corporation’s proxy statement pursuant
to Rule 14a-8 (or any successor rule), as applicable, under the Exchange Act and, to the extent required by such rule, have
such proposals considered and voted on at an Annual Meeting or (ii) the holders of any series of Undesignated Preferred Stock
to elect directors under specified circumstances.
SECTION 3. Special
Meetings. Except as otherwise required by statute and subject to the rights, if any, of the holders of any series of Undesignated
Preferred Stock, special meetings of the stockholders of the Corporation may be called only by the Board of Directors acting pursuant
to a resolution approved by the affirmative vote of a majority of the Directors then in office. The Board of Directors may postpone
or reschedule any previously scheduled special meeting of stockholders. Only those matters set forth in the notice of the special
meeting may be considered or acted upon at a special meeting of stockholders of the Corporation. Nominations of persons for election
to the Board of Directors of the Corporation and stockholder proposals of other business shall not be brought before a special
meeting of stockholders to be considered by the stockholders unless such special meeting is held in lieu of an annual meeting of
stockholders in accordance with Article I, Section 1 of these By-laws, in which case such special meeting in lieu thereof
shall be deemed an Annual Meeting for purposes of these By-laws and the provisions of Article I, Section 2 of these By-laws
shall govern such special meeting.
SECTION 4. Notice
of Meetings; Adjournments.
(a) A
notice of each Annual Meeting stating the hour, date and place, if any, of such Annual Meeting and the means of remote communication,
if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such meeting, shall be given not
less than ten (10) days nor more than sixty (60) days before the Annual Meeting, to each stockholder entitled to vote thereat
by delivering such notice to such stockholder or by mailing it, postage prepaid, addressed to such stockholder at the address of
such stockholder as it appears on the Corporation’s stock transfer books. Without limiting the manner by which notice may
otherwise be given to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided in
Section 232 of the Delaware General Corporation Law (“DGCL”).
(b) Notice
of all special meetings of stockholders shall be given in the same manner as provided for Annual Meetings, except that the notice
of all special meetings shall state the purpose or purposes for which the meeting has been called.
(c) Notice
of an Annual Meeting or special meeting of stockholders need not be given to a stockholder if a waiver of notice is executed, or
waiver of notice by electronic transmission is provided, before or after such meeting by such stockholder or if such stockholder
attends such meeting, unless such attendance is for the express purpose of objecting at the beginning of the meeting to the transaction
of any business because the meeting was not lawfully called or convened.
(d) The
Board of Directors may postpone and reschedule any previously scheduled Annual Meeting or special meeting of stockholders and any
record date with respect thereto, regardless of whether any notice or public disclosure with respect to any such meeting has been
sent or made pursuant to Section 2 of this Article I of these By-laws or otherwise. In no event shall the public announcement
of an adjournment, postponement or rescheduling of any previously scheduled meeting of stockholders commence a new time period
for the giving of a stockholder’s notice under this Article I of these By-laws.
(e) When
any meeting is convened, the presiding officer may adjourn the meeting if (i) no quorum is present for the transaction of
business, (ii) the Board of Directors determines that adjournment is necessary or appropriate to enable the stockholders to
consider fully information which the Board of Directors determines has not been made sufficiently or timely available to stockholders,
or (iii) the Board of Directors determines that adjournment is otherwise in the best interests of the Corporation. When any
Annual Meeting or special meeting of stockholders is adjourned to another hour, date or place, notice need not be given of the
adjourned meeting other than an announcement at the meeting at which the adjournment is taken of the hour, date and place, if any,
to which the meeting is adjourned and the means of remote communications, if any, by which stockholders and proxyholders may be
deemed to be present in person and vote at such adjourned meeting; provided, however, that if the adjournment is for more than
thirty (30) days from the meeting date, or if after the adjournment a new record date is fixed for the adjourned meeting, notice
of the adjourned meeting and the means of remote communications, if any, by which stockholders and proxyholders may be deemed to
be present in person and vote at such adjourned meeting shall be given to each stockholder of record entitled to vote thereat and
each stockholder who, by law or under the Certificate of Incorporation of the Corporation (as the same may hereafter be amended
and/or restated, the “Certificate”) or these By-laws, is entitled to such notice.
SECTION 5. Quorum.
A majority of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at any meeting
of stockholders. If less than a quorum is present at a meeting, the holders of voting stock representing a majority of the voting
power present at the meeting or the presiding officer may adjourn the meeting from time to time, and the meeting may be held as
adjourned without further notice, except as provided in Section 4 of this Article I. At such adjourned meeting at which
a quorum is present, any business may be transacted which might have been transacted at the meeting as originally noticed. The
stockholders present at a duly constituted meeting may continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
SECTION 6. Voting
and Proxies. Stockholders shall have one vote for each share of stock entitled to vote owned by them of record according to
the stock ledger of the Corporation as of the record date, unless otherwise provided by law or by the Certificate. Stockholders
may vote either (i) in person, (ii) by written proxy or (iii) by a transmission permitted by Section 212(c) of
the DGCL. Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission permitted by Section 212(c) of
the DGCL may be substituted for or used in lieu of the original writing or transmission for any and all purposes for which the
original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall
be a complete reproduction of the entire original writing or transmission. Proxies shall be filed in accordance with the procedures
established for the meeting of stockholders. Except as otherwise limited therein or as otherwise provided by law, proxies authorizing
a person to vote at a specific meeting shall entitle the persons authorized thereby to vote at any adjournment of such meeting,
but they shall not be valid after final adjournment of such meeting. A proxy with respect to stock held in the name of two or more
persons shall be valid if executed by or on behalf of any one of them unless at or prior to the exercise of the proxy the Corporation
receives a specific written notice to the contrary from any one of them.
SECTION 7. Action
at Meeting. When a quorum is present at any meeting of stockholders, any matter before any such meeting (other than an election
of a director or directors) shall be decided by a majority of the votes properly cast for and against such matter, except where
a larger vote is required by law, by the Certificate or by these By-laws. Any election of directors by stockholders shall be determined
by a plurality of the votes properly cast on the election of directors.
SECTION 8. Stockholder
Lists. The Secretary or an Assistant Secretary (or the Corporation’s transfer agent or other person authorized by these
By-laws or by law) shall prepare and make, at least ten (10) days before every Annual Meeting or special meeting of stockholders,
a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination
of any stockholder, for a period of at least ten (10) days prior to the meeting in the manner provided by law. The list shall
also be open to the examination of any stockholder during the whole time of the meeting as provided by law.
SECTION 9. Presiding
Officer. The Board of Directors shall designate a representative to preside over all Annual Meetings or special meetings of
stockholders, provide that if the Board of Directors does not so designate such a presiding officer, then the Chairman of the Board,
if one is elected, shall preside over such meetings. If the Board of Directors does not so designate such a presiding officer and
there is no Chairman of the Board or the Chairman of the Board is unable to so preside or is absent, then the Chief Executive Officer,
if one is elected, shall preside over such meetings, provided further that if there is no Chief Executive Officer or the Chief
Executive Officer is unable to so preside or is absent, then the President shall preside over such meetings. The presiding officer
at any Annual Meeting or special meeting of stockholders shall have the power, among other things, to adjourn such meeting at any
time and from time to time, subject to Sections 4 and 5 of this Article I. The order of business and all other matters
of procedure at any meeting of the stockholders shall be determined by the presiding officer.
SECTION 10. Inspectors
of Elections. The Corporation shall, in advance of any meeting of stockholders, appoint one or more inspectors to act at the
meeting and make a written report thereof. The Corporation may designate one or more persons as alternate inspectors to replace
any inspector who fails to act. If no inspector or alternate is able to act at a meeting of stockholders, the presiding officer
shall appoint one or more inspectors to act at the meeting. Any inspector may, but need not, be an officer, employee or agent of
the Corporation. Each inspector, before entering upon the discharge of his or her duties, shall take and sign an oath faithfully
to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall
perform such duties as are required by the DGCL, including the counting of all votes and ballots. The inspectors may appoint or
retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. The presiding officer
may review all determinations made by the inspectors, and in so doing the presiding officer shall be entitled to exercise his or
her sole judgment and discretion and he or she shall not be bound by any determinations made by the inspectors. All determinations
by the inspectors and, if applicable, the presiding officer, shall be subject to further review by any court of competent jurisdiction.
ARTICLE II
Directors
SECTION 1. Powers.
The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors except as otherwise
provided by the Certificate or required by law.
SECTION 2. Number
and Terms. The number of directors of the Corporation shall be fixed solely and exclusively by resolution duly adopted from
time to time by the Board of Directors. The directors shall hold office in the manner provided in the Certificate.
SECTION 3. Qualification.
No director need be a stockholder of the Corporation.
SECTION 4. Vacancies.
Vacancies in the Board of Directors shall be filled in the manner provided in the Certificate.
SECTION 5. Removal.
Directors may be removed from office only in the manner provided in the Certificate.
SECTION 6. Resignation.
A director may resign at any time by giving written notice to the Chairman of the Board, if one is elected, the President or the
Secretary. A resignation shall be effective upon receipt, unless the resignation otherwise provides.
SECTION 7. Regular
Meetings. Regular meetings (including any annual meeting) of the Board of Directors may be held at such hour, date and place
as the Board of Directors may by resolution from time to time determine and publicize by means of reasonable notice given to any
director who is not present at the meeting at which such resolution is adopted.
SECTION 8. Special
Meetings. Special meetings of the Board of Directors may be called, orally or in writing, by or at the request of a majority
of the directors, the Chairman of the Board, if one is elected, or the President. The person calling any such special meeting of
the Board of Directors may fix the hour, date and place thereof.
SECTION 9. Notice
of Meetings. Notice of the hour, date and place of all special meetings of the Board of Directors shall be given to each director
by the Secretary or an Assistant Secretary, or in case of the death, absence, incapacity or refusal of such persons, by the Chairman
of the Board, if one is elected, or the President or such other officer designated by the Chairman of the Board, if one is elected,
or the President. Notice of any special meeting of the Board of Directors shall be given to each director in person, by telephone,
or by facsimile, electronic mail or other form of electronic communication, sent to his or her business or home address, at least
twenty-four (24) hours in advance of the meeting, or by written notice mailed to his or her business or home address, at least
forty-eight (48) hours in advance of the meeting. Such notice shall be deemed to be delivered when hand-delivered to such address,
read to such director by telephone, deposited in the mail so addressed, with postage thereon prepaid if mailed, dispatched or transmitted
if sent by facsimile transmission or by electronic mail or other form of electronic communications. A written waiver of notice
signed before or after a meeting by a director and filed with the records of the meeting shall be deemed to be equivalent to notice
of the meeting. The attendance of a director at a meeting shall constitute a waiver of notice of such meeting, except where a director
attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because
such meeting is not lawfully called or convened. Except as otherwise required by law, by the Certificate or by these By-laws, neither
the business to be transacted at, nor the purpose of, any meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
SECTION 10. Quorum.
At any meeting of the Board of Directors, a majority of the total number of directors shall constitute a quorum for the transaction
of business, but if less than a quorum is present at a meeting, a majority of the directors present may adjourn the meeting from
time to time, and the meeting may be held as adjourned without further notice. Any business which might have been transacted at
the meeting as originally noticed may be transacted at such adjourned meeting at which a quorum is present. For purposes of this
section, the total number of directors includes any unfilled vacancies on the Board of Directors.
SECTION 11. Action
at Meeting. At any meeting of the Board of Directors at which a quorum is present, the vote of a majority of the directors
present shall constitute action by the Board of Directors, unless otherwise required by law, by the Certificate or by these By-laws.
SECTION 12. Action
by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting
if all members of the Board of Directors consent thereto in writing or by electronic transmission and the writing or writings or
electronic transmission or transmissions are filed with the records of the meetings of the Board of Directors. Such filing shall
be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic
form. Such consent shall be treated as a resolution of the Board of Directors for all purposes.
SECTION 13. Manner
of Participation. Directors may participate in meetings of the Board of Directors by means of conference telephone or other
communications equipment by means of which all directors participating in the meeting can hear each other, and participation in
a meeting in accordance herewith shall constitute presence in person at such meeting for purposes of these By-laws.
SECTION 14. Presiding
Director. The Board of Directors shall designate a representative to preside over all meetings of the Board of Directors, provided
that if the Board of Directors does not so designate such a presiding director or such designated presiding director is unable
to so preside or is absent, then the Chairman of the Board, if one is elected, shall preside over all meetings of the Board of
Directors. If both the designated presiding director, if one is so designated, and the Chairman of the Board, if one is elected,
are unable to preside or are absent, the Board of Directors shall designate an alternate representative to preside over a meeting
of the Board of Directors.
SECTION 15. Committees.
The Board of Directors, by vote of a majority of the directors then in office, may elect one or more committees, including, without
limitation, a Compensation Committee, a Nominating & Corporate Governance Committee and an Audit Committee, and may delegate
thereto some or all of its powers except those which by law, by the Certificate or by these By-laws may not be delegated. Except
as the Board of Directors may otherwise determine, any such committee may make rules for the conduct of its business, but
unless otherwise provided by the Board of Directors or in such rules, its business shall be conducted so far as possible in the
same manner as is provided by these By-laws for the Board of Directors. All members of such committees shall hold such offices
at the pleasure of the Board of Directors. The Board of Directors may abolish any such committee at any time. Any committee to
which the Board of Directors delegates any of its powers or duties shall keep records of its meetings and shall report its action
to the Board of Directors.
SECTION 16. Compensation
of Directors. Directors shall receive such compensation for their services as shall be determined by a majority of the Board
of Directors, or a designated committee thereof, provided that directors who are serving the Corporation as employees and who receive
compensation for their services as such, shall not receive any salary or other compensation for their services as directors of
the Corporation.
ARTICLE III
Officers
SECTION 1. Enumeration.
The officers of the Corporation shall consist of a President, a Treasurer, a Secretary and such other officers, including, without
limitation, a Chairman of the Board of Directors, a Chief Executive Officer and one or more Vice Presidents (including Executive
Vice Presidents or Senior Vice Presidents), Assistant Vice Presidents, Assistant Treasurers and Assistant Secretaries, as the Board
of Directors may determine.
SECTION 2. Election.
At the regular annual meeting of the Board of Directors following the Annual Meeting, the Board of Directors shall elect the President,
the Treasurer and the Secretary. Other officers may be elected by the Board of Directors at such regular annual meeting of the
Board of Directors or at any other regular or special meeting.
SECTION 3. Qualification.
No officer need be a stockholder or a director. Any person may occupy more than one office of the Corporation at any time.
SECTION 4. Tenure.
Except as otherwise provided by the Certificate or by these By-laws, each of the officers of the Corporation shall hold office
until the regular annual meeting of the Board of Directors following the next Annual Meeting and until his or her successor is
elected and qualified or until his or her earlier resignation or removal.
SECTION 5. Resignation.
Any officer may resign by delivering his or her written resignation to the Corporation addressed to the President or the Secretary,
and such resignation shall be effective upon receipt, unless the resignation otherwise provides.
SECTION 6. Removal.
Except as otherwise provided by law, the Board of Directors may remove any officer with or without cause by the affirmative vote
of a majority of the directors then in office.
SECTION 7. Absence
or Disability. In the event of the absence or disability of any officer, the Board of Directors may designate another officer
to act temporarily in place of such absent or disabled officer.
SECTION 8. Vacancies.
Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors.
SECTION 9. President.
The President shall, subject to the direction of the Board of Directors, have such powers and shall perform such duties as the
Board of Directors may from time to time designate.
SECTION 10. Chairman
of the Board. The Chairman of the Board, if one is elected, shall have such powers and shall perform such duties as the Board
of Directors may from time to time designate.
SECTION 11. Chief
Executive Officer. The Chief Executive Officer, if one is elected, shall have such powers and shall perform such duties as
the Board of Directors may from time to time designate.
SECTION 12. Vice
Presidents and Assistant Vice Presidents. Any Vice President (including any Executive Vice President or Senior Vice President)
and any Assistant Vice President shall have such powers and shall perform such duties as the Board of Directors or the Chief Executive
Officer may from time to time designate.
SECTION 13. Treasurer
and Assistant Treasurers. The Treasurer shall, subject to the direction of the Board of Directors and except as the Board of
Directors or the Chief Executive Officer may otherwise provide, have general charge of the financial affairs of the Corporation
and shall cause to be kept accurate books of account. The Treasurer shall have custody of all funds, securities, and valuable documents
of the Corporation. He or she shall have such other duties and powers as may be designated from time to time by the Board of Directors
or the Chief Executive Officer. Any Assistant Treasurer shall have such powers and perform such duties as the Board of Directors
or the Chief Executive Officer may from time to time designate.
SECTION 14. Secretary
and Assistant Secretaries. The Secretary shall record all the proceedings of the meetings of the stockholders and the Board
of Directors (including committees of the Board of Directors) in books kept for that purpose. In his or her absence from any such
meeting, a temporary secretary chosen at the meeting shall record the proceedings thereof. The Secretary shall have charge of the
stock ledger (which may, however, be kept by any transfer or other agent of the Corporation). The Secretary shall have custody
of the seal of the Corporation, and the Secretary, or an Assistant Secretary shall have authority to affix it to any instrument
requiring it, and, when so affixed, the seal may be attested by his or her signature or that of an Assistant Secretary. The Secretary
shall have such other duties and powers as may be designated from time to time by the Board of Directors or the Chief Executive
Officer. In the absence of the Secretary, any Assistant Secretary may perform his or her duties and responsibilities. Any Assistant
Secretary shall have such powers and perform such duties as the Board of Directors or the Chief Executive Officer may from time
to time designate.
SECTION 15. Other
Powers and Duties. Subject to these By-laws and to such limitations as the Board of Directors may from time to time prescribe,
the officers of the Corporation shall each have such powers and duties as generally pertain to their respective offices, as well
as such powers and duties as from time to time may be conferred by the Board of Directors or the Chief Executive Officer.
ARTICLE IV
Capital Stock
SECTION 1. Certificates
of Stock. Each stockholder shall be entitled to a certificate of the capital stock of the Corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be signed by the Chairman of the Board, the President
or a Vice President and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. The Corporation
seal and the signatures by the Corporation’s officers, the transfer agent or the registrar may be facsimiles. In case any
officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on such certificate shall have
ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with
the same effect as if he or she were such officer, transfer agent or registrar at the time of its issue. Every certificate for
shares of stock which are subject to any restriction on transfer and every certificate issued when the Corporation is authorized
to issue more than one class or series of stock shall contain such legend with respect thereto as is required by law. Notwithstanding
anything to the contrary provided in these Bylaws, the Board of Directors of the Corporation may provide by resolution or resolutions
that some or all of any or all classes or series of its stock shall be uncertificated shares (except that the foregoing shall not
apply to shares represented by a certificate until such certificate is surrendered to the Corporation), and by the approval and
adoption of these Bylaws the Board of Directors has determined that all classes or series of the Corporation’s stock may
be uncertificated, whether upon original issuance, re-issuance, or subsequent transfer.
SECTION 2. Transfers.
Subject to any restrictions on transfer and unless otherwise provided by the Board of Directors, shares of stock that are represented
by a certificate may be transferred on the books of the Corporation by the surrender to the Corporation or its transfer agent of
the certificate theretofore properly endorsed or accompanied by a written assignment or power of attorney properly executed, with
transfer stamps (if necessary) affixed, and with such proof of the authenticity of signature as the Corporation or its transfer
agent may reasonably require. Shares of stock that are not represented by a certificate may be transferred on the books of the
Corporation by submitting to the Corporation or its transfer agent such evidence of transfer and following such other procedures
as the Corporation or its transfer agent may require.
SECTION 3. Record
Holders. Except as may otherwise be required by law, by the Certificate or by these By-laws, the Corporation shall be entitled
to treat the record holder of stock as shown on its books as the owner of such stock for all purposes, including the payment of
dividends and the right to vote with respect thereto, regardless of any transfer, pledge or other disposition of such stock, until
the shares have been transferred on the books of the Corporation in accordance with the requirements of these By-laws.
SECTION 4. Record
Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof or entitled to receive payment of any dividend or other distribution or allotment of any rights, or
entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing
the record date is adopted by the Board of Directors, and which record date: (a) in the case of determination of stockholders
entitled to vote at any meeting of stockholders, shall, unless otherwise required by law, not be more than sixty (60) nor less
than ten (10) days before the date of such meeting and (b) in the case of any other action, shall not be more than sixty
(60) days prior to such other action. If no record date is fixed: (i) the record date for determining stockholders entitled
to notice of or to vote at a meeting of stockholders shall be at the close of business on the day next preceding the day on which
notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held;
and (ii) the record date for determining stockholders for any other purpose shall be at the close of business on the day on
which the Board of Directors adopts the resolution relating thereto.
SECTION 5. Replacement
of Certificates. In case of the alleged loss, destruction or mutilation of a certificate of stock of the Corporation, a duplicate
certificate may be issued in place thereof, upon such terms as the Board of Directors may prescribe.
ARTICLE V
Indemnification
SECTION 1. Definitions.
For purposes of this Article:
(a) “Corporate
Status” describes the status of a person who is serving or has served (i) as a Director of the Corporation, (ii) as
an Officer of the Corporation, (iii) as a Non-Officer Employee of the Corporation, or (iv) as a director, partner, trustee,
officer, employee or agent of any other corporation, partnership, limited liability company, joint venture, trust, employee benefit
plan, foundation, association, organization or other legal entity which such person is or was serving at the request of the Corporation.
For purposes of this Section 1(a), a Director, Officer or Non-Officer Employee of the Corporation who is serving or has served
as a director, partner, trustee, officer, employee or agent of a Subsidiary shall be deemed to be serving at the request of the
Corporation. Notwithstanding the foregoing, “Corporate Status” shall not include the status of a person who is serving
or has served as a director, officer, employee or agent of a constituent corporation absorbed in a merger or consolidation transaction
with the Corporation with respect to such person’s activities prior to said transaction, unless specifically authorized by
the Board of Directors or the stockholders of the Corporation;
(b) “Director”
means any person who serves or has served the Corporation as a director on the Board of Directors of the Corporation;
(c) “Disinterested
Director” means, with respect to each Proceeding in respect of which indemnification is sought hereunder, a Director of the
Corporation who is not and was not a party to such Proceeding;
(d) “Expenses”
means all attorneys’ fees, retainers, court costs, transcript costs, fees of expert witnesses, private investigators and
professional advisors (including, without limitation, accountants and investment bankers), travel expenses, duplicating costs,
printing and binding costs, costs of preparation of demonstrative evidence and other courtroom presentation aids and devices, costs
incurred in connection with document review, organization, imaging and computerization, telephone charges, postage, delivery service
fees, and all other disbursements, costs or expenses of the type customarily incurred in connection with prosecuting, defending,
preparing to prosecute or defend, investigating, being or preparing to be a witness in, settling or otherwise participating in,
a Proceeding;
(e) “Liabilities”
means judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in settlement;
(f) “Non-Officer
Employee” means any person who serves or has served as an employee or agent of the Corporation, but who is not or was not
a Director or Officer;
(g) “Officer”
means any person who serves or has served the Corporation as an officer of the Corporation appointed by the Board of Directors
of the Corporation;
(h) “Proceeding”
means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, inquiry, investigation,
administrative hearing or other proceeding, whether civil, criminal, administrative, arbitrative or investigative; and
(i) “Subsidiary”
shall mean any corporation, partnership, limited liability company, joint venture, trust or other entity of which the Corporation
owns (either directly or through or together with another Subsidiary of the Corporation) either (i) a general partner, managing
member or other similar interest or (ii) (A) fifty percent (50%) or more of the voting power of the voting capital equity
interests of such corporation, partnership, limited liability company, joint venture or other entity, or (B) fifty percent
(50%) or more of the outstanding voting capital stock or other voting equity interests of such corporation, partnership, limited
liability company, joint venture or other entity.
SECTION 2. Indemnification
of Directors and Officers.
(a) Subject
to the operation of Section 4 of this Article V of these By-laws, each Director and Officer shall be indemnified and
held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended (but,
in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such amendment), and to the extent authorized in this Section 2.
(1) Actions,
Suits and Proceedings Other than By or In the Right of the Corporation. Each Director and Officer shall be indemnified and
held harmless by the Corporation against any and all Expenses and Liabilities that are incurred or paid by such Director or Officer
or on such Director’s or Officer’s behalf in connection with any Proceeding or any claim, issue or matter therein (other
than an action by or in the right of the Corporation), which such Director or Officer is, or is threatened to be made, a party
to or participant in by reason of such Director’s or Officer’s Corporate Status, if such Director or Officer acted
in good faith and in a manner such Director or Officer reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful.
(2) Actions,
Suits and Proceedings By or In the Right of the Corporation. Each Director and Officer shall be indemnified and held harmless
by the Corporation against any and all Expenses that are incurred by such Director or Officer or on such Director’s or Officer’s
behalf in connection with any Proceeding or any claim, issue or matter therein by or in the right of the Corporation, which such
Director or Officer is, or is threatened to be made, a party to or participant in by reason of such Director’s or Officer’s
Corporate Status, if such Director or Officer acted in good faith and in a manner such Director or Officer reasonably believed
to be in or not opposed to the best interests of the Corporation; provided, however, that no indemnification shall be made under
this Section 2(a)(2) in respect of any claim, issue or matter as to which such Director or Officer shall have been finally
adjudged by a court of competent jurisdiction to be liable to the Corporation, unless, and only to the extent that, the Court of
Chancery or another court in which such Proceeding was brought shall determine upon application that, despite adjudication of liability,
but in view of all the circumstances of the case, such Director or Officer is fairly and reasonably entitled to indemnification
for such Expenses that such court deems proper.
(3) Survival
of Rights. The rights of indemnification provided by this Section 2 shall continue as to a Director or Officer after he
or she has ceased to be a Director or Officer and shall inure to the benefit of his or her heirs, executors, administrators and
personal representatives.
(4) Actions
by Directors or Officers. Notwithstanding the foregoing, the Corporation shall indemnify any Director or Officer seeking indemnification
in connection with a Proceeding initiated by such Director or Officer only if such Proceeding (including any parts of such Proceeding
not initiated by such Director or Officer) was authorized in advance by the Board of Directors of the Corporation, unless such
Proceeding was brought to enforce such Officer’s or Director’s rights to indemnification or, in the case of Directors,
advancement of Expenses under these By-laws in accordance with the provisions set forth herein.
SECTION 3. Indemnification
of Non-Officer Employees. Subject to the operation of Section 4 of this Article V of these By-laws, each Non-Officer
Employee may, in the discretion of the Board of Directors of the Corporation, be indemnified by the Corporation to the fullest
extent authorized by the DGCL, as the same exists or may hereafter be amended, against any or all Expenses and Liabilities that
are incurred by such Non-Officer Employee or on such Non-Officer Employee’s behalf in connection with any threatened, pending
or completed Proceeding, or any claim, issue or matter therein, which such Non-Officer Employee is, or is threatened to be made,
a party to or participant in by reason of such Non-Officer Employee’s Corporate Status, if such Non-Officer Employee acted
in good faith and in a manner such Non-Officer Employee reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The
rights of indemnification provided by this Section 3 shall exist as to a Non-Officer Employee after he or she has ceased to
be a Non-Officer Employee and shall inure to the benefit of his or her heirs, personal representatives, executors and administrators.
Notwithstanding the foregoing, the Corporation may indemnify any Non-Officer Employee seeking indemnification in connection with
a Proceeding initiated by such Non-Officer Employee only if such Proceeding was authorized in advance by the Board of Directors
of the Corporation.
SECTION 4. Determination.
Unless ordered by a court, no indemnification shall be provided pursuant to this Article V to a Director, to an Officer or
to a Non-Officer Employee unless a determination shall have been made that such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal Proceeding,
such person had no reasonable cause to believe his or her conduct was unlawful. Such determination shall be made by (a) a
majority vote of the Disinterested Directors, even though less than a quorum of the Board of Directors, (b) a committee comprised
of Disinterested Directors, such committee having been designated by a majority vote of the Disinterested Directors (even though
less than a quorum), (c) if there are no such Disinterested Directors, or if a majority of Disinterested Directors so directs,
by independent legal counsel in a written opinion, or (d) by the stockholders of the Corporation.
SECTION 5. Advancement
of Expenses to Directors Prior to Final Disposition.
(a) The
Corporation shall advance all Expenses incurred by or on behalf of any Director in connection with any Proceeding in which such
Director is involved by reason of such Director’s Corporate Status within thirty (30) days after the receipt by the Corporation
of a written statement from such Director requesting such advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Director and
shall be preceded or accompanied by an undertaking by or on behalf of such Director to repay any Expenses so advanced if it shall
ultimately be determined that such Director is not entitled to be indemnified against such Expenses. Notwithstanding the foregoing,
the Corporation shall advance all Expenses incurred by or on behalf of any Director seeking advancement of expenses hereunder in
connection with a Proceeding initiated by such Director only if such Proceeding (including any parts of such Proceeding not initiated
by such Director) was (i) authorized by the Board of Directors of the Corporation, or (ii) brought to enforce such Director’s
rights to indemnification or advancement of Expenses under these By-laws.
(b) If
a claim for advancement of Expenses hereunder by a Director is not paid in full by the Corporation within thirty (30) days after
receipt by the Corporation of documentation of Expenses and the required undertaking, such Director may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim and if successful in whole or in part, such Director
shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its Board of
Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility
of such advancement of Expenses under this Article V shall not be a defense to an action brought by a Director for recovery
of the unpaid amount of an advancement claim and shall not create a presumption that such advancement is not permissible. The burden
of proving that a Director is not entitled to an advancement of expenses shall be on the Corporation.
(c) In
any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation
shall be entitled to recover such expenses upon a final adjudication that the Director has not met any applicable standard for
indemnification set forth in the DGCL.
SECTION 6. Advancement
of Expenses to Officers and Non-Officer Employees Prior to Final Disposition.
(a) The
Corporation may, at the discretion of the Board of Directors of the Corporation, advance any or all Expenses incurred by or on
behalf of any Officer or any Non-Officer Employee in connection with any Proceeding in which such person is involved by reason
of his or her Corporate Status as an Officer or Non-Officer Employee upon the receipt by the Corporation of a statement or statements
from such Officer or Non-Officer Employee requesting such advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such Officer or
Non-Officer Employee and shall be preceded or accompanied by an undertaking by or on behalf of such person to repay any Expenses
so advanced if it shall ultimately be determined that such Officer or Non-Officer Employee is not entitled to be indemnified against
such Expenses.
(b) In
any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation
shall be entitled to recover such expenses upon a final adjudication that the Officer or Non-Officer Employee has not met any applicable
standard for indemnification set forth in the DGCL.
SECTION 7. Contractual
Nature of Rights.
(a) The
provisions of this Article V shall be deemed to be a contract between the Corporation and each Director and Officer entitled
to the benefits hereof at any time while this Article V is in effect, in consideration of such person’s past or current
and any future performance of services for the Corporation. Neither amendment, repeal or modification of any provision of this
Article V nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Article V shall
eliminate or reduce any right conferred by this Article V in respect of any act or omission occurring, or any cause of action
or claim that accrues or arises or any state of facts existing, at the time of or before such amendment, repeal, modification or
adoption of an inconsistent provision (even in the case of a proceeding based on such a state of facts that is commenced after
such time), and all rights to indemnification and advancement of Expenses granted herein or arising out of any act or omission
shall vest at the time of the act or omission in question, regardless of when or if any proceeding with respect to such act or
omission is commenced. The rights to indemnification and to advancement of expenses provided by, or granted pursuant to, this Article V
shall continue notwithstanding that the person has ceased to be a director or officer of the Corporation and shall inure to the
benefit of the estate, heirs, executors, administrators, legatees and distributes of such person.
(b) If
a claim for indemnification hereunder by a Director or Officer is not paid in full by the Corporation within sixty (60) days after
receipt by the Corporation of a written claim for indemnification, such Director or Officer may at any time thereafter bring suit
against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, such Director or Officer
shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including its Board of
Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning the permissibility
of such indemnification under this Article V shall not be a defense to an action brought by a Director or Officer for recovery
of the unpaid amount of an indemnification claim and shall not create a presumption that such indemnification is not permissible.
The burden of proving that a Director or Officer is not entitled to indemnification shall be on the Corporation.
(c) In
any suit brought by a Director or Officer to enforce a right to indemnification hereunder, it shall be a defense that such Director
or Officer has not met any applicable standard for indemnification set forth in the DGCL.
SECTION 8. Non-Exclusivity
of Rights. The rights to indemnification and to advancement of Expenses set forth in this Article V shall not be exclusive
of any other right which any Director, Officer, or Non-Officer Employee may have or hereafter acquire under any statute, provision
of the Certificate or these By-laws, agreement, vote of stockholders or Disinterested Directors or otherwise.
SECTION 9. Insurance.
The Corporation may maintain insurance, at its expense, to protect itself and any Director, Officer or Non-Officer Employee against
any liability of any character asserted against or incurred by the Corporation or any such Director, Officer or Non-Officer Employee,
or arising out of any such person’s Corporate Status, whether or not the Corporation would have the power to indemnify such
person against such liability under the DGCL or the provisions of this Article V.
SECTION 10. Other
Indemnification. The Corporation’s obligation, if any, to indemnify or provide advancement of Expenses to any person
under this Article V as a result of such person serving, at the request of the Corporation, as a director, partner, trustee,
officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise
shall be reduced by any amount such person may collect as indemnification or advancement of Expenses from such other corporation,
partnership, joint venture, trust, employee benefit plan or enterprise (the “Primary Indemnitor”). Any indemnification
or advancement of Expenses under this Article V owed by the Corporation as a result of a person serving, at the request of
the Corporation, as a director, partner, trustee, officer, employee or agent of another corporation, partnership, joint venture,
trust, employee benefit plan or other enterprise shall only be in excess of, and shall be secondary to, the indemnification or
advancement of Expenses available from the applicable Primary Indemnitor(s) and any applicable insurance policies.
ARTICLE VI
Miscellaneous Provisions
SECTION 1. Fiscal
Year. The fiscal year of the Corporation shall be determined by the Board of Directors.
SECTION 2. Seal.
The Board of Directors shall have power to adopt and alter the seal of the Corporation.
SECTION 3. Execution
of Instruments. All deeds, leases, transfers, contracts, bonds, notes and other obligations to be entered into by the Corporation
in the ordinary course of its business without director action may be executed on behalf of the Corporation by the Chairman of
the Board, if one is elected, the President or the Treasurer or any other officer, employee or agent of the Corporation as the
Board of Directors or the executive committee of the Board may authorize.
SECTION 4. Voting
of Securities. Unless the Board of Directors otherwise provides, the Chairman of the Board, if one is elected, the President
or the Treasurer may waive notice of and act on behalf of the Corporation, or appoint another person or persons to act as proxy
or attorney in fact for the Corporation with or without discretionary power and/or power of substitution, at any meeting of stockholders
or shareholders of any other corporation or organization, any of whose securities are held by the Corporation.
SECTION 5. Resident
Agent. The Board of Directors may appoint a resident agent upon whom legal process may be served in any action or proceeding
against the Corporation.
SECTION 6. Corporate
Records. The original or attested copies of the Certificate, By-laws and records of all meetings of the incorporators, stockholders
and the Board of Directors and the stock transfer books, which shall contain the names of all stockholders, their record addresses
and the amount of stock held by each, may be kept outside the State of Delaware and shall be kept at the principal office of the
Corporation, at an office of its counsel, at an office of its transfer agent or at such other place or places as may be designated
from time to time by the Board of Directors.
SECTION 7. Certificate.
All references in these By-laws to the Certificate shall be deemed to refer to the Sixth Amended and Restated Certificate of Incorporation
of the Corporation, as amended and/or restated and in effect from time to time.
SECTION 8. Exclusive
Jurisdiction of Delaware Courts. Unless the Corporation consents in writing to the selection of an alternative forum, the Court
of Chancery of the State of Delaware shall be the sole and exclusive forum for (i) any derivative action or proceeding brought
on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer
or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting
a claim arising pursuant to any provision of the Delaware General Corporation Law or the Certificate or By-laws, or (iv) any
action asserting a claim against the Corporation governed by the internal affairs doctrine. Any person or entity purchasing
or otherwise acquiring any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented
to the provisions of this Section 8.
SECTION 9. Amendment
of By-laws.
(a) Amendment
by Directors. Except as provided otherwise by law, these By-laws may be amended or repealed by the Board of Directors by the
affirmative vote of a majority of the directors then in office.
(b) Amendment
by Stockholders. These By-laws may be amended or repealed at any Annual Meeting, or special meeting of stockholders called
for such purpose in accordance with these By-Laws, by the affirmative vote of at least seventy-five percent (75%) of the outstanding
shares entitled to vote on such amendment or repeal, voting together as a single class; provided, however, that if the Board of
Directors recommends that stockholders approve such amendment or repeal at such meeting of stockholders, such amendment or repeal
shall only require the affirmative vote of the majority of the outstanding shares entitled to vote on such amendment or repeal,
voting together as a single class. Notwithstanding the foregoing, stockholder approval shall not be required unless mandated by
the Certificate, these By-laws, or other applicable law.
SECTION 10. Notices.
If mailed, notice to stockholders shall be deemed given when deposited in the mail, postage prepaid, directed to the stockholder
at such stockholder’s address as it appears on the records of the Corporation. Without limiting the manner by which notice
otherwise may be given to stockholders, any notice to stockholders may be given by electronic transmission in the manner provided
in Section 232 of the DGCL.
SECTION 11. Waivers.
A written waiver of any notice, signed by a stockholder or director, or waiver by electronic transmission by such person, whether
given before or after the time of the event for which notice is to be given, shall be deemed equivalent to the notice required
to be given to such person. Neither the business to be transacted at, nor the purpose of, any meeting need be specified in such
a waiver.
Adopted ___________, ____ and effective as of ___________, ____.
Exhibit 4.1
FOURTH AMENDED AND RESTATED STOCKHOLDERS
AGREEMENT
By and Among
908 Devices Inc.
Other Stockholders
as defined herein
and
the Investors
as defined herein
Dated as of April 11, 2019
Table of Contents
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Page
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ARTICLE I - DEFINITIONS
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1
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Section 1.1
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Construction of Terms
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1
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Section 1.2
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Terms Not Defined
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1
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Section 1.3
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Number of Shares of Stock
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1
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Section 1.4
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Defined Terms
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2
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ARTICLE II - REPRESENTATIONS AND WARRANTIES
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4
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Section 2.1
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Representations and Warranties of the Investors
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4
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Section 2.2
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Representations and Warranties of the Other Stockholders
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4
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Section 2.3
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Representations, Warranties and Covenants of Designating Investors
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4
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ARTICLE III - RESTRICTIONS ON TRANSFER; RIGHT OF REFUSAL; CO-SALE PROVISIONS
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5
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Section 3.1
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Restrictions on Transfer
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5
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Section 3.2
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Permitted Transfers
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5
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Section 3.3
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Prohibited Transferees
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5
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Section 3.4
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Right of First Refusal
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6
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Section 3.5
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Co-Sale Option of Investors
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8
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Section 3.6
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Contemporaneous Transfers
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9
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Section 3.7
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Assignment
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9
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Section 3.8
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Effect of Prohibited Transfers
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10
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ARTICLE IV - RIGHTS TO PURCHASE
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10
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Section 4.1
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Right to Participate in Certain Sales of Additional Securities
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10
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Section 4.2
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Investor Acceptance
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10
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Section 4.3
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Calculation of Pro Rata Allotment
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10
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Section 4.4
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Sale to Third Party
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10
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Section 4.5
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Subsequent Sale
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10
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Section 4.6
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Exceptions to Pre-emptive Rights
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11
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Section 4.7
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Assignment of Rights
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11
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ARTICLE V - RIGHTS TO SELL
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11
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Section 5.1
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Drag Along Rights
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11
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Section 5.2
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Conditions
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12
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ARTICLE VI - BOARD OF DIRECTORS
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13
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Section 6.1
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Board Composition
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14
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Section 6.2
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Removal; Vacancies
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14
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Section 6.3
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Committees of the Board
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15
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Section 6.4
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Assignment
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15
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Section 6.5
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Compensation of Directors
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15
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Section 6.6
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Board of Directors Meetings
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15
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Section 6.7
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Directors’ and Officers’ Insurance
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15
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Section 6.8
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Board of Directors Observation Rights
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15
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Section 6.9
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No Liability for Election of Recommended Directors
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16
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Section 6.10
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Confidentiality
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16
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Section 6.11
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No “Bad Actor” Designees
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16
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ARTICLE VII - COVENANTS OF THE COMPANY
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17
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Section 7.1
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Financial Statements, Reports, Etc.
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17
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Section 7.2
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Corporate Existence
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18
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Section 7.3
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Properties, Business Insurance
|
18
|
|
Section 7.4
|
Key Person Insurance
|
18
|
|
Section 7.5
|
Inspection, Consultation and Advice
|
18
|
|
Section 7.6
|
By-laws
|
18
|
|
Section 7.7
|
Employee Agreements
|
18
|
|
Section 7.8
|
Restrictive Agreements Prohibited
|
18
|
|
Section 7.9
|
Compliance with Laws
|
19
|
|
Section 7.10
|
Keeping of Records and Books of Account
|
19
|
|
Section 7.11
|
Prohibited Actions
|
19
|
|
Section 7.12
|
Qualified Small Business Stock
|
20
|
|
Section 7.13
|
Lock-Up Agreements
|
20
|
|
Section 7.14
|
Affiliated Transactions
|
20
|
|
Section 7.15
|
Management Compensation
|
20
|
|
Section 7.16
|
Financings
|
20
|
|
Section 7.17
|
Key Events
|
20
|
|
Section 7.18
|
Non-Solicitation
|
20
|
|
Section 7.19
|
Indemnification
|
21
|
|
Section 7.20
|
Successor Indemnification
|
22
|
|
Section 7.21
|
Employee Stock Vesting
|
22
|
|
Section 7.22
|
Vote to Increase Authorized Common Stock
|
22
|
|
Section 7.23
|
Term
|
22
|
|
Section 7.24
|
Tax Reporting
|
22
|
|
Section 7.25
|
Export Compliance
|
22
|
|
ARTICLE VIII - MISCELLANEOUS PROVISIONS
|
23
|
|
Section 8.1
|
Survival of Covenants
|
23
|
|
Section 8.2
|
Legend on Securities
|
23
|
|
Section 8.3
|
Amendment and Waiver; Actions of the Board of Directors
|
23
|
|
Section 8.4
|
Notices
|
24
|
|
Section 8.5
|
Headings
|
24
|
|
Section 8.6
|
Irrevocable Proxy and Power of Attorney
|
24
|
|
Section 8.7
|
Remedies; Severability
|
25
|
|
Section 8.8
|
Entire Agreement
|
25
|
|
Section 8.9
|
Adjustments
|
25
|
|
Section 8.10
|
Law Governing
|
25
|
|
Section 8.11
|
Successors and Assigns
|
25
|
|
Section 8.12
|
Dispute Resolution
|
25
|
|
Section 8.13
|
Counterparts
|
26
|
FOURTH AMENDED AND RESTATED STOCKHOLDERS
AGREEMENT
This FOURTH AMENDED
AND RESTATED STOCKHOLDERS AGREEMENT (the “Agreement”) is made as of April 11, 2019, by and among 908 Devices
Inc., a Delaware corporation (the “Company”), the individuals identified on Schedule A hereto as Other
Stockholders (collectively, the “Other Stockholders,” and each individually, an “Other Stockholder”),
the Persons identified on Schedule A hereto as the Investors (each, an “Investor” and collectively,
the “Investors”) and any other stockholder or option holder who from time to time becomes party to this Agreement
by execution of a Joinder Agreement in substantially the form attached hereto as Exhibit A. The Other Stockholders and the
Investors are sometimes referred to herein collectively as the “Stockholders,” and each individually, a “Stockholder.”
WHEREAS, on the date
hereof, the Investors are purchasing shares of Series E Preferred Stock pursuant to that certain Series E Preferred Stock Purchase
Agreement dated as of the date hereof among the Company and certain Investors (the “Purchase Agreement”) and
other related agreements;
WHEREAS, the Other
Stockholders hold shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”);
WHEREAS, the Company,
certain Investors and the Other Stockholders have previously entered into that certain Third Amended and Restated Stockholders
Agreement dated as of March 2, 2017 (the “Prior Agreement”);
WHEREAS, it is a condition
to the obligations of the Investors under the Purchase Agreement that this Agreement be executed by the parties hereto, and the
parties are willing to execute this Agreement and be bound by the provisions hereof; and
WHEREAS, to induce
certain Investors to enter into the Purchase Agreement and purchase shares of Series E Preferred Stock thereunder, the Company,
the Investors and the Other Stockholders have agreed to amend and restate the Prior Agreement and to accept the rights created
pursuant hereto in lieu of the rights created under the Prior Agreement.
NOW, THEREFORE, in
consideration of the foregoing and the mutual covenants and agreements hereinafter set forth, the parties hereto agree as follows:
ARTICLE I - DEFINITIONS
Section 1.1
Construction of Terms. As used herein, the masculine, feminine or neuter gender, and the singular or plural
number, shall be deemed to be or to include the other genders or number, as the case may be, whenever the context so indicates
or requires.
Section 1.2
Terms Not Defined. Capitalized terms used herein and not otherwise defined shall have the meanings ascribed
to them in the Purchase Agreement.
Section 1.3
Number of Shares of Stock. Whenever any provision of this Agreement calls for any calculation based on a number
of shares of capital stock issued and outstanding or held by a Stockholder, the number of shares deemed to be issued and outstanding
or held by that Stockholder, as applicable, shall be the total number of shares of Common Stock then issued and outstanding or
owned by the Stockholder, as applicable, plus, without duplication, the total number of shares of Common Stock issuable
upon the conversion of any Preferred Stock then issued and outstanding, owned by such Stockholder, as applicable.
Section 1.4
Defined Terms. The following capitalized terms, as used in this Agreement, shall have the meanings set forth
below.
An “Affiliate”
of any Person means a Person that, directly or indirectly, through one or more intermediaries, controls, is controlled by or is
under common control with the first mentioned Person. A Person shall be deemed to control another Person if such first Person possesses,
directly or indirectly, the power to direct, or cause the direction of, the management and policies of the second Person, whether
through the ownership of voting securities, by contract or otherwise. For the avoidance of doubt, SAEV Guernsey Holdings Limited
is an Affiliate of SAEV for purposes of this Agreement.
“ARCH”
means ARCH Venture Fund VII, L.P.
“Board of
Directors” means the Board of Directors of the Company.
“Charter”
means Company’s Fifth Amended and Restated Certificate of Incorporation in effect as of the date hereof.
“Code”
means the Internal Revenue Code of 1986, as amended.
“Common Stock”
means the Common Stock and any other common equity securities issued by the Company, and any other shares of stock issued or issuable
with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such shares or
otherwise in connection with a combination of shares, recapitalization, merger, consolidation or other corporate reorganization).
“Cormorant”
means, collectively, Cormorant Private Healthcare Fund I, LP, Cormorant Global Healthcare Master Fund, LP and CRMA SPV, L.P.
“Equity Incentive
Plan” means the Company’s 2012 Stock Option and Grant Plan, as amended from time to time.
“Exchange
Act” means the Securities Exchange Act of 1934, as amended.
“Founders”
means each of Christopher Brown, Kevin Knopp and J. Michael Ramsey.
“Investors”
has the meaning given to such term in the preamble to this Agreement. For the avoidance of doubt, an Investor holding shares of
Preferred Stock and Common Stock shall be deemed to be (i) an Investor solely with respect to the shares of Preferred Stock and
shares of Common Stock acquired upon conversion of shares of Preferred Stock held by such Person, and (ii) an Other Stockholder
with respect to the shares of Common Stock (other than shares of Common Stock acquired upon conversion of Preferred Stock) held
by such Person.
“Majority
Interest” means, as of any time, the Investors holding a majority of the then outstanding shares of Preferred Stock held
by all of the Investors, calculated in accordance with Section 1.3 hereof.
“Northpond”
means Northpond Ventures, LP.
“Person”
means an individual, a corporation, an association, a joint venture, a partnership, a limited liability company, an estate, a trust,
an unincorporated organization and any other entity or organization, governmental or otherwise.
“Preferred
Stock” means the Series E Preferred Stock, Series D Preferred Stock, Series C Preferred Stock, Series B
Preferred Stock and the Series A Preferred Stock, together with any shares issued or issuable with respect thereto (whether
by way of a stock dividend or stock split or in exchange for or in replacement of such shares or otherwise in connection with a
combination of shares, recapitalization, merger, consolidation or other corporate reorganization).
“QPO”
has the meaning set forth in the Charter.
“Razor’s
Edge” means, collectively, Razor’s Edge Fund, LP, RE Sidecar 4, LLC and Yodabyte Investments, LLC.
“SAEV”
means Saudi Aramco Energy Ventures, LLC.
“Schlumberger”
means Schlumberger Technology Corporation.
“Securities
Act” means the Securities Act of 1933, as amended.
“Series A
Preferred Stock” means the Series A Preferred Stock, par value $0.001 per share, of the Company.
“Series B
Preferred Stock” means the Series B Preferred Stock, par value $0.001 per share, of the Company.
“Series C
Preferred Stock” means the Series C Preferred Stock, par value $0.001 per share, of the Company.
“Series D
Preferred Stock” means the Series D Preferred Stock, par value $0.001 per share, of the Company.
“Series E
Preferred Stock” means the Series E Preferred Stock, par value $0.001 per share, of the Company.
“Shares”
means, at any time, shares of (i) Common Stock, (ii) Preferred Stock, and (iii) any other equity securities now or hereafter issued
by the Company, together with any options thereon and any other shares of stock issued or issuable with respect thereto (whether
by way of a stock dividend, stock split or in exchange for or upon conversion of such shares or otherwise in connection with a
combination of shares, recapitalization, merger, consolidation or other corporate reorganization). At all times, the number of
Shares deemed issued and outstanding or held or to be voted by any Stockholder shall be calculated in accordance with Section
1.3.
“TAO Invest”
means TAO Invest LLC.
“Transfer”
means any direct or indirect transfer, donation, sale, assignment, pledge, hypothecation,
grant of a security interest in or other disposal or attempted disposal of all or any portion of a security, any interest or rights
in a security, or any rights under this Agreement. “Transferred” means the accomplishment of a Transfer, and
“Transferee” means the recipient of a Transfer.
“UTEC”
means UTEC 2 L.P.
ARTICLE II - REPRESENTATIONS AND
WARRANTIES
Section 2.1
Representations and Warranties of the Investors. Each of the Investors, individually and not jointly, hereby
represents, warrants and covenants to the Company and the Other Stockholders as follows: (a) such Investor has full authority and
power under its charter, by-laws, governing partnership agreement or comparable document (if applicable) to enter into this Agreement
and perform its obligations hereunder; (b) this Agreement constitutes the valid and binding obligation of such Investor enforceable
against it in accordance with its terms, except: (i) as limited by applicable bankruptcy, insolvency, reorganization, moratorium
and other laws of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating
to the availability of specific performance, injunctive relief, or other equitable remedies, and (iii) to the extent the indemnification
provisions may be limited by applicable federal or state securities laws; and (c) the execution, delivery and performance by such
Investor of this Agreement: (i) does not and will not violate any laws, rules or regulations of the United States or any state
or other jurisdiction applicable to such Investor, or require such Investor to obtain any approval, consent or waiver of, or to
make any filing with, any person that has not been obtained or made; and (ii) does not and will not result in a breach of, constitute
a default under, accelerate any obligation under or give rise to a right of termination of any indenture or loan or credit agreement
or any other agreement, contract, instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction,
decree, determination or arbitration award to which such Investor is a party or by which the property of such Investor is bound
or affected, or result in the creation or imposition of any mortgage, pledge, lien, security interest or other charge or encumbrance
on any of the assets or properties of such Investor.
Section 2.2
Representations and Warranties of the Other Stockholders. Each of the Other Stockholders, individually and
not jointly, hereby represents, warrants and covenants to the Company and the Investors as follows: (a) such Other Stockholder
has full authority, power and capacity to enter into this Agreement and perform its obligations hereunder; (b) this Agreement constitutes
the valid and binding obligation of such Other Stockholder enforceable against him in accordance with its terms, except: (i) as
limited by applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement
of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies, and (iii) to the extent the indemnification provisions may be limited by applicable federal
or state securities laws; and (c) the execution, delivery and performance by such Other Stockholder of this Agreement: (i) does
not and will not violate any laws, rules or regulations of the United States or any state or other jurisdiction applicable to such
Other Stockholder, or require such Other Stockholder to obtain any approval, consent or waiver of, or to make any filing with,
any Person that has not been obtained or made; and (ii) does not and will not result in a breach of, constitute a default under,
accelerate any obligation under or give rise to a right of termination of any indenture or loan or credit agreement or any other
material agreement, contract, instrument, mortgage, lien, lease, permit, authorization, order, writ, judgment, injunction, decree,
determination or arbitration award to which such Other Stockholder is a party or by which the property of such Other Stockholder
is bound or affected, or result in the creation or imposition of any mortgage, pledge, lien, security interest or other charge
or encumbrance on any of the assets or properties of such Other Stockholder.
Section 2.3
Representations, Warranties and Covenants of Designating Investors. Each Person with the right to designate
or participate in the designation of a director pursuant to this Agreement hereby represents that none of the “bad actor”
disqualifying events described in Rule 506(d)(1)(i)-(viii) promulgated under the Securities Act (a “Disqualification
Event”) is applicable to such Person or any of its Rule 506(d) Related Parties, except, if applicable, for a Disqualification
Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. For purposes of this Agreement, “Rule 506(d)
Related Party” shall mean with respect to any Person any other Person that is a beneficial owner of such first Person’s
securities for purposes of Rule 506(d) of the Securities Act. Each Person with the right to designate or participate in the
designation of a director pursuant to this Agreement hereby agrees that it shall notify the Company promptly in writing in the
event a Disqualification Event becomes applicable to such Person or any of its Rule 506(d) Related Parties, except, if applicable,
for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable.
ARTICLE III -
RESTRICTIONS ON TRANSFER; RIGHT OF REFUSAL; CO-SALE PROVISIONS
The following provisions
of this Article III shall terminate immediately upon, and shall not apply with respect to, a QPO.
Section 3.1
Restrictions on Transfer. Each Other Stockholder agrees that such Other Stockholder will not, without the
prior written consent of a Majority Interest, Transfer all or any portion of the Shares now owned or hereafter acquired by such
Other Stockholder, except in connection with, and strictly in compliance with the conditions of this Article III. No Stockholder
shall be a party to any a transaction or series of related transactions in which a Person, or a group of related Persons, acquires
from stockholders of the Company shares representing more than fifty percent (50%) of the outstanding voting power of the Company
(a “Stock Sale”) unless all holders of Preferred Stock are allowed to participate in such transaction and the
consideration received pursuant to such transaction is allocated among the parties thereto in the manner specified in the Company’s
Charter in effect immediately prior to the Stock Sale (as if such transaction were a Liquidation Event (as such term is defined
in the Charter)), unless the holders of at least a Majority Interest elect otherwise by written notice given to the Company at
least 5 days prior to the effective date of any such transaction or series of related transactions.
Section 3.2
Permitted Transfers. Notwithstanding anything herein to the contrary, the provisions of Sections 3.3
and 3.4 shall not apply to either of the Transfers listed below (each such transferee, a “Permitted Transferee”),
provided that in each case the Transferee shall have entered into a Joinder Agreement in substantially the form attached
hereto as Exhibit A providing that all Shares so Transferred shall continue to be subject to all provisions of this Agreement
as if such Shares were still held by such Other Stockholder, except that no further Transfer shall thereafter be permitted hereunder
except in compliance with Sections 3.3 and 3.4:
(a)
Transfers by any Other Stockholder to the ancestors, spouse, or children of such Other Stockholder or to a trust or family
limited partnership for the benefit of any of them; and
(b)
Transfers upon the death of any Other Stockholder to such Other Stockholder’s heirs, executors or administrators or
to a trust under such Other Stockholder’s will, or Transfers between such Other Stockholder and such Other Stockholder’s
guardian or conservator.
Notwithstanding the foregoing, no party
hereto shall avoid the provisions of this Agreement by (i) making one or more Transfers to one or more Permitted Transferees and
then disposing of all or any portion of such party’s interest in any such Permitted Transferee or (ii) by Transferring the
securities of any entity holding Shares directly or indirectly. Notwithstanding anything to the contrary in this Agreement or any
failure by a Transferee under this Section 3.2 to execute a Joinder Agreement, such Transferee shall take any Shares so
Transferred subject to all provisions of this Agreement as if such Shares were still held by the Other Stockholder making such
Transfer, whether or not they so agree in writing.
Section 3.3
Prohibited Transferees. Notwithstanding the foregoing, no Stockholder shall Transfer to (a) any entity which,
in the determination of the Company’s Board of Directors, directly or indirectly competes with the Company; or (b) any customer,
distributor or supplier of the Company, if the Company’s Board of Directors should determine that such transfer would result
in such customer, distributor or supplier receiving information that would place the Company at a competitive disadvantage with
respect to such customer, distributor or supplier. Notwithstanding anything to the contrary herein SAEV may Transfer to SAEV Guernsey
Holdings Limited and Schlumberger may Transfer to a U.S. Schlumberger Affiliate (provided that at the time of the proposed Transfer
by SAEV or Schlumberger either (i) the transferee is not an entity which, in the determination of the Board of Directors, directly
or indirectly competes with the Company, or (ii) the transferor represents in writing to the Company that the transferee is a non-operating
entity) at any time without the prior consent of any Person by following the transfer procedures set forth in Section 3.2
above.
Section 3.4
Right of First Refusal. In the event that any of the Other Stockholders entertains a bona fide offer to purchase
all or any portion of the Shares (other than shares of Preferred Stock) held by such Other Stockholder (a “Transaction
Offer”) from any other Person (a “Buyer”), such Other Stockholder (a “Transferring Stockholder”)
may, subject to the provisions of Section 3.4 hereof, Transfer such Shares pursuant to and in accordance with the following
provisions of this Section 3.3:
(a)
Offer Notice. The Transferring Stockholder shall cause the Transaction Offer and all of the terms thereof
to be reduced to writing and shall promptly notify the Company and each of the Investors and Founders of such Transferring Stockholder’s
desire to effect the Transaction Offer and otherwise comply with the provisions of this Section 3.3 and, if applicable,
Section 3.4 (such notice, the “Offer Notice”). The Transferring Stockholder’s Offer Notice shall
constitute an irrevocable offer to sell all but not less than all of the Shares which are the subject of the Transaction Offer
(the “Offered Shares”) to the Company, the Investors and the Founders, on the basis described below, at a purchase
price equal to the price contained in, and on the same terms and conditions of, the Transaction Offer. The Offer Notice shall be
accompanied by a true copy of the Transaction Offer (which shall identify the Buyer and all relevant information in connection
therewith).
(b)
Company Option. The Company shall have the first option to purchase all or a portion of the Offered Shares.
At any time within twenty (20) days after receipt by the Company of the Offer Notice (the “Company Option Period”),
the Company may elect to accept the offer to purchase with respect to any or all of the Offered Shares and shall give written notice
of such election (the “Company Acceptance Notice”) to the Transferring Stockholder within the Company Option
Period, which notice shall indicate the number of Offered Shares that the Company is willing to purchase. The Company Acceptance
Notice shall constitute a valid, legally binding and enforceable agreement for the sale and purchase of the Offered Shares covered
by the Company Acceptance Notice. If the Company accepts the offer to purchase all of the Offered Shares, the closing for such
purchase of the Offered Shares by the Company under this Section 3.4(b) shall take place within thirty (30) days following
the expiration of the Company Option Period, at the offices of the Company or on such other date or at such other place as may
be agreed to by the Transferring Stockholder and the Company. If the Company fails to purchase all of the Offered Shares by exercising
its option under this Section 3.4(b) within the Company Option Period and such 30 day period, the Transferring Stockholder
shall so notify the Investors and Founders promptly (the “Additional Offer Notice”), which Additional Offer
Notice shall identify the Offered Shares that the Company has failed to purchase (the “Remaining Shares”). The
Remaining Shares shall be subject to the options granted to the Investors and Founders pursuant to Section 3.4(c) below.
(c)
Investors’ and Founders’ Option. If the Company fails to purchase all of the Offered Shares under
Section 3.4(b) above, at any time within thirty (30) days after receipt by the Investors and Founders of the Additional
Offer Notice (the “Investor/Founder Option Period”), each Investor and Founder (other than the Transferring
Stockholder, if applicable) may elect to accept the offer to purchase with respect to any or all of the Remaining Shares and shall
give written notice of such election (the “Investor/Founder Acceptance Notice”) to the Transferring Stockholder
and each Investor and Founder within the Investor/Founder Option Period, which notice shall indicate the maximum number of Shares
that the Investor or Founder, as applicable, is willing to purchase, including the number of Remaining Shares it would purchase
if one or more other Investors and Founders do not elect to purchase their Pro Rata Fractions (as defined in paragraph (d) below).
The Investor/Founder Acceptance Notice shall constitute a valid, legally binding and enforceable agreement for the sale and purchase
of the Remaining Shares covered by the Investor/Founder Acceptance Notice. The closing for any purchase of Remaining Shares by
the Investors and Founders under this Section 3.4(c) (along with the purchase by the Company of any Offered Shares under
paragraph (b) above if the Company is purchasing less than all of the Offered Shares) shall take place within thirty (30) days
following the expiration of the Investor/Founder Option Period, at the offices of the Company or on such other date or at such
other place as may be agreed to by the Transferring Stockholder and such Investors. The Transferring Stockholder shall notify the
Investors and Founders promptly if any Investor or Founder fails to offer to purchase all of its Pro Rata Fraction.
(d)
Allocation of Remaining Shares among Investors and Founders. Upon the expiration of the Investor/Founder Option
Period, the number of Remaining Shares to be purchased by each Investor and Founder shall be determined as follows: (i) first,
there shall be allocated to each Investor and Founder electing to purchase, a number of Remaining Shares equal to the lesser of
(A) the number of Remaining Shares as to which such Investor or Founder, as applicable, accepted as set forth in its respective
Investor/Founder Acceptance Notice or (B) such Investor’s or Founder’s Pro Rata Fraction of the Remaining Shares (as
defined below), and (ii) second, the balance, if any, not allocated under clause (i) above, shall be allocated to those Investors
who within the Investor/Founder Option Period delivered an Investor/Founder Acceptance Notice that set forth a number of Remaining
Shares that exceeded their respective Pro Rata Fractions, in each case on a pro rata basis in proportion to the number of Shares
held by each such Investor up to the amount of such excess. An Investor’s or Founder’s “Pro Rata Fraction”
shall be equal to the product obtained by multiplying the total number of Remaining Shares by a fraction, the numerator of which
is the total number of Shares owned by such Investor or Founder, and the denominator of which is the total number of Shares
held by all Investors and Founders (other than the Transferring Stockholder, if applicable), in each case as of the date of the
Offer Notice.
(e)
Valuation of Property. In the event that the price set forth in the Offer Notice is stated in consideration
other than cash or cash equivalents, the Transferring Stockholder, the Company and a Majority Interest shall mutually determine
the fair market value of such consideration, reasonably and in good faith, and the Company and/or the Investors or Founders, as
the case may be, may effect their purchase under this Section 3.4 by payment of such fair market value in cash or cash equivalents.
(f)
Sale to Third Party. In the event that the Company, the Investors and the Founders do not elect to exercise
the rights to purchase under this Section 3.4 with respect to all of the Shares proposed to be sold, the Transferring Stockholder
may sell any remaining Shares to the Buyer on the terms and conditions set forth in the Offer Notice, subject to the provisions
of Section 3.5. Promptly after such Transfer, the Transferring Stockholder shall notify the Company, which in turn shall
promptly notify all the Investors and Founders, of the consummation thereof and shall furnish such evidence of the completion and
time of completion of the Transfer and of the terms thereof as may reasonably be requested by a Majority Interest. Prior to the
effectiveness of any Transfer to a Buyer hereunder, such Buyer shall have entered into a Joinder Agreement in substantially the
form attached hereto as Exhibit A, and such Buyer shall have all the rights and obligations hereunder as if such Buyer were
an Other Stockholder. If the Transferring Stockholder’s sale to a Buyer is not consummated in accordance with the terms of
the Offer Notice on or before sixty (60) calendar days after the latest of: (i) the expiration of the Company Option Period, (ii)
the expiration of the Investor/Founder Option Period, (iii) the expiration of the Co-Sale Election Period set forth in Section
3.5 below, if applicable, and (iv) the satisfaction of all governmental approval or filing requirements, the Transaction Offer
shall be deemed to lapse, and any Transfers of Shares pursuant to such Transaction Offer shall be in violation of the provisions
of this Agreement unless the Transferring Stockholder sends a new Offer Notice and once again complies with the provisions of this
Section 3.4 with respect to such Transaction Offer.
(g)
Assignment of Rights The Company hereby irrevocably assigns to the Investors all rights of first refusal the
Company may have pursuant to any agreement with any holder of equity securities of the Company with respect to any shares of Common
Stock of the Company not purchased by the Company pursuant to such rights of first refusal, to be allocated among the Investors
in accordance with this Section 3.4.
Section 3.5
Co-Sale Option of Investors. In the event that the Company, the Investors and the Founders do not exercise
their rights under Section 3.4 with respect to all of the Shares proposed to be so Transferred in connection with any Transaction
Offer, the Transferring Stockholder may Transfer such Shares only pursuant to and in accordance with the following provisions of
this Section 3.5:
(a)
Co-Sale Notice. As soon as practicable following the expiration of the Investor/Founder Option Period, and
in no event later than five (5) days thereafter, the Transferring Stockholder shall provide notice to each of the Investors (the
“Co-Sale Notice”) of its right to participate in the Transaction Offer on a pro rata basis with the Transferring
Stockholder (the “Co-Sale Option”). To the extent one or more Investors exercise their Co-Sale Option in accordance
with this Section 3.4, the number of Shares that the Transferring Stockholder may Transfer in the Transaction Offer shall
be correspondingly reduced.
(b)
Investor Acceptance. Each of the Investors shall have the right to exercise its Co-Sale Option by giving written
notice of such intent to participate (the “Co-Sale Acceptance Notice”) to the Transferring Stockholder within
ten (10) days after receipt by such Investor of the Co-Sale Notice (the “Co-Sale Election Period”). Each Co-Sale
Acceptance Notice shall indicate the maximum number of Shares subject thereto which the Investor wishes to sell, including the
number of Shares it would sell if one or more other Investors do not elect to participate in the sale on the terms and conditions
stated in the Offer Notice. Any Investor holding Preferred Stock shall be permitted to sell to the relevant Buyer in connection
with any exercise of the Co-Sale Option, at its option, (i) shares of Common Stock acquired upon conversion of such Preferred Stock
or (ii) shares of Preferred Stock giving effect to the relative preferences and value of the Preferred Stock and the Common Stock.
(c)
Allocation of Shares. Each Investor shall have the right to sell a portion of its Shares pursuant to the Transaction
Offer which is equal to or less than the product obtained by multiplying the total number of Shares available for sale to the Buyer
subject to the Transaction Offer by a fraction, the numerator of which is the total number of Shares owned by such Investor
and the denominator of which is the total number of Shares held by all Investors and the Transferring Stockholder, in each
case as of the date of the Offer Notice, subject to increase as hereinafter provided. In the event any Investor does not elect
to sell the full amount of such Shares which such Investor is entitled to sell pursuant to this Section 3.5, then any Investors
who have elected to sell Shares shall have the right to sell, on a pro-rata basis (based on the number of Shares held by each such
Investor) with any other Investors who have delivered a Co-Sale Acceptance Notice and up to the maximum number of Shares stated
in each such Investor’s Co-Sale Acceptance Notice, any Shares not elected to be sold by such Investor.
(d)
Co-Sale Closing. Within ten (10) calendar days after the end of the Co-Sale Election Period, the Transferring
Stockholder shall promptly notify each participating Investor of the number of Shares held by such Investor that will be included
in the sale and the date on which the Transaction Offer will be consummated, which shall be no later than the later of (i) thirty
(30) calendar days after the end of the Co-Sale Election Period and (ii) the satisfaction of any governmental approval or filing
requirements, if any. Each participating Investor may effect its participation in any Transaction Offer hereunder by delivery to
the Buyer, or to the Transferring Stockholder for delivery to the Buyer, of one or more instruments or certificates, properly endorsed
for transfer, representing the Shares it elects to sell pursuant thereto. At the time of consummation of the Transaction Offer,
the Buyer shall remit directly to each participating Investor that portion of the sale proceeds to which the participating Investor
is entitled by reason of its participation with respect thereto. No Shares may be purchased by the Buyer from the Transferring
Stockholder unless the Buyer simultaneously purchases from the participating Investors all of the Shares that they have elected
to sell pursuant to this Section 3.5.
(e)
Liability of Investors. Each participating Investor shall be liable to the Buyer only to same extent as the
Transferring Stockholder with respect to representations and warranties regarding the Company or its business, on a several basis
for each such participating Investor’s pro rata portion, provided that each such Investor’s liability with respect
to such representations and warranties shall not exceed the value of the proceeds received by such Investor upon the consummation
of the Transaction Offer.
(f)
Sale to Third Party. Any Shares held by a Transferring Stockholder that are the subject of the Transaction
Offer and that the Transferring Stockholder desires to Transfer following compliance with this Section 3.5, may be sold
to the Buyer only during the period specified in Section 3.4(f) and only on terms no more favorable to the Transferring
Stockholder than those contained in the Offer Notice. Promptly after such Transfer, the Transferring Stockholder shall notify the
Company, which in turn shall promptly notify all the Investors, of the consummation thereof and shall furnish such evidence of
the completion and time of completion of the Transfer and of the terms thereof as may reasonably be requested by a Majority Interest.
Prior to the effectiveness of any Transfer to a Buyer hereunder, such Buyer shall have entered into a Joinder Agreement in substantially
the form attached hereto as Exhibit A, and such Buyer shall have all the rights and obligations hereunder as if such Buyer
were an Other Stockholder. In the event that the Transaction Offer is not consummated within the period required by this Section
3.5 or the Buyer fails timely to remit to each participating Investor its respective portion of the sale proceeds, the Transaction
Offer shall be deemed to lapse, and any Transfer of Shares pursuant to such Transaction Offer shall be in violation of the provisions
of this Agreement unless the Transferring Stockholder sends a new Offer Notice and once again complies with the provisions of Sections
3.4 and 3.5 with respect to such Transaction Offer.
Section 3.6
Contemporaneous Transfers. If two or more Other Stockholders propose concurrent Transfers that are subject
to this Article III, then the relevant provisions of Sections 3.4 and 3.5, as applicable, shall apply separately
to each such proposed Transfer.
Section 3.7
Assignment. Subject to Section 8.11 hereof, each Investor shall have the right to assign its rights
hereunder to any Transferee of such Investor’s Shares, and shall further have the right to assign and transfer such Investor’s
right to accept any particular Transaction Offer, and any such Transferee shall be deemed within the definition of an “Investor”
for purposes of this Article III.
Section 3.8
Effect of Prohibited Transfers. If any Transfer is made or attempted contrary to the provisions of this Agreement,
such purported Transfer shall be void ab initio; the Company and the other parties hereto shall have, in addition to any
other legal or equitable remedies which they may have, the right to enforce the provisions of this Agreement by actions for specific
performance (to the extent permitted by law); and the Company shall have the right to refuse to recognize any Transferee as one
of its Stockholders for any purpose.
ARTICLE IV - RIGHTS TO PURCHASE
The following provisions
of this Article IV shall terminate immediately upon, and shall not apply with respect to, a QPO.
Section 4.1
Right to Participate in Certain Sales of Additional Securities. The Company agrees that it will not sell or
issue: (a) any shares of capital stock of the Company, (b) securities convertible into or exercisable or exchangeable for capital
stock of the Company or (c) options, warrants or rights carrying any rights to purchase capital stock of the Company, unless the
Company first submits a written notice to each Investor identifying the terms of the proposed sale (including price, number or
aggregate principal amount of securities and all other material terms), and offers to each Investor the opportunity to purchase
its Pro Rata Allotment (as hereinafter defined) of the securities (subject to increase for over allotment if some Investors do
not fully exercise their rights) on terms and conditions, including price, not less favorable than those on which the Company proposes
to sell such securities to a third party or parties. The Company’s offer pursuant to this Section 4.1 shall remain
open and irrevocable for a period of twenty (20) days following receipt by the Investors of such written notice (the “Right
of First Offer Period”).
Section 4.2
Investor Acceptance. Each Investor may elect to purchase the securities so offered by giving written notice
thereof to the Company within the Right of First Offer Period, including in such written notice the maximum number of shares of
capital stock or other securities of the Company that the Investor wishes to purchase, including the number of such shares it would
purchase if one or more other Investors do not elect to purchase their respective Pro Rata Allotments.
Section 4.3
Calculation of Pro Rata Allotment. Each Investor’s “Pro Rata Allotment” of such securities
shall be based on the ratio which the number of Shares owned by such Investor bears to all of the issued and outstanding Shares
as of the date of such written offer. If one or more Investors do not elect to purchase their respective Pro Rata Allotment, each
of the electing Investors may purchase such shares on a pro rata basis, based upon the relative holdings of Shares of each of the
electing Investors in the case of over subscription.
Section 4.4
Sale to Third Party. Any securities so offered that are not purchased by the Investors pursuant to the offer
set forth in Section 4.1 above, may be sold by the Company, but only on terms and conditions not more favorable than those
set forth in the notice to Investors, at any time within sixty (60) calendar days following the termination of the Right of First
Offer Period, but may not be sold to any other Person or on terms and conditions, including price, that are more favorable to the
purchaser than those set forth in such offer or on any terms after the expiration of such 60 day period without renewed compliance
with this Article IV.
Section 4.5
Subsequent Sale. Notwithstanding anything to the contrary in this Article IV, the Company shall
be permitted, with the prior written consent of a Majority Interest, to issue any securities without complying with the provisions
of this Article IV so long as (i) the Company gives prompt written notice to the Investors, which notice shall describe
in reasonable detail the securities being issued and the issue price thereof and (ii) the Company takes all steps reasonably necessary
to enable such Investors to effectively exercise their respective rights under this Article IV as promptly as reasonably
practicable after such issuance on the terms specified herein and in a manner that affords each such Investor electing to exercise
such rights all of the rights and benefits it would have received if each such Investor had purchased such securities contemporaneously
with such issuance.
Section 4.6
Exceptions to Pre-emptive Rights. Notwithstanding the foregoing, the right to purchase granted under this
Article IV shall be inapplicable with respect to Excluded Shares (as defined herein) and any other Shares with respect to
which the holder thereof waives in writing (or is deemed to have waived pursuant to Section 8.3) its rights pursuant to
this Article IV. “Excluded Shares” shall mean (i) shares of Common Stock upon conversion of shares of Preferred
Stock, (ii) shares of Common Stock or options therefor to directors, officers, employees or consultants of the Company in connection
with their service as directors of the Company, their employment by the Company or their retention as consultants by the Company,
in each case authorized by the Board of Directors and issued pursuant to any equity incentive plans approved by the Board of Directors,
(iii) as part of the consideration payable in the acquisition of another entity by the Company by merger, purchase of all or substantially
all of the assets of such entity, stock purchase or other reorganization of such entity, in each case as authorized by the Board
of Directors and the Majority Interest, (iv) to a bank or other financial institution (not to exceed two percent (2%) of all outstanding
securities) to secure a lending or equipment leasing transaction, in each case as authorized by the Board of Directors and the
Majority Interest, and (v) to a business partner, government laboratory or university to advance strategic business objectives,
as authorized by the Board of Directors and the Majority Interest.
Section 4.7
Assignment of Rights. Subject to Section 8.11 hereof, each Investor shall have the right to assign
its rights under this Article IV to any Transferee of such Investor’s Shares, and shall further have the right to
assign and transfer such Investor’s right to accept any particular offer under Section 4.1 hereof, and any such Transferee
shall be deemed within the definition of an “Investor” for purposes of this Article IV.
ARTICLE V - RIGHTS TO SELL
The following provisions
of this Article V shall terminate immediately upon, and shall not apply with respect to, a QPO.
Section 5.1
Drag Along Rights. In the event that (i) the holders of a Majority Interest (the “Selling Investors”)
and (ii) the Board of Directors approves in writing a Sale Event (as defined below) meeting the requirements set forth in Section
5.2, then each Stockholder hereby agrees to the following (provided, however, that in the event the Majority
Interest includes any Investors or their majority-controlled or controlling Affiliates that will be the buyer(s) pursuant to such
Sale Event (the “Buyer Investors”), then the approval of Investors holding a majority of the outstanding shares
of Preferred Stock not held by the Buyer Investors and their Affiliates shall also be required):
(a)
if such transaction requires stockholder approval, with respect to all Shares that such Stockholder owns or over which such
Stockholder otherwise exercises voting power, to vote (in person, by proxy or by action by written consent, as applicable) all
Shares in favor of, and adopt, such Sale Event (together with any related amendment to the Charter required in order to implement
such Sale Event) and to vote in opposition to any and all other proposals that could delay or impair the ability of the Company
to consummate such Sale Event;
(b)
if such transaction is a Stock Sale (as defined below), sell the same proportion of shares of capital stock of the Company
beneficially held by such Stockholder as is being sold by the Selling Investors to the Person to whom the Selling Investors propose
to sell their Shares, and, on the same terms and conditions as the Selling Investors;
(c)
to execute and deliver all related documentation and take such other action in support of the Sale Event as shall reasonably
be requested by the Company or the Selling Investors in order to carry out the terms and provision of this Article V, including
without limitation executing and delivering instruments of conveyance and transfer, and any purchase agreement, merger agreement,
indemnity agreement, escrow agreement, consent, waiver, governmental filing, share certificates duly endorsed for transfer (free
and clear of impermissible liens, claims and encumbrances) and any similar or related documents;
(d)
not to deposit, and to cause their Affiliates not to deposit, except as provided in this Agreement, any Shares of the Company
owned by such party or Affiliate in a voting trust or subject any Shares to any arrangement or agreement with respect to the voting
of such Shares, unless specifically requested to do so by the acquiror in connection with the Sale Event;
(e)
to refrain from exercising any dissenters’ rights or rights of appraisal under applicable law at any time with respect
to such Sale Event; and
(f)
if the consideration to be paid in exchange for the Shares pursuant to this Article V includes any securities and
due receipt thereof by any Stockholder would require under applicable law (x) the registration or qualification of such securities
or of any person as a broker or dealer or agent with respect to such securities or (y) the provision to any Stockholder of any
information other than such information as a prudent issuer would generally furnish in an offering made solely to “accredited
investors” as defined in Regulation D promulgated under the Securities Act, the Company may cause to be paid to any such
Stockholder in lieu thereof, against surrender of the Shares which would have otherwise been sold by such Stockholder, an amount
in cash equal to the fair value (as determined in good faith by the Company) of the securities which such Stockholder would otherwise
receive as of the date of the issuance of such securities in exchange for the Shares.
For purposes of this
Agreement, a “Sale Event” shall mean either: (a) a transaction or series of related transactions in which a
Person, or a group of related Persons, acquires from Stockholders of the Company shares representing more than fifty percent (50%)
of the outstanding voting power of the Company (a “Stock Sale”), or (b) a transaction that is or could be treated
as a Liquidation Event (as defined in the Charter).
Section 5.2
Conditions. The obligations of the Stockholders pursuant to this Article V are subject to the satisfaction
of the following conditions:
(a)
upon the consummation of the Sale Event, each Stockholder shall receive the same proportion of the aggregate consideration
from such Sale Event that such Stockholder would have received if such aggregate consideration had been distributed by the Company
in a Liquidation Event (as defined in the Charter) pursuant to, and in accordance with, the rights and preferences set forth in
Article IV, Section A.4 of the Charter as in effect immediately prior to such Sale Event (giving effect to applicable orders of
priority);
(b)
if any Stockholders of a class or series are given an option as to the form and amount of consideration to be received,
all Stockholders of such class or series will be given the same option, provided, however, that nothing in
this Subsection 5.2(b) shall entitle any holder to receive any form of consideration that such holder would be ineligible
to receive as a result of such holder’s failure to satisfy any condition, requirement or limitation that is generally applicable
to the Company’s stockholders and the Company shall in no way be obligated to issue any equity to any investors who are not
“accredited investors” as defined in Regulation D promulgated under the Securities Act;
(c)
each holder of each class and series of the Company’s stock will receive the same form of consideration for their
shares of such class and series as is received by other holders in respect of their shares of such same class and series of stock, each
holder of a series of Preferred Stock will receive the same amount of consideration per share of such series of Preferred Stock
as is received by other holders in respect of their shares of such same series;
(d)
any representations and warranties to be made by such Stockholder in connection with the Sale Event are limited to representations
and warranties as to the Stockholder, and not as to the Company, including, but not limited to, representations related to authority,
ownership of the capital stock or options, warrants or similar rights to acquire capital stock of the Company (“Stock
Equivalents”) held by such Stockholder and the ability to convey title to such capital stock and Stock Equivalents;
(e)
the Stockholder shall not be liable for the inaccuracy of any representation or warranty made by any other person in connection
with the Sale Event, other than the Company;
(f)
the liability for indemnification, if any, of such Stockholder in the Sale Event and for the inaccuracy of any representations
and warranties made by the Company in connection with such Sale Event, is either (i) several and not joint with any other person,
and is pro rata in proportion to the amount received by the Stockholders in the Sale Event (which may take into account the applicable
orders of priority for distribution of funds); (ii) limited to funds contributed to an escrow in proportion to the amount received
by the Stockholders in the Sale Event (which may take into account the applicable orders of priority for distribution of funds);
or (iii) any combination of the above;
(g)
liability shall be limited to the amount of consideration actually paid to such Stockholder in connection with such Sale
Event, except with respect to (i) representations and warranties of such Stockholder as to such Stockholder, and not as to the
Company, including representations and warranties related to authority, ownership of the capital stock and Stock Equivalents held
by such Stockholder and the ability to convey title to such capital stock and Stock Equivalents; (ii) any covenants made by such
Stockholder with respect to confidentiality or voting related to the Sale Event; or (iii) claims related to fraud or willful breach
by such Stockholder, the liability for which need not be limited; and
(h)
if some or all of the consideration received in connection with the Sale Event is other than cash, then the valuation of
such assets shall be deemed to have a dollar value equal to the fair market value of such assets as determined in good faith by
the Board of Directors. The determination of fair market value shall be final and binding on all parties.
ARTICLE VI -BOARD OF DIRECTORS
The provisions of this
Article VI shall terminate immediately upon the closing of a QPO.
Section 6.1
Board Composition. Each Stockholder agrees to vote all of his, her or its Shares having voting power (and
any other Shares over which he, she or it exercises voting control), in connection with the election of Directors and to take such
other actions as are necessary so as to, subject to this Section 6.1, fix the number of Directors at seven (7) and to elect
and continue in office as Directors the following:
(a)
For so long as ARCH holds any Shares, one (1) Person (the “ARCH Nominee”) nominated by ARCH, which ARCH
Nominee shall initially be Keith Crandell;
(b)
For so long as Razor’s Edge holds any Shares, one (1) Person (the “Razor’s Edge Nominee”)
nominated by Razor’s Edge, which Razor’s Edge Nominee shall initially be Mark Spoto;
(c)
For so long as Northpond holds any Shares, one (1) Person (the “Northpond Nominee,” and, collectively
with the ARCH Nominee and the Razor’s Edge Nominee, the “Preferred Directors”) nominated by Northpond,
which Northpond Nominee shall initially be Sharon Kedar;
(d)
One (1) Person (the “Founder Nominee”) nominated by the Founders holding a majority of vested shares
of Common Stock held by the Founders voting together as a single class, which Founder Nominee shall initially be J. Michael Ramsey;
(e)
One (1) Person (the “Founder Independent Nominee”), who shall be an outside independent director with
industry expertise, to be nominated by the Founders holding a majority of vested shares of Common Stock held by the Founders and
agreed upon by a majority of the other Directors, including all the Preferred Directors, which Founder Independent Nominee shall
initially be Kevin Hrusovsky;
(f)
One (1) Person (the “Preferred Independent Nominee”, collectively with the Founder Independent Nominee,
the “Independent Nominees”), who shall be an outside independent director with industry expertise, to be nominated
by the holders of a majority of shares of Series C Preferred Stock and Series D Preferred Stock, voting together as a single class,
and agreed upon by a majority of the other Directors, including all the Preferred Directors, which Preferred Independent Nominee
shall initially be Nicolas Barthelemy; and
(g)
The chief executive officer of the Company then-in-office, who shall initially be Kevin Knopp (the “CEO Director”),
provided that if for any reason the CEO Director shall cease to serve as the chief executive officer of the Company, each of the
Stockholders shall promptly vote their respective Shares (i) to remove the former chief executive officer of the Company from the
Board of Directors if such person has not resigned as a member of the Board of Directors; and (ii) to elect such person’s
replacement as chief executive officer of the Company as the new CEO Director.
Section 6.2
Removal; Vacancies. Each Stockholder agrees to vote all of his, her or its Shares having voting power (and
any other Shares over which he, she or it exercises voting control), for the removal of any Director upon the request of the Persons
then entitled to nominate such Director as set forth in Section 6.1 above, and for the election to the Board of Directors
of a substitute designated by such Person in accordance with the provisions hereof. Each Stockholder further agrees to vote all
of his, her or its Shares having voting power (and any other Shares over which he, she or it exercises voting control) in such
manner as shall be necessary or appropriate to ensure that any vacancy on the Board of Directors occurring for any reason shall
be filled only in accordance with the provisions of this Article VI.
Section 6.3
Committees of the Board. The Company shall use reasonable best efforts to establish (a) a Compensation Committee
of the Board of Directors (which shall be charged with the exclusive authority over (i) all equity compensation plans, including
the issuance of options and stock awards; and (ii) all non-equity compensation (including salary, bonuses and other items) for
all officers (director-level and above) and for all employees with base salaries greater than $175,000 per year), (b) an Audit
Committee of the Board of Directors (which shall be charged with the approval of the annual budget, all non-budgeted capital expenditures,
oversight of the integrity of the Company’s financial statements and monitoring of the Company’s accounting practices
and reporting) and (c) such other committees as the Board of Directors shall deem necessary or convenient from time to time. The
Compensation Committee and the Audit Committee shall each be composed of three non-management directors, unless the Board of Directors
(including at least two of the Preferred Directors) shall consent otherwise. Except to the extent otherwise required by applicable
law or regulation, or as otherwise agreed in writing by the applicable nominee, the ARCH Nominee and the Northpond nominee, at
his or her sole discretion, may be a member of each committee of the Board of Directors, including the Audit Committee and the
Compensation Committee.
Section 6.4
Assignment. Each Stockholder agrees, as a condition to any Transfer of his, her or its Shares, to cause the
Transferee to become a party to this Agreement by executing and delivering a counterpart signature page hereto agreeing to be bound
by and subject to the terms of this Agreement to the same extent as the transferring Stockholder in connection with its ownership
of the Shares Transferred.
Section 6.5
Compensation of Directors. The Company shall promptly reimburse in full each Director of the Company who is
not an employee of the Company for all of his reasonable out-of-pocket expenses incurred in attending each meeting of the Board
of Directors or any Committee thereof. After an initial public offering of the Company’s capital stock, the Company shall
pay or provide to any director of the Company who is nominated by the Investors, fees, options and other compensation in amounts
at least equal to the fees, options or other compensation paid to all other non-management directors of the Company.
Section 6.6
Board of Directors Meetings. The Company shall use its reasonable best efforts to ensure that meetings of
its Board of Directors are held monthly for the first year from the date hereof and at least once every 60 days thereafter.
Section 6.7
Directors’ and Officers’ Insurance. The Company shall, as promptly as practicable following the
date hereof, obtain and maintain directors’ and officers’ liability insurance coverage of at least $3,000,000 per occurrence
(or such greater amount determined by the Board of Directors and acceptable to all the Preferred Directors) on terms satisfactory
to the majority of the Board of Directors (such majority to include all the Preferred Directors), covering, among other things,
violations of federal or state securities laws. The Company shall use its reasonable best efforts prior to any initial public offering
of the Company’s capital stock to increase its directors’ and officers’ liability insurance to at least $10,000,000
per occurrence, including coverage of claims under the Securities Act and the Exchange Act.
Section 6.8
Board of Directors Observation Rights. For so long as each (or an Affiliate) holds 750,000 Shares, the Company shall
allow each of the Founders and one representative of each of ARCH, Razor’s Edge, Schlumberger, UTEC, SAEV, TAO Invest, Cormorant
and Northpond to attend and participate in all meetings and other business activities of the Board of Directors and all committees
thereof in a nonvoting capacity (each observer appointed pursuant to this Agreement or pursuant to any management rights letter
issued by the Company on the date hereof, an “Observer”, and collectively, the “Observers”).
The Company shall (i) give the Observers notice of all such meetings, at the same time as such notice is furnished to the members
of the Board of Directors, (ii) provide to each Observer all notices, documents and information furnished to the Board of Directors
at the same time and by the same means, to the extent reasonably practicable under the circumstances, so provided, (iii) notify
each Observer and permit each Observer to participate by telephone in emergency meetings of such Board of Directors and all committees
thereof, (iv) provide each Observer copies of the minutes of all such meetings at the time such minutes are furnished to the Board
of Directors; provided, however, that such Observer shall agree to hold in confidence and trust and to act in a fiduciary manner
with respect to all information provided. Notwithstanding the foregoing, the Board of Directors, in its sole discretion, shall
have the right to withhold such materials or exclude any or all Observers from all or part of any meeting of the Board of Directors.
Section 6.9
No Liability for Election of Recommended Directors. No Stockholder, nor any Affiliate of any Stockholder, shall have
any liability as a result of designating a person for election as a director for any act or omission by such designated person
in his or her capacity as a director of the Company, nor shall any Stockholder have any liability as a result of voting for any
such designee in accordance with the provisions of this Agreement.
Section 6.10
Confidentiality. Each Stockholder agrees that such Stockholder will keep confidential and will not disclose, divulge,
or use for any purpose (other than to monitor its investment in the Company) any confidential information obtained from the Company
pursuant to the terms of this Agreement or the Registration Rights Agreement (including notice of the Company’s intention
to file a registration statement), unless such confidential information (a) is known or becomes known to the public in general
(other than as a result of a breach of this Section 6.11 by such Stockholder), (b) is or has been independently developed
or conceived by the Stockholder without use of the Company’s confidential information, or (c) is or has been made known or
disclosed to the Stockholder by a third party without, to such Stockholder’s knowledge, a breach of any obligation of confidentiality
such third party may have to the Company; provided, however, that an Stockholder may disclose confidential information (i) to its
attorneys, accountants, consultants, and other professionals to the extent necessary to obtain their services in connection with
monitoring its investment in the Company; (ii) to any prospective purchaser of any Shares from such Stockholder, if such prospective
purchaser agrees to be bound by the provisions of this Agreement pursuant to Section 3 herein; (iii) to any existing or prospective
Affiliate, partner, member, stockholder, or wholly owned subsidiary of such Stockholder in the ordinary course of business, provided
that such Stockholder informs such Person that such information is confidential and directs such Person to maintain the confidentiality
of such information; or (iv) as may otherwise be required by law, provided that the Stockholder promptly notifies the Company of
such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.
Section 6.11
No “Bad Actor” Designees. Each Person with the right to designate or participate in the designation of
a director as specified above hereby represents and warrants to the Company that, to such Person’s knowledge, none of the
Disqualification Events is applicable to such Person’s initial designee named above except, if applicable, for a Disqualification
Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable. Any director designee to whom any Disqualification
Event is applicable, except for a Disqualification Event as to which Rule 506(d)(2)(ii) or (iii) or (d)(3) is applicable,
is hereinafter referred to as a “Disqualified Designee”. Each Person with the right to designate or participate
in the designation of a director as specified above hereby covenants and agrees (a) not to designate or participate in the
designation of any director designee who, to such Person’s knowledge, is a Disqualified Designee and (b) that in the
event such Person becomes aware that any individual previously designated by any such Person is or has become a Disqualified Designee,
such Person shall as promptly as practicable take such actions as are necessary to remove such Disqualified Designee from the Board
and designate a replacement designee who is not a Disqualified Designee.
ARTICLE VII - COVENANTS OF THE
COMPANY
The Company covenants
and agrees with each of the Stockholders that:
Section 7.1
Financial Statements, Reports, Etc. At the request of an Investor, the Company shall furnish to each such
Investor the following reports:
(a)
Annual Financial Statements. Within one hundred eighty (180) days after the end of each fiscal year of the
Company, a consolidated balance sheet of the Company and its subsidiaries, if any, as of the end of such fiscal year and the related
consolidated statements of income, capitalization table, cash flows and comparisons against the applicable Budget (as defined below)
for the fiscal year then ended, prepared in accordance with generally accepted accounting principles and certified by a firm of
independent public accountants of recognized national standing selected by the Board of Directors of the Company;
(b)
Quarterly Financial Statements. Within thirty (30) days after the end of each quarter in each fiscal year
(for the avoidance of doubt, including, without limitation, the fourth quarter of each fiscal year), a consolidated balance sheet
of the Company and its subsidiaries, if any, and the related consolidated statements of income, capitalization table, cash flows
and comparisons against the applicable Budget, unaudited but prepared in accordance with generally accepted accounting principles,
such consolidated balance sheet to be as of the end of such quarter and such consolidated statements of income, stockholders’
equity and cash flows and comparisons to be for such quarter and for the period from the beginning of the fiscal year to the end
of such quarter, in each case with comparative statements for the prior fiscal year;
(c)
Monthly Financial Statements. Within thirty (30) days after the end of each month in each fiscal year, a consolidated
balance sheet of the Company and its subsidiaries, if any, and the related consolidated statements of income, capitalization table,
cash flows and comparisons against the applicable Budget, unaudited but prepared in accordance with generally accepted accounting
principles, such consolidated balance sheet to be as of the end of such month and such consolidated statements of income, stockholders’
equity and cash flows and comparisons to be for such month and for the period from the beginning of the fiscal year to the end
of such month, in each case with comparative statements for the prior fiscal year;
(d)
Budget. No later than thirty (30) days prior to the start of each fiscal year, consolidated capital and operating
expense budgets, cash flow projections and income and loss projections for the Company and its subsidiaries in respect of such
fiscal year (the “Budget”), all itemized in reasonable detail and prepared on a monthly basis, and, promptly
after preparation, any revisions to any of the foregoing;
(e)
Accountant’s Letters. Promptly following receipt by the Company, each audit response letter, accountant’s
management letter and other written report submitted to the Company by its independent public accountants in connection with an
annual or interim audit of the books of the Company or any of its subsidiaries;
(f)
Notices. Promptly after the commencement thereof, notice of all actions, suits, claims, proceedings, investigations
and inquiries that could materially and adversely affect the Company or any of its subsidiaries, if any; and
(g)
Other Information. Promptly, from time to time, such other information regarding the business, prospects,
financial condition, operations, property or affairs of the Company and its subsidiaries as such Investor reasonably may request.
The Company shall provide full disclosure to the Board of Directors of any discussions related to a potential Sale Event and/or
the sale or licensing of any material assets, intellectual property, or marketing rights of the Company, and of any adverse developments.
Section 7.2
Corporate Existence. The Company shall maintain and cause each of its subsidiaries, if any, to maintain, their
respective corporate existence.
Section 7.3
Properties, Business Insurance. The Company shall obtain and maintain and cause each of its subsidiaries,
if any, to maintain as to their respective properties and business, with financially sound and reputable insurers, insurance against
such casualties and contingencies and of such types and in such amounts as is customary for companies similarly situated.
Section 7.4
Key Person Insurance. Unless otherwise determined by the Board of Directors, the Company shall obtain, as
soon as reasonably practicable following the date hereof, “key person” term life insurance policies of at least $500,000
on each of the lives of Kevin Knopp and Christopher Brown, which each shall name the Company as beneficiary. The Company will use
its best efforts to maintain in effect such “key person” term life insurance policies.
Section 7.5
Inspection, Consultation and Advice. The Company shall permit and cause each of its subsidiaries, if any,
to permit each Investor and such persons as each Investor may designate, at such Investor’s expense, to visit and inspect
any of the properties of the Company and its subsidiaries, examine their books and take copies and extracts therefrom, discuss
the affairs, finances and accounts of the Company and its subsidiaries with their officers, employees and public accountants (and
the Company hereby authorizes said accountants to discuss with such Investor and such designees such affairs, finances and accounts),
and consult with and advise the management of the Company and its subsidiaries as to their affairs, finances and accounts, all
at reasonable times and upon reasonable advance notice during normal business hours and provided that such Investor or designee
has executed a confidentiality agreement in substance and form reasonably acceptable to the Company; provided, however, that the
Company shall not be obligated pursuant to this Section 7.5 to provide access to any information that it reasonably and
in good faith considers to be a trade secret or confidential information (unless covered by an enforceable confidentiality agreement,
in form acceptable to the Company) or the disclosure of which would adversely affect the attorney-client privilege between the
Company and its counsel.
Section 7.6
By-laws. The Company shall at all times cause its By-laws to provide that unless otherwise required by the
laws of the State of Delaware, any one director shall have the right to call a meeting of the Board of Directors. The Company shall
at all times maintain provisions in its By-laws indemnifying all directors against liability and absolving all directors from liability
to the Company and its stockholders to the maximum extent permitted under the laws of the State of Delaware.
Section 7.7
Employee Agreements. The Company shall obtain, and shall cause its subsidiaries, if any, to obtain, a proprietary
information and inventions agreement from all future officers and employees and any consultants who will have access to confidential
information of the Company or any of its subsidiaries, upon their employment by the Company or any of its subsidiaries. The Company
shall not amend, modify, terminate, waive or otherwise alter, in whole or in part, any of the Proprietary Information and Inventions
Agreements, now or in the future in effect, without the approval of the Board of Directors, including at least two of the Preferred
Directors.
Section 7.8
Restrictive Agreements Prohibited. Neither the Company nor any of its subsidiaries shall become a party to
any agreement which by its terms expressly restricts the Company’s performance of this Agreement or any other Transaction
Document.
Section 7.9
Compliance with Laws. The Company shall comply, and cause each subsidiary, if any, to comply, with all applicable
laws, rules, regulations and orders, noncompliance with which could materially adversely affect its business or condition, financial
or otherwise.
Section 7.10
Keeping of Records and Books of Account. The Company shall keep, and cause each subsidiary, if any, to keep,
adequate records and books of account, in which complete entries will be made in accordance with generally accepted accounting
principles consistently applied, reflecting all financial transactions of the Company and such subsidiary, and in which, for each
fiscal year, all proper reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in
connection with its business shall be made.
Section 7.11
Prohibited Actions. Without the prior written consent of the Board of Directors, including at least two Preferred
Directors, the Company shall not:
(a)
make, or permit any subsidiary, if any, to make, any material change in the nature of its business as of the date hereof;
(b)
establish or invest in any subsidiary of the Company or joint venture, other than a wholly-owned subsidiary of the Company;
(c)
incur capital expenditures in excess of $250,000 in the aggregate that are not included in the Budget for the applicable
fiscal year;
(d)
grant any Stock Equivalents containing accelerated vesting provisions upon (i) the occurrence of a Sale Event or (ii) termination
of employment, consultancy or similar arrangement by the Company;
(e)
adopt any new or amend any existing stock plan (including, without limitation, the Equity Incentive Plan), employee stock
ownership plan or phantom stock or similar plan to increase the aggregate number of shares reserved under such plans;
(f)
enter into an exclusive license of the Company’s intellectual property, other than an exclusive license granted in
connection with a reseller or distribution agreement;
(g)
enter into or makes the Company a party to any transaction with any officer, member of the Board of Directors, or employee
(or any “associate” of the foregoing as defined in Rule 12b-2 promulgated under the Exchange Act), other than (i) standard
indemnification and/or inventions and nondisclosure agreements entered into in connection with their service as officers or directors
of the Corporation, or (ii) pursuant to the Corporation’s benefit plans and travel and expense policies in effect from time
to time;
(h)
make any loan or advance to, or own any stock or other securities of, or guarantee, directly or indirectly, any indebtedness
of, any subsidiary or other corporation, partnership or other entity;
(i)
make any loan or advance to any person, including any employee or member of the Board of Directors, except advances and
similar expenditures in the ordinary course of business or under the terms of the Equity Incentive Plan or other employee stock
or option plan approved by the Board of Directors;
(j)
make any investment inconsistent with any investment policy approved by the Board; or
(k)
enter into any agreement to do any of the foregoing.
Section 7.12 Qualified
Small Business Stock. The Company shall use commercially reasonable efforts to cooperate with any request for information
from any Investor regarding whether such Investor’s interest in the Company constitutes “qualified small business
stock” as defined in Section 1202(c) of the Code, and the Company shall use commercially reasonable efforts to assist such
Investor with completing any documents necessary for such determination. The Company’s obligation to furnish any requested
information pursuant to this Section 7.12 shall continue notwithstanding the fact that a class of the Company’s stock
may be traded on an established securities market. Notwithstanding the foregoing, in no event shall a Sale Event be unreasonably
deferred due to an Investor's pursuit of capital gains treatment pursuant to Section 1202 of the Code.
Section 7.13
Lock-Up Agreements. The Company will obtain agreements in writing from each holder of stock or options of
the Company, as a condition to any issuance of stock or grant of options, agreeing not to directly or indirectly offer, sell, contract
to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant for
the sale of or otherwise dispose of or transfer any shares of stock without the consent of the Company’s underwriters, in
connection with any public offering of the Company’s capital stock, consistent with the provisions of Section 12 of that
certain Registration Rights Agreement by and among the Company and the Investors.
Section 7.14
Affiliated Transactions. All transactions by and between the Company and any officer, employee, director or
stockholder of the Company or persons controlling, controlled by, under common control with or otherwise affiliated with such officer,
employee, director or stockholder shall be conducted on an arm’s-length basis, shall be on terms and conditions no less favorable
to the Company than could be obtained from nonrelated persons and shall be approved in advance by the Board of Directors, including
at least two of the Preferred Directors (or, if such transaction is between the Company and a Preferred Director or its Affiliates,
the other Preferred Directors).
Section 7.15
Management Compensation. Any grants of capital stock or options to employees, officers, directors or consultants
of the Company shall be made pursuant to the Equity Incentive Plan, and conditioned upon the grantee agreeing to be bound by the
terms of an option and/or stock agreement containing first refusal rights of the Company with respect to the transfer of such stock
or options and such other provisions as are approved or requested by the Board of Directors, including at least two of the Preferred
Directors.
Section 7.16 Financings.
The Company will promptly provide to the Investors the details and terms of, and any brochures or investment memoranda prepared
by the Company related to, any possible financing of any nature for the Company, whether initiated by the Company or any other
person or entity.
Section 7.17 Key Events. The Company shall provide to the Investors the details and terms of any potential Sale Event,
sale or licensing of any material assets, intellectual property or marketing rights of the Company, or any adverse developments,
as promptly as possible after such event or events.
Section 7.18
Non-Solicitation. The Company shall not solicit for employment any consultants or advisors introduced to the
Company by ARCH, Schlumberger, UTEC, SAEV, Razor’s Edge or Northpond on or after the date hereof without the written consent
of the applicable party who made such introductions.
Section 7.19
Indemnification.
(a)
Without limitation of any other provision of this Agreement or any agreement executed in connection herewith, the Company
agrees to defend, indemnify and hold each Investor, its respective Affiliates and direct and indirect partners (including partners
of partners and stockholders and members of partners), members, stockholders, directors, officers, employees and agents and each
person who controls any of them within the meaning of Section 15 of the Securities Act, or Section 20 of the Exchange Act (collectively,
the “Investor Indemnified Parties” and, individually, an “Investor Indemnified Party”) harmless from and
against any and all damages, liabilities, losses, Taxes, fines, penalties, reasonable costs and expenses (including, without limitation,
reasonable fees of a single counsel representing the Investor Indemnified Parties), as the same are incurred, of any kind or nature
whatsoever (whether or not arising out of third party claims and including all amounts paid in investigation, defense or settlement
of the foregoing) which may be sustained or suffered by any such Investor Indemnified Party (“Losses”), based upon,
arising out of, or by reason of any third party or governmental claims relating in any way to such Investor Indemnified Party’s
status as a security holder, creditor, director, agent, representative or controlling person of the Company or otherwise relating
to such Investor Indemnified Party’s involvement with the Company to the extent, and solely to the extent, that such Losses
are based upon, arise out of or are otherwise reasonably related to any action taken or omitted to be taken or alleged to have
been taken or omitted to have been taken by or on behalf of or through the Company or any of its subsidiaries (including, without
limitation, any and all Losses under the Securities Act, the Exchange Act or other federal or state statutory law or regulation,
at common law or otherwise, which relate directly or indirectly to the registration, purchase, sale or ownership of any securities
of the Company or to any fiduciary obligation owed with respect thereto), including, without limitation, in connection with any
third party or governmental action or claim relating to any action taken or omitted to be taken or alleged to have been taken or
omitted to have been taken by any Investor Indemnified Party as security holder, director, agent, representative or controlling
person of the Company or otherwise, alleging so called control person liability or securities law liability; provided, however,
that the Company will not be liable to the extent that such Losses arise from and are based on (A) an untrue statement or omission
or alleged untrue statement or omission in a registration statement or prospectus which is made in reliance on and in conformity
with written information furnished to the Company by or on behalf of such Investor Indemnified Party, or (B) conduct by such Investor
Indemnified Party which constitutes fraud or willful misconduct.
(b)
If the indemnification provided for in Section 7.19(a) above for any reason is held by a court of competent jurisdiction
to be unavailable to an Investor Indemnified Party in respect of any Losses referred to therein, then the Company, in lieu of indemnifying
such Investor Indemnified Party thereunder, shall contribute to the amount paid or payable by such Investor Indemnified Party as
a result of such Losses (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the
Investors, or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company
and the Investors in connection with the action or inaction which resulted in such Losses, as well as any other relevant equitable
considerations. The relative fault of the Company and the Investors shall be determined by reference to, among other things, whether
the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates
to information supplied by the Company and the Investors and the parties’ relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
(c)
Each of the Company and the Investors agrees that it would not be just and equitable if contribution pursuant to Section
7.19(b) were determined by pro rata or per capita allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding paragraph.
Section 7.20
Successor Indemnification. If the Company or any of its successors or assignees consolidates with or merges
into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the
extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of
the Company with respect to indemnification of members of the Board of Directors as in effect immediately before such transaction,
whether such obligations are contained in the Company’s By-laws, the Charter, this Agreement or elsewhere, as the case may
be.
Section 7.21
Employee Stock Vesting. Unless otherwise approved by the Board of Directors, including at least two of the
Preferred Directors, all employees and consultants of the Company who purchase, receive options to purchase, or receive awards
of shares of the Company’s capital stock after the date hereof shall be required to execute restricted stock or option agreements,
as applicable, providing for vesting of shares over a four (4) year period, with the first twenty-five percent (25%) of such shares
vesting following twelve (12) months of continued employment or service, and the remaining shares vesting in equal monthly installments
over the following thirty-six (36) months. In addition, unless otherwise approved by the Board of Directors, including at least
two of the Preferred Directors, the Company or its assignee shall retain a “right of first refusal” on employee transfers
until the Company’s QPO and shall have the right to repurchase unvested shares at cost upon termination of employment of
a holder of restricted stock and stock issued as a result of early exercised options.
Section 7.22
Vote to Increase Authorized Common Stock. Each Stockholder agrees to vote or cause to be voted all Shares
owned by such Stockholder, or over which such Stockholder has voting control, from time to time and at all times, in whatever manner
as shall be necessary to increase the number of authorized shares of Common Stock from time to time to ensure that there will be
sufficient shares of Common Stock available for conversion of all of the shares of Preferred Stock outstanding at any given time.
Section 7.23
Term. Except as provided below, the covenants set forth in this Article VII shall terminate upon the
closing of a QPO. Notwithstanding the foregoing, the covenants set forth in Section 7.6 hereof shall continue for so long
as any ARCH Nominee, Razor’s Edge Nominee or Northpond Nominee is a member of the Board of Directors, and the covenants set
forth in Sections 7.19 and 7.20 shall continue for so long as any Investor holds any Shares or until the expiration
of the applicable statute of limitations, if later.
Section 7.24
Tax Reporting. The Company will use commercially reasonable efforts to comply with any obligation imposed
on the Company to make any required U.S. Federal Income Tax filing (including any filing on the Internal Revenue Service Form 5471)
as a result of any interest that the Company holds in a non-U.S. Person or any activities that the Company conducts outside of
the U.S. and shall use commercially reasonable efforts to include in such filing any information necessary to obviate (to the extent
reasonably practicable) any similar obligation to which any shareholder would otherwise be subject with respect to such interest
or such activity. The Company shall promptly provide each Investor with a copy of any such filing upon request.
Section 7.25
Export Compliance. The Company shall: (a) prepare and file all required filings with the U.S. Commerce Department
and/or the U.S. Department of State necessary in order to be, or become, compliant with United States export regulations and (b)
prepare and file all required filings with the appropriate governmental entity to be, or become, compliant with the export regulations
of any jurisdiction from which the Company’s products were or are licensed, shipped or distributed.
ARTICLE VIII -MISCELLANEOUS PROVISIONS
Section 8.1
Survival of Covenants. Each of the parties hereto agrees that each covenant and agreement made by it in this
Agreement or in any certificate, instrument or other document delivered pursuant to this Agreement is material, shall be deemed
to have been relied upon by the other parties and shall remain operative and in full force and effect after the date hereof regardless
of any investigation. This Agreement shall not be construed so as to confer any right or benefit upon any Person other than the
parties hereto and their respective successors and permitted assigns to the extent contemplated herein.
Section 8.2
Legend on Securities. The Company and the Stockholders acknowledge and agree that in addition to any other
legend on the certificates representing Shares held by them, substantially the following legend shall be typed on each certificate
evidencing any of the Shares held at any time by any of the Stockholders:
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT
TO THE PROVISIONS OF A STOCKHOLDERS AGREEMENT, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER SET FORTH THEREIN. A COMPLETE AND CORRECT
COPY OF SUCH AGREEMENT IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY AND WILL BE FURNISHED UPON WRITTEN REQUEST
AND WITHOUT CHARGE.
The foregoing legend
shall be removed from the certificates representing any Shares, upon the termination of this Agreement.
Section 8.3
Amendment and Waiver; Actions of the Board of Directors. Any party may waive any provision hereof intended
for its benefit in writing. No failure or delay on the part of any party hereto in exercising any right, power or remedy hereunder
shall operate as a waiver thereof. The remedies provided for herein are cumulative and are not exclusive of any remedies that may
be available to any party hereto at law or in equity or otherwise. This Agreement may be amended or terminated and the observance
of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only
by a written instrument executed by (i) the Company, (ii) a majority-in-interest of the Other Stockholders (based upon the number
of Shares held by each Other Stockholder), and (iii) a Majority Interest. Notwithstanding the foregoing: (a) this Agreement may
not be amended or terminated and the observance of any term of this Agreement may not be waived with respect to any Investor or
Other Stockholder without the written consent of such Investor or Other Stockholder unless such amendment, termination or waiver
applies to all Investors or Other Stockholders, as the case may be, in the same fashion; (b) the consent of the Other Stockholders
shall not be required for any amendment or waiver if such amendment or waiver either (A) is not directly applicable to the rights
of the Other Stockholders hereunder or (B) does not adversely affect the rights of the Other Stockholders in a manner that is different
than the effect on the rights of the other parties hereto; (c) Subsections 6.1(a), 6.1(b) and 6.1(c)
of this Agreement shall not be amended or waived without the prior written consent of ARCH, Razor’s Edge or Northpond, respectively;
(d) Section 5.2 of this Agreement shall not be amended or waived in any way which would adversely affect the rights of the
holders of Series E Preferred Stock hereunder in a manner disproportionate to any adverse effect such amendment or waiver would
have on the rights of the holders of the other series of Preferred Stock; (e) Section 6.8 of the Agreement shall not be
amended or waived in a manner adverse to Northpond without the prior written consent of Northpond and (f) Section 6.1(f)
of the Agreement shall not be amended or waived without the prior written consent of the holders of a majority of shares of Series
C Preferred Stock and Series D Preferred Stock, voting together as a single class. Any consent or waiver given as provided in this
Section 8.3 shall be binding on all Stockholders.
Section 8.4
Notices. All notices and other communications provided for herein shall be in writing and shall be deemed
to have been duly given, delivered and received (a) if delivered personally or (b) if sent by facsimile, email, registered or certified
mail (return receipt requested) postage prepaid, or by courier guaranteeing next day delivery, in each case to the party to whom
it is directed, which if to the Company, shall be at 908 Devices Inc., 645 Summer Street, Boston, MA 02210, Phone: (978) 729-4478,
Email: kjknopp@908devices.com, Attn: Kevin Knopp, with a copy to Goodwin Procter LLP, 100 Northern Avenue, Boston, MA, 02210 Facsimile:
(617) 801-8610, Email: mmacenka@goodwinlaw.com, Attn: Mark J. Macenka, and if to Northpond, at the address set forth below Northpond’s
signature hereto, with a mandatory copy (which shall not constitute notice) to Ropes & Gray LLP, Prudential Tower, 800 Boylston
Street, Boston, MA 02199, Facsimile: 617-235-0375, Email: Joel.Freedman@ropesgray.com, Attn:Joel Freedman, and if to any Investor
or Other Stockholder except Northpond, at the addresses set forth below such party’s signature hereto, with a mandatory copy
(which shall not constitute notice) to Morrison & Foerster LLP, John Hancock Tower, 200 Clarendon Street, Boston, MA 02116,
Facsimile: 617-830-0142, Email: ori@mofo.com, Attn: Ori Solomon (or at such other address for any party as shall be specified by
notice given in accordance with the provisions hereof, provided that notices of a change of address shall be effective only upon
receipt thereof). Notices delivered personally shall be effective on the day so delivered, notices sent by registered or certified
mail shall be effective five days after mailing, notices sent by facsimile shall be effective when receipt is acknowledged, and
notices sent by courier guaranteeing next day delivery shall be effective on the earlier of the second business day after timely
delivery to the courier or the day of actual delivery by the courier.
Section 8.5
Headings. The Article and Section headings used or contained in this Agreement are for convenience of reference
only and shall not affect the construction of this Agreement. The parties have participated jointly in the negotiation and drafting
of this Agreement and the other agreements, documents and instruments executed and delivered in connection herewith with counsel
sophisticated in investment transactions. In the event an ambiguity or question of intent or interpretation arises, this Agreement
and the agreements, documents and instruments executed and delivered in connection herewith shall be construed as if drafted jointly
by the parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship
of any provisions of this Agreement and the agreements, documents and instruments executed and delivered in connection herewith.
Section 8.6
Irrevocable Proxy and Power of Attorney. Each party to this Agreement hereby constitutes and appoints as the
proxies of the party and hereby grants a power of attorney to the President of the Company, and a designee of the Selling Investors,
and each of them, with full power of substitution, with respect to the matters set forth herein, including without limitation,
votes regarding any Sale Event pursuant to Article V hereof, election of Persons as members of the Board of Directors in
accordance with Article VI hereof and votes to increase authorized shares pursuant to Section 7.22 hereof, and hereby
authorizes each of them to represent and to vote, if and only if the party (i) fails to vote or (ii) attempts to vote (whether
by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement, all of such party’s
Shares in favor of the election of Persons as members of the Board of Directors determined pursuant to and in accordance with the
terms and provisions of this Agreement or the increase of authorized shares or approval of any Sale of the Company pursuant to
and in accordance with the terms and provisions of Section 7.22 and Article V, respectively, of this Agreement or
to take any action necessary to effect Section 7.22 and Article V, respectively, of this Agreement. Each of the proxy
and power of attorney granted pursuant to the immediately preceding sentence is given in consideration of the agreements and covenants
of the Company and the parties in connection with the transactions contemplated by this Agreement and, as such, each is coupled
with an interest and shall be irrevocable unless and until this Agreement terminates or expires pursuant to the terms of this Agreement.
Each party hereto hereby revokes any and all previous proxies or powers of attorney with respect to the Shares and shall not hereafter,
unless and until this Agreement terminates or expires pursuant to the terms hereof, purport to grant any other proxy or power of
attorney with respect to any of the Shares, deposit any of the Shares into a voting trust or enter into any agreement (other than
this Agreement), arrangement or understanding with any Person, directly or indirectly, to vote, grant any proxy or give instructions
with respect to the voting of any of the Shares, in each case, with respect to any of the matters set forth herein.
Section 8.7
Remedies; Severability. It is specifically understood and agreed that any breach of the provisions of this
Agreement by any Person subject hereto will result in irreparable injury to the other parties hereto, that the remedy at law alone
will be an inadequate remedy for such breach, and that, in addition to any other legal or equitable remedies which they may have,
such other parties may enforce their respective rights by actions for specific performance (to the extent permitted by law) and
the Company may refuse to recognize any unauthorized Transferee as one of its Stockholders for any purpose, including, without
limitation, for purposes of dividend and voting rights, until the relevant party or parties have complied with all applicable provisions
of this Agreement.
In the event that any
one or more of the provisions contained herein, or the application thereof in any circumstances, is held invalid, illegal or unenforceable
in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired thereby, it being intended that all of the rights and privileges
of the parties hereto shall be enforceable to the fullest extent permitted by law.
Section 8.8
Entire Agreement. This Agreement is intended by the parties as a final expression of their agreement and intended
to be complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter
contained herein. By executing this Agreement, the undersigned Investors who are also parties to the Prior Agreement, representing
a Supermajority Interest (as defined in the Prior Agreement) and a majority-in-interest of the Other Stockholders (based upon the
number of Shares held by each Other Stockholder), hereby amend and restate the Prior Agreement in its entirety as set forth in
this Agreement.
Section 8.9
Adjustments. All references to share prices and amounts herein shall be equitably adjusted to reflect stock
splits, stock dividends, recapitalizations and similar changes affecting the capital stock of the Company.
Section 8.10
Law Governing. This Agreement shall be construed and enforced in accordance with and governed by the laws
of the State of Delaware (without giving effect to principles of conflicts of law).
Section 8.11
Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the respective successors
and permitted assigns of the parties hereto as contemplated herein, and any successor to the Company by way of merger or otherwise
shall specifically agree to be bound by the terms hereof as a condition of such successor. The rights of the Investors hereunder
shall be assignable to Transferees of their Shares as contemplated herein. This Agreement may not be assigned by any Other Stockholder
except as provided herein without the prior written consent of the Company and a Majority Interest, and without such prior written
consent any attempted Transfer shall be null and void.
Section 8.12
Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the
courts of the State of Delaware and the United States District Court for the District of Delaware for the purpose of any suit,
action or other proceeding arising out of or based upon this Agreement; (b) agree not to commence any suit, action or other proceeding
arising out of or based upon this Agreement except in the courts of the State of Delaware or the United States District Court for
the District of Delaware; and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such
suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above named courts, that its
property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum,
that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced
in or by such court.
EACH PARTY ACKNOWLEDGES
AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES AND,
THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LEGAL
ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE
OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT SEEK TO ENFORCE THE FOREGOING WAIVER
IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) SUCH PARTY MAKES THIS WAIVER
VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS
IN THIS SECTION.
Section 8.13
Counterparts. This Agreement may be executed in one or more counterparts and by the parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original and all of which together shall be deemed to constitute
one and the same agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS WHEREOF, the parties hereto have
caused this Stockholders Agreement to be duly executed as of the date first set forth above.
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THE COMPANY:
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908 DEVICES INC.
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By:
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/s/ Kevin Knopp
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Name: Kevin Knopp
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Title: President
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[Signature Page to Stockholders Agreement]
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OTHER STOCKHOLDERS:
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/s/ Christopher David Brown
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Christopher David Brown
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/s/ Kevin Hrusovsky
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Kevin Hrusovsky
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/s/ J. Michael Ramsey
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J. Michael Ramsey
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/s/ Roswitha S. Ramsey
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Roswitha S. Ramsey
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[Signature Page to Stockholders Agreement]
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INVESTORS:
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NORTHPOND VENTURES, LP
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By: Northpond Ventures GP, its general partner
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By:
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Name
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Title:
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[Signature Page to Stockholders Agreement]
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INVESTORS:
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TAO INVEST III LLC
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By:
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/s/ Nicholas J. Pritzker
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Name: Nicholas J. Pritzker
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Title: Chairman
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INVESTORS:
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TAO INVEST LLC
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By:
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/s/ Nicholas J. Pritzker
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Name: Nicholas J. Pritzker
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Title: Chairman
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[Signature Page to Stockholders Agreement]
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INVESTORS:
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ARCH VENTURE FUND VII, L.P.
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By:
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ARCH Venture Partners VII, L.P.,
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its General Partner
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By:
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ARCH Venture Partners VII, LLC,
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its General Partner
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By:
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/s/ Keith Crandell
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Name: Keith Crandell
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Title: Managing Director
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[Signature Page to Stockholders Agreement]
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INVESTORS:
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RAZOR’S EDGE FUND, LP
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By: Razor’s Edge Ventures, LLC, its General Partner
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By:
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/s/ Mark Spoto
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Name: Mark Spoto
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Title: Managing Director
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RE SIDECAR 4, LLC
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By:
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/s/ Mark Spoto
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Name: Mark Spoto
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Title: Managing Director
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YODABYTE INVESTMENTS, LLC
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By:
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/s/ Mark Spoto
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Name: Mark Spoto
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Title: Managing Director
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[Signature Page to Stockholders Agreement]
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INVESTORS:
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SCHLUMBERGER TECHNOLOGY CORPORATION
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By:
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/s/ Tim Henry
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Name: Tim Henry
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Title: Treasurer
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[Signature Page to Stockholders Agreement]
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INVESTORS:
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SAEV Guernsey Holdings Limited
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By:
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/s/ Majid Mufti
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Name: Majid Mufti
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Title: Chief Executive Officer
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INVESTORS:
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/s/ Kevin J. Knopp
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Kevin J. Knopp
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Address:
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91 Thorndike Street
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Brookline, MA 02446
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[Signature Page to Stockholders Agreement]
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INVESTORS:
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/s/ E. Kevin Hrusovsky
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E. Kevin Hrusovsky 2012 Irrevocable Trust
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Trustee: Kevin Hrusovsky
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[Signature Page to Stockholders Agreement]
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INVESTORS:
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CASDIN PARTNERS MASTER FUND LP
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/s/ Eli Casdin
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Name: Eli Casdin
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Title:
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[Signature Page to Stockholders Agreement]
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INVESTORS:
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The Barthelemy 2001 Trust
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/s/ Nicolas Barthelemy
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Name: Nicolas Barthelemy
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Title:
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[Signature Page to Stockholders Agreement]
EXHIBIT A
Form of Joinder Agreement
The undersigned hereby agrees, effective
as of the date hereof, to become a party to that certain Fourth Amended and Restated Stockholders Agreement (the “Agreement”)
dated as of April 11, 2019 by and among 908 Devices Inc. (the “Company”) and the parties named therein and for
all purposes of the Agreement, the undersigned shall be included within the term [“Other Stockholder”/”Investor”]
(as defined in the Agreement). The undersigned further confirms that the representations and warranties contained in Article
II of the Agreement are true and correct as to the undersigned as of the date hereof. The address and facsimile number to which
notices may be sent to the undersigned is as follows:
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Address:
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Facsimile No.
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[NAME OF UNDERSIGNED]
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Schedule A
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Other Stockholder
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Steven P. Araiza
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Andrew J. Bartfay-Szabo
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Christopher David Brown
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David Cruikshank
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Michael J. Jobin
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Scott Miller
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Chris Petty
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J. Michael Ramsey
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Kevin Knopp
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Investors
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ARCH Venture Fund VII, L.P.
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RE Sidecar 4, LLC
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Razor’s Edge Fund, LP
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Yodabyte Investments, LLC
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Schlumberger Technology Corporation
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UTEC 2 L.P.
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David Walt
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Kevin Knopp
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Kevin Hrusovsky
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Daryoosh Vakhshoori
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Stephen Reeves
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Jay Flatley
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Doug Kahn
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E. Kevin Hrusovsky 2012 Irrevocable Trust
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SAEV Guernsey Holdings Limited
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Martin Madaus GST Trust
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Joseph H. Griffith IV
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Exora Investments LLC c/u Perspecta Trust LLC
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Woburn Abbey November 2011 Trust
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Casdin Partners Master Fund LP
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Cormorant Private Healthcare Fund I, LP
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Cormorant Global Healthcare Master Fund, LP
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CRMA SPV, L.P.
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TAO Invest LLC
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TAO Invest III LLC
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TAO Invest IV LLC
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Northpond Ventures, LP
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The Barthelemy 2001 Trust
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PEI Investments
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Sands Capital
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Exhibit 4.2
FOURTH AMENDED AND
RESTATED REGISTRATION RIGHTS AGREEMENT
This FOURTH AMENDED AND RESTATED
REGISTRATION RIGHTS AGREEMENT (the “Agreement”) is dated as of April 12, 2019, by and among 908 Devices Inc., a Delaware
corporation (the “Company”), and the persons identified on the signature pages hereto (collectively, the “Investors,”
and each individually, an “Investor”).
WHEREAS, the parties to
this Agreement are simultaneously entering into a certain Series E Stock Purchase Agreement, dated as of the date hereof (the “Purchase
Agreement”), whereby the Investors have agreed to purchase shares of Series E Preferred Stock (the “Securities”)
from the Company for an aggregate purchase price of up to $17,500,000; and
WHEREAS, the Company and
certain Investors have previously entered into that certain Third Amended and Restated Registration Rights Agreement dated as of
March 2, 2017 (the “Prior Agreement”);
WHEREAS, the execution
of this Agreement is an inducement and a condition precedent to the purchase by the Investors of the Securities under the Purchase
Agreement;
WHEREAS, to induce certain
Investors to enter into the Purchase Agreement and purchase shares of Series E Preferred Stock thereunder, the Company and the
Investors have agreed to amend and restate the Prior Agreement and to accept the rights created pursuant hereto in lieu of the
rights created under the Prior Agreement.
NOW, THEREFORE, in consideration
of the premises, as an inducement to the Investors to consummate the transactions contemplated by the Purchase Agreement, and for
other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the Company and the Investors
hereby covenant and agree with each other as follows:
1. Certain
Definitions. As used in this Agreement, the following terms shall have the following respective meanings:
“Commission”
shall mean the United States Securities and Exchange Commission, or any other federal agency administering the Securities Act and
the Exchange Act at the time.
“Common Stock”
shall mean the Common Stock and any other common equity securities issued by the Company, and any other shares of stock issued
or issuable with respect thereto (whether by way of a stock dividend or stock split or in exchange for or upon conversion of such
shares or otherwise in connection with a combination of shares, recapitalization, merger, consolidation or other corporate reorganization).
“Exchange
Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute, and the rules
and regulations of the Commission thereunder, all as the same shall be in effect at the time.
“Person”
shall mean an individual, a corporation, a partnership, a joint venture, a trust, an unincorporated organization, a limited liability
company or partnership, a government and any agency or political subdivision thereof.
“Registrable
Securities” shall mean (i) any shares of Common Stock held by the Investors at any time, and (ii) any other securities
issued and issuable to the Investors with respect to any such shares described in clause (i) above by way of a stock dividend
or stock split or in connection with a combination of shares, recapitalization, merger, consolidation or other reorganization
(it being understood that for purposes of this Agreement, a Person will be deemed to be a holder of Registrable Securities whenever
such Person has the right to then acquire or obtain from the Company any Registrable Securities, whether or not such acquisition
has actually been effected).
“Registration Expenses” shall mean
the expenses so described in Section 6 hereof.
“Securities Act”
shall mean the Securities Act of 1933, as amended, or any similar successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
All other capitalized
terms not defined herein shall have the meaning set forth in the Purchase Agreement unless otherwise indicated.
2. Demand Registration.
(a) At any time after one hundred eighty (180) days after the initial public offering of the Company’s Common Stock
pursuant to an effective registration under the Securities Act, the holders of a majority of the Registrable Securities may notify
the Company that they intend to offer or cause to be offered for public sale all or any portion of their Registrable Securities
in the manner specified in such request. Upon receipt of such request, the Company shall promptly deliver notice of such request
to all Investors holding Registrable Securities who shall then have thirty (30) days to notify the Company in writing of their
desire to be included in such registration. If the request for registration contemplates an underwritten public offering, the Company
shall state such in the written notice and in such event the right of any Person to participate in such registration shall be conditioned
upon such Person’s participation in such underwritten public offering and the inclusion of such Person’s Registrable
Securities in the underwritten public offering to the extent provided herein. The Company will use its best efforts to expeditiously
effect (but in any event no later than sixty (60) days after such request) the registration of all Registrable Securities whose
holders request participation in such registration under the Securities Act, but only to the extent provided for in this Agreement;
provided, however, that the Company shall not be required to effect registration pursuant to a request under this Section 2 more
than two (2) times for the holders of the Registrable Securities as a group. Notwithstanding anything to the contrary contained
herein, no request may be made under this Section 2 within ninety (90) days after the effective date of a registration statement
filed by the Company covering a firm commitment underwritten public offering in which the holders of Registrable Securities shall
have been entitled to join pursuant to Section 4 and in which there shall have been effectively registered all Registrable Securities
as to which registration shall have been requested. A registration will not count as a requested registration under this Section
2(a) unless and until the registration statement relating to such registration has been declared effective by the Commission at
the request of the initiating shareholders; provided, however, that a majority in interest of the participating holders of Registrable
Securities may request, in writing, that the Company withdraw a registration statement which has been filed under this Section
2(a) but has not yet been declared effective, and a majority in interest of such holders may thereafter request the Company to
reinstate such registration statement, if permitted under the Securities Act, or to file another registration statement, in accordance
with the procedures set forth herein and without reduction in the number of demand registrations permitted under this Section 2(a).
(b) If a requested registration involves an underwritten public offering and the managing underwriter of such offering
determines in good faith that the number of securities sought to be offered should be limited due to market conditions, then the
number of securities to be included in such underwritten public offering shall be reduced to a number deemed satisfactory by such
managing underwriter; provided, that the shares to be excluded shall be determined in the following order of priority: (i) persons
not having any contractual or other right to include such securities in the registration statement, (ii) securities held by any
other Persons (other than the holders of Registrable Securities) having a contractual, incidental “piggy back” right
to include such securities in the registration statement, (iii) securities to be registered by the Company pursuant to such registration
statement and, if necessary, (iv) Registrable Securities. If there is a reduction of the number of Registrable Securities pursuant
to clause (iv), such reduction shall be made on a pro rata basis (based upon the aggregate number of Registrable Securities held
by such holders).
(c) With respect to a request for registration pursuant to Section 2(a) which is for an underwritten public offering,
the managing underwriter shall be chosen by the holders of a majority of the Registrable Securities to be sold in such offering
(which approval will not be unreasonably withheld or delayed). The Company may not cause any other registration of securities for
sale for its own account (other than a registration effected solely to implement an employee benefit plan or a transaction to which
Rule 145 of the Securities Act is applicable) to become effective within one hundred twenty
(120) days following the effective date of any registration
required pursuant to this Section 2.
3. Form
S-3. After the first public offering of its securities registered under the Securities Act, the Company shall use its reasonable
best efforts to qualify and remain qualified to register securities pursuant to a registration statement on Form S-3 (or any successor
form) under the Securities Act. An Investor or Investors holding Registrable Securities anticipated to have an aggregate sale
price (net underwriting discounts and commissions, if any) in excess of $500,000 shall have the right to request any number of
registrations on Form S-3 (or any successor form) for the Registrable Securities held by such requesting holders. Such requests
shall be in writing and shall state the number of shares of Registrable Securities to be disposed of and the intended method of
disposition of such shares by such holder or holders. The Company shall give notice to all other holders of the Registrable Securities
of the receipt of a request for registration pursuant to this Section 3 and such holders of Registrable Securities shall then
have thirty (30) days to notify the Company in writing of their desire to participate in the registration. The Company shall use
its reasonable best efforts to effect promptly the registration of all shares on Form S-3 (or a comparable successor form) to
the extent requested by such holders. The Company shall use its reasonable best efforts to keep such registration statement effective
until the earlier of 90 days or until such holders have completed the distribution described in such registration statement.
4. Piggyback
Registration. If the Company at any time proposes to register any of its securities under the Securities Act for sale to the public
(except with respect to registration statements on Forms S-4, S-8 or another form not available for registering the Registrable
Securities for sale to the public), each such time it will give written notice at the applicable address of record to each holder
of Registrable Securities of its intention to do so. Upon the written request of any of such holders of the Registrable Securities,
given within twenty (20) days after receipt by such Person of such notice, the Company will, subject to the limits contained in
this Section 4, use its reasonable best efforts to cause all such Registrable Securities of said requesting holders to be registered
under the Securities Act and qualified for sale under any state blue sky law, all to the extent required to permit such sale or
other disposition of said Registrable Securities; provided, however, that if the Company is advised in writing in good faith by
any managing underwriter of the Company’s securities being offered in a public offering pursuant to such registration statement
that the amount to be sold by persons other than the Company (collectively, “Selling Stockholders”) is greater than
the amount which can be offered without adversely affecting the offering, the Company may reduce the amount offered for the accounts
of Selling Stockholders (including such holders of shares of Registrable Securities) to a number deemed satisfactory by such managing
underwriter; and provided further, that (a) in no event shall the amount of Registrable Securities of selling Investors be reduced
below fifty percent (50%) of the total amount of securities included in such offering, unless such offering is the initial public
offering of the Company’s securities; and (b) any shares to be excluded shall be determined in the following order of priority:
(i) securities held by any Persons not having any such contractual, incidental registration rights, (ii) securities held by any
Persons having contractual, incidental registration rights pursuant to an agreement which is not this Agreement, and (iii) the
Registrable Securities sought to be included by the holders thereof as determined on a pro rata basis (based upon the aggregate
number of Registrable Securities held by such holders).
5. Registration Procedures. If and whenever the Company is required by the provisions of this Agreement to use its best
efforts to promptly effect the registration of any of its securities under the Securities Act, the Company will:
(a) use its best efforts diligently to prepare and file with the Commission a registration statement on the appropriate
form under the Securities Act with respect to such securities, which form shall comply as to form in all material respects with
the requirements of the applicable form and include all financial statements required by the Commission to be filed therewith,
and use its best efforts to cause such registration statement to become and remain effective until completion of the proposed offering;
(b) use
its best efforts to diligently prepare and file with the Commission such amendments and supplements to such registration statement
and the prospectus used in connection therewith as may be necessary to keep such registration statement effective until the Holder
or Holders have completed the distribution described in such registration statement and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all securities covered by such registration statement whenever the seller
or sellers of such securities shall desire to sell or otherwise dispose of the same, but only to the extent provided in this Agreement;
(c) furnish
to each selling holder and the underwriters, if any, such number of copies of such registration statement, any amendments thereto,
any documents incorporated by reference therein, the prospectus, including a preliminary prospectus, in conformity with the requirements
of the Securities Act, and such other documents as such selling holder may reasonably request in order to facilitate the public
sale or other disposition of the securities owned by such selling holder;
(d) use
its best efforts to register or qualify the securities covered by such registration statement under such other securities or state
blue sky laws of such jurisdictions as each selling holder shall request, and do any and all other acts and things which may be
necessary under such securities or blue sky laws to enable such selling holder to consummate the public sale or other disposition
in such jurisdictions of the securities owned by such selling holder, except that the Company shall not for any such purpose be
required to qualify to do business as a foreign corporation in any jurisdiction wherein it is not so qualified;
(e) within
a reasonable time before each filing of the registration statement or prospectus or amendments or supplements thereto with the
Commission, furnish to counsel selected by the holders of Registrable Securities copies of such documents proposed to be filed,
which documents shall be subject to the approval of such counsel;
(f) immediately
notify each selling holder of Registrable Securities, such selling holder’s counsel and any underwriter and (if requested
by any such Person) confirm such notice in writing, of the happening of any event which makes any statement made in the registration
statement or related prospectus untrue or which requires the making of any changes in such registration statement or prospectus
so that they will not contain any untrue statement of a material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein in the light of the circumstances under which they were made not misleading;
and, as promptly as practicable thereafter, prepare and file with the Commission and furnish a supplement or amendment to such
prospectus so that, as thereafter deliverable to the purchasers of such Registrable Securities, such prospectus will not contain
any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading;
(g) use
its best efforts to prevent the issuance of any order suspending the effectiveness of a registration statement, and if one is
issued use its best efforts to obtain the withdrawal of any order suspending the effectiveness of a registration statement at
the earliest possible moment;
(h) if
requested by the managing underwriter or underwriters (if any), any selling holder, or such selling holder’s counsel, promptly
incorporate in a prospectus supplement or post effective amendment such information as such Person requests to be included therein,
including, without limitation, with respect to the securities being sold by such selling holder to such underwriter or underwriters,
the purchase price being paid therefor by such underwriter or underwriters and with respect to any other terms of an underwritten
offering of the securities to be sold in such offering, and promptly make all required filings of such prospectus supplement or
post effective amendment;
(i) make
available to each selling holder, any underwriter participating in any disposition pursuant to a registration statement, and any
attorney, accountant or other agent or representative retained by any such selling holder or underwriter (collectively, the “Inspectors”),
all financial and other records, pertinent corporate documents and properties of the Company (collectively, the “Records”),
as shall be reasonably necessary to enable them to exercise their due diligence responsibility, and cause the Company’s
officers, directors and employees to supply all information requested by any such Inspector in connection with such registration
statement;
(j) enter into any reasonable underwriting agreement required by the proposed underwriter(s) for the selling holders,
if any, and use its best efforts to facilitate the public offering of the securities;
(k) furnish
to each prospective selling holder a signed counterpart, addressed to the prospective selling holder, of (A) an opinion of counsel
for the Company, dated the effective date of the registration statement, and (B) a “comfort” letter signed by the
independent public accountants who have certified the Company’s financial statements included in the registration statement,
covering substantially the same matters with respect to the registration statement (and the prospectus included therein) and (in
the case of the accountants’ letter) with respect to events subsequent to the date of the financial statements, as are customarily
covered (at the time of such registration) in opinions of the Company’s counsel and in accountants’ letters delivered
to the underwriters in underwritten public offerings of securities;
(l) cause
the securities covered by such registration statement to be listed on the securities exchange or quoted on the quotation system
on which the Common Stock of the Company is then listed or quoted (or if the Common Stock is not yet listed or quoted, then on
such exchange or quotation system as the selling holders of Registrable Securities and the Company shall determine);
(m) otherwise
use its best efforts to comply with all applicable rules and regulations of the Commission and make generally available to its
security holders, in each case as soon as practicable, but not later than 30 days after the close of the period covered thereby,
an earnings statement of the Company which will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 thereunder
(or any comparable successor provisions);
(n) otherwise
cooperate with the underwriter(s), the Commission and other regulatory agencies and take all actions and execute and deliver or
cause to be executed and delivered all documents necessary to effect the registration of any securities under this Agreement;
and
(o) during
the period when the prospectus is required to be delivered under the Securities Act, promptly file all documents required to be
filed with the Commission pursuant to Sections 13(a), 13(c), 14, or 15(d) of the Exchange Act.
6. Expenses. All expenses incurred by the Company or the Investors in effecting the registrations provided for in Sections
2 and 4, including, without limitation, all registration and filing fees, printing expenses, fees and disbursements of counsel
for the Company, and one counsel (which such counsel’s fees and disbursements shall be in an amount not to exceed $75,000
per registration) for the Investors participating in such registration as a group (selected by the holders of a majority of the
Registrable Securities who participate in the registration), underwriting expenses (other than fees, commissions or discounts),
expenses of any audits incident to or required by any such registration and expenses of complying with the securities or blue sky
laws of any jurisdictions (all of such expenses referred to as “Registration Expenses”), shall be paid by the Company.
All expenses incurred by the Investors in effecting the registrations provided for in Section 3 shall be paid by the Investors.
7. Indemnification.
(a) The
Company shall indemnify and hold harmless each Investor that is a selling holder of Registrable Securities (including its partners
(including partners of partners and shareholders of such partners)), each underwriter (as defined in the Securities Act), and
directors, officers, employees and agents of any of them, and each other Person who participates in the offering of such securities
and each other Person, if any, who controls (within the meaning of the Securities Act) such seller, underwriter or participating
Person (individually and collectively, the “Indemnified Person”) against any losses, claims, damages or liabilities
(collectively, the “liability”), joint or several, to which such Indemnified Person may become subject under the Securities
Act or any other statute or at common law, insofar as such liability (or action in respect thereof) arises out of or is based
upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any
registration statement under which such securities were registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein, or any amendment or supplement thereto, or (ii) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violation
by the Company of the Securities Act, any state securities or “blue sky” laws or any sale or regulation thereunder
in connection with such registration. Except as otherwise provided in Section 7(d), the Company shall reimburse each such Indemnified
Person in connection with investigating or defending any such liability; provided, however, that the Company shall not be liable
to any Indemnified Person in any such case to the extent that any such liability arises out of or is based upon any untrue statement
or alleged untrue statement or omission or alleged omission made in such registration statement, preliminary or final prospectus,
or amendment or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by
such Person specifically for use therein; and provided further, that the Company shall not be required to indemnify any Person
against any liability arising from any untrue or misleading statement or omission contained in any preliminary prospectus if such
deficiency is corrected in the final prospectus or for any liability which arises out of the failure of any Person to deliver
a prospectus as required by the Securities Act regardless of any investigation made by or on behalf of such Indemnified Person
and shall survive transfer of such securities by such seller.
(b) Each
Investor holding of any securities included in such registration being effected shall indemnify and hold harmless each other selling
holder of any securities, the Company, its directors and officers, each underwriter and each other Person, if any, who controls
(within the meaning of the Securities Act) the Company or such underwriter (individually and collectively also the “Indemnified
Person”), against any liability, joint or several, to which any such Indemnified Person may become subject under the Securities
Act or any other statute or at common law, insofar as such liability (or actions in respect thereof) arises out of or is based
upon (i) any untrue statement or alleged untrue statement of any material fact contained, on the effective date thereof, in any
registration statement under which securities were registered under the Securities Act at the request of such selling Investor,
any preliminary prospectus or final prospectus contained therein, or any amendment or supplement thereto, or (ii) any omission
or alleged omission by such selling Investor to state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, in the case of (i) and (ii) to the extent, but only to the extent, that such untrue statement
or alleged untrue statement or omission or alleged omission was made in such registration statement, preliminary or final prospectus,
amendment or supplement thereto in reliance upon and in conformity with information furnished in writing to the Company by such
selling Investor specifically for use therein regarding itself or the Registrable Securities held by it. Such selling Investor
shall reimburse any Indemnified Person for any legal fees incurred in investigating or defending any such liability; provided,
however, that in no event shall the liability of any Investor for indemnification under this Section 7 in its capacity as a seller
of Registrable Securities exceed the lesser of (i) that proportion of the total of such losses, claims, damages, expenses or liabilities
indemnified against equal to the proportion of the total securities sold under such registration statement which is being held
by such Investor, or (ii) the amount equal to the net proceeds to such Investor of the securities sold in any such registration;
and provided further, however, that no selling Investor shall be required to indemnify any Person against any liability arising
from any untrue or misleading statement or omission contained in any preliminary prospectus if such deficiency is corrected in
the final prospectus or for any liability which arises out of the failure of any Person to deliver a prospectus as required by
the Securities Act.
(c) Indemnification
similar to that specified in Sections 7(a) and (b) shall be given by the Company and each selling holder (with such modifications
as may be appropriate) with respect to any required registration or other qualification of their securities under any federal
or state law or regulation of governmental authority other than the Securities Act.
(d) In
the event the Company, any selling holder or other Person receives a complaint, claim or other notice of any liability or action,
giving rise to a claim for indemnification under Sections 7(a), (b) or (c) above, the Person claiming indemnification under such
paragraphs shall promptly notify the Person against whom indemnification is sought of such complaint, notice, claim or action,
and such indemnifying Person shall have the right to investigate and defend any such loss, claim, damage, liability or action.
(e) If
the indemnification provided for in this Section 7 for any reason is held by a court of competent jurisdiction to be unavailable
to an Indemnified Person in respect of any losses, claims, damages expenses or liabilities referred to therein, then each indemnifying
party under this Section 7, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages, expenses or liabilities (i) in such proportion
as is appropriate to reflect the relative benefits received by the Company, the Investor, or Investors and the underwriters from
the offering of Registrable Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law,
in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative
fault of the Company, the other Investors and the underwriters in connection with the statements or omissions which resulted in
such losses, claims, damages expenses or liabilities, as well as any other relevant equitable considerations. The relative benefits
received by the Company, the Investors and the underwriters shall be deemed to be in the same respective proportions that the
net proceeds from the offering (before deducting expenses) received by the Company, the Investors, and the underwriting discount
received by the underwriters, in each case as set forth in the table on the cover page of the applicable prospectus, bear to the
aggregate public offering price of the Registrable Securities. The relative fault of the Company, the Investors and the underwriters
shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or
the omission or alleged omission to state a material fact relates to information supplied by the Company, the Investors, or the
underwriters and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Company, the Investors
and the Underwriters agree that it would not be just and equitable if contribution to this Section 7 were determined by pro rata
or per capita allocation or by any other method of allocation which does not take account the equitable considerations referred
to in the immediately preceding paragraph. In no event, however, shall an Investor be required to contribute under this Section
7(e) in excess of the lesser of (i) that proportion of the total of such losses, claims, damages expenses or liabilities indemnified
against equal to the proportion of the total Registrable Securities sold under such registration statement which are being sold
by such Investor or (ii) the net proceeds received by such Investor from its sale of Registrable Securities under such registration
statement. No Person found guilty of fraudulent representation (within the meaning of Section 11(f) of the Securities Act) shall
be entitled to contribution from any person who was not found guilty of such fraudulent misrepresentation.
(f) The
amount paid by an indemnifying party or payable to an Indemnified Person as a result of the losses, claims, damages, expenses
and liabilities referred to in this Section 7 shall be deemed to include, subject to limitations set forth above, any legal or
other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or
claim, payable as the same are incurred. The indemnification and contribution provided for in this Section 7 will remain in full
force and effect regardless of any investigation made by or on behalf of the indemnified parties or any other officer, director,
employee, agent or controlling person of the indemnified parties. No indemnifying party, in the defense of any such claim or litigation,
shall enter into a consent or entry of any judgment or enter into a settlement without the consent of the Indemnified Person,
which consent will not be unreasonably withheld or delayed.
8. Compliance
with Rule 144. In the event that the Company (i) registers a class of securities under Section 12 of the Exchange Act or (ii)
shall commence to file reports under Section 13 or 15(d) of the Exchange Act, the Company will use its best efforts thereafter
to file with the Commission such information as is required under the Exchange Act for so long as there are holders of Registrable
Securities; and in such event, the Company shall use its best efforts to take all action as may be required as a condition to
the availability of Rule 144 under the Securities Act (or any comparable successor rules). The Company shall furnish to any holder
of Registrable Securities upon request a written statement executed by the Company as to the steps it has taken to comply with
the current public information requirement of Rule 144 (or such comparable successor rules). After the occurrence of the first
underwritten public offering of Common Stock of the Company pursuant to an offering registered under the Securities Act on Form
S-1 (or any comparable successor forms), subject to the limitations on transfers imposed by this Agreement, the Company shall
use its best efforts to facilitate and expedite transfers of Registrable Securities pursuant to Rule 144 under the Securities
Act, which efforts shall include timely notice to its transfer agent to expedite such transfers of Registrable Securities.
9. Rule
144A Information. The Company shall, upon written request of any Investor, provide to such Investor and to any prospective institutional
transferee of the Common Stock designated by such Investor, such financial and other information as is available to the Company
or can be obtained by the Company without material expense and as such Investor may reasonably determine is required to permit
such transfer to comply with the requirements of Rule 144A promulgated under the Securities Act.
10. Amendments.
The provisions of this Agreement may be amended, and the Company may take any action herein prohibited or omit to perform any
act herein required to be performed by it, only if the Company has obtained the written consent of the holders of a majority of
the Registrable Securities. For the purposes of this Agreement and all agreements executed pursuant hereto, no course of dealing
between or among any of the parties hereto and no delay on the part of any party hereto in exercising any rights hereunder or
thereunder shall operate as a waiver of the rights hereof and thereof.
11. Postponement.
The Company may postpone the filing of any registration statement required hereunder for a reasonable period of time, not to exceed
ninety (90) days in the aggregate during any twelve month period, if the Company has been advised by legal counsel that such filing
would require a special audit or the disclosure of a material impending transaction or other matter and the Company’s Board
of Directors determines reasonably and in good faith that such disclosure would have a material adverse effect on the Company
(a “Black Out Period”). Upon notice of the existence of a Black Out Period from the Company to any Investor or Investors
with respect to any registration statement already effective, such Investor or Investors shall refrain from selling their Registrable
Securities under such registration statement until such Black Out Period has ended; provided, however, that the Company shall
not impose a Black Out Period with respect to any registration statement that is already effective more than once during any period
of twelve (12) consecutive months and in no event shall such Black Out Period exceed sixty (60) days.
12. Market
Stand Off. Each Investor hereby agrees that it will not, without the prior written consent of the managing underwriter, during
the period commencing on the date of the final prospectus relating to the registration by the Company of shares of its Common
Stock or any other equity securities under the Securities Act on a registration statement on Form S-1 or Form S-3, and ending
on the date specified by the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days in
the case of the IPO, or such other period as may be requested by the Company or an underwriter to accommodate regulatory restrictions
on (1) the publication or other distribution of research reports and (2) analyst recommendations and opinions, including, but
not limited to, the restrictions contained in FINRA Rule 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments
thereto), (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract
to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares
of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock (whether
such shares or any such securities are then owned by the Investor or are thereafter acquired) or (ii) enter into any swap or other
arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of such securities,
whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities,
in cash, or otherwise. The foregoing provisions of this Section 12 shall not apply to the sale of any shares to an underwriter
pursuant to an underwriting agreement, and shall be applicable to the Investors only if all officers and directors are subject
to the same restrictions and the Company uses commercially reasonable efforts to obtain a similar agreement from all stockholders
individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion
into Common Stock of all outstanding Preferred Stock). Any discretionary waiver or termination of the restrictions of any or all
of such agreements by the Company or the underwriters shall apply pro rata to all stockholders that are subject to such agreements,
based on the number of shares subject to such agreements. The underwriters in connection with such registration are intended third
party beneficiaries of this Section 12 and shall have the right, power, and authority to enforce the provisions hereof as though
they were a party hereto. Each Investor further agrees to execute such agreements as may be reasonably requested by the underwriters
in connection with such registration that are consistent with this Section 12 or that are necessary to give further effect thereto.
13. Transferability
of Registration Rights. The registration rights set forth in this Agreement are transferable to each transferee of Registrable
Securities. Each subsequent holder of Registrable Securities must consent in writing to be bound by the terms and conditions of
this Agreement in order to acquire the rights granted pursuant to this Agreement.
14. Rights
Which May Be Granted to Subsequent Investors. Other than permitted transferees of Registrable Securities under this Section, the
Company shall not, without the prior written consent of holders of a majority of the Series A Preferred Stock, Series B Preferred
Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock, voting together as a single class, (a)
allow purchasers of the Company’s securities to become a party to this Agreement or (b) grant any other registration rights
other than any incidental or so called piggyback registration rights to any third parties that are not inconsistent with the terms
of this Agreement.
15. Damages.
The Company recognizes and agrees that each holder of Registrable Securities will not have an adequate remedy if the Company fails
to comply with the terms and provisions of this Agreement and that damages will not be readily ascertainable, and the Company
expressly agrees that, in the event of such failure, it shall not oppose an application by any holder of Registrable Securities
or any other Person entitled to the benefits of this Agreement requiring specific performance of any and all provisions hereof
or enjoining the Company from continuing to commit any such breach of this Agreement.
16. Miscellaneous.
(a) Notices.
All notices, requests, demands and other communications provided for hereunder shall be in writing and mailed (by first class
registered or certified mail, postage prepaid), emailed, sent by express overnight courier service or electronic facsimile transmission
(with a copy by mail), or delivered to the applicable party at the addresses indicated below:
To
the Company: 908 Devices Inc.
645 Summer Street
Boston, MA 02210 Attn: Kevin
Knopp Phone: (978) 729-4478
Email:
kjknopp@908devices.com
With a copy to: Goodwin Procter LLP
100 Northern Avenue
Boston, MA 02210
Attn: Mark J. Macenka
Phone: (617) 570-1145
Fax: (617) 801-8610
Email: mmacenka@goodwinlaw.com
If to the Investors: At the addresses,
facsimile numbers or email addresses shown on the signature pages hereto
If to any other holder of Registrable Securities:
At such Person’s address for notice as set forth in the books and records of the Company or, as to each of the foregoing,
at such other address as shall be designated by such Person in a written notice to other parties complying as to delivery with
the terms of this subsection (a). All such notices, requests, demands and other communications shall, when mailed, telegraphed
or sent, respectively, be effective (i) two days after being deposited in the mails or (ii) one day after being delivered to the
telegraph company, deposited with the express overnight courier service or sent by electronic facsimile transmission, respectively,
addressed as aforesaid.
(b) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state
of Delaware, without giving effect to conflict of laws principles thereof.
(c)
Dispute Resolution.
(i) The
parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the courts of the State of Delaware and the United
States District Court for the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based
upon this Agreement; (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement
except in the courts of the State of Delaware or the United States District Court for the District of Delaware; and (c) hereby
waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim
that it is not subject personally to the jurisdiction of the above named courts, that its property is exempt or immune from attachment
or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding
is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
(ii)
EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE
COMPLICATED AND DIFFICULT ISSUES AND, THEREFORE, EACH SUCH PARTY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT IT MAY HAVE TO
A TRIAL BY JURY IN RESPECT OF ANY LEGAL ACTION ARISING OUT OF OR RELATING TO THIS AGREEMENT. EACH PARTY TO THIS AGREEMENT CERTIFIES
AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD
NOT SEEK TO ENFORCE THE FOREGOING WAIVER IN THE EVENT OF A LEGAL ACTION, (B) SUCH PARTY HAS CONSIDERED THE IMPLICATIONS OF THIS
WAIVER, (C) SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG
OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
(d) Counterparts.
This Agreement may be executed in two or more facsimile counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(e) Severability.
If any provision of this Agreement shall be held to be illegal, invalid or unenforceable, such illegality, invalidity or unenforceability
shall attach only to such provision and shall not in any manner affect or render illegal, invalid or unenforceable any other provision
of this Agreement, and this Agreement shall be carried out as if any such illegal, invalid or unenforceable provision were not
contained herein.
(f) Integration. This Agreement, including the exhibits, documents and instruments referred to herein or therein,
constitutes the entire agreement among the parties with respect to the subject matter.
(g) Entire
Agreement. By executing this Agreement, the undersigned Investors who are also parties to the Prior Agreement, representing
the holders of a majority of the Registrable Securities, hereby amend and restate the Prior Agreement in its entirety as set forth
in this Agreement.
[SIGNATURE PAGE FOLLOWS]
IN WITNESS
WHEREOF, the parties hereto have caused this Registration Rights Agreement to be duly executed as of the date first set forth
above.
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COMPANY:
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908 DEVICES INC.
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/s/
Kevin Knopp
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Name: Kevin Knopp
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Title: President
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[Signature
Page to Registration Rights Agreement]
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INVESTORS:
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NORTHPOND VENTURES, LP
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By: Northpond Ventures GP, its general partner
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By:
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/s/ Patrick Smerkers
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Name Patrick Smerkers
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Title: Director of Finance and Operations
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Address for notices:
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Attn: Northpond Ventures, LP
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7500 Old Georgetown Road
Suite 850
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Bethesda, Maryland 20814
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Attn: Patrick Smerkers
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With a copy (which shall not constitute notice) to:
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Ropes & Gray LLP
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Prudential Tower
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800 Boylston Street
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Boston, MA 02199
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Attn: Joel Freedman
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Facsimile: (617) 235-0375
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[Signature
Page to Registration Rights Agreement]
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INVESTORS:
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Martin Madaus GST Trust
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By:
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/s/ Chip Martin
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Name:
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Chip Martin
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Title:
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Trustee
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Address for notices:
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[Signature
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INVESTORS:
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/s/ David R. Walt
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Name: David R. Walt
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[Signature
Page to Registration Rights Agreement]
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INVESTORS:
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The Barthelemy 2001 Trust
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/s/ Nicolas Barthelemy
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Name:
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Nicolas Barthelemy
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Title:
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[Signature
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INVESTORS:
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TAO INVEST IV LLC
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By:
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/s/ Nicholas J. Pritzker
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Name: Nicholas J. Pritzker
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Title: Chairman
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[Signature
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INVESTORS:
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TAO INVEST III LLC
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By:
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/s/ Nicholas J. Pritzker
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Name: Nicholas J. Pritzker
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Title: Chairman
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[Signature
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INVESTORS:
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ARCH VENTURE FUND VII, L.P.
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By:
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ARCH Venture Partners VII, L.P.,
its General Partner
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By:
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ARCH Venture Partners VII, LLC,
its General Partner
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By:
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/s/ Keith Crandell
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Name: Keith Crandell
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Title: Managing Director
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[Signature
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INVESTORS:
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RAZOR’S EDGE FUND, LP
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By: Razor’s Edge Ventures, LLC, its General Partner
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By:
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/s/ Mark D Spoto
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Name: Mark Spoto
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Title: Managing Director
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RE SIDECAR 4, LLC
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By:
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/s/ Mark D Spoto
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Name: Mark Spoto
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Title: Managing Director
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YODABYTE INVESTMENTS, LLC
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By:
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/s/ Mark D Spoto
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Name: Mark Spoto
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Title: Managing Director
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[Signature
Page to Registration Rights Agreement]
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INVESTORS:
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SAEV Guernsey Holdings Limited
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By:
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/s/ Majid Mufti
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Name: Majid Mufti
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Title: Chief Executive Officer
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[Signature
Page to Registration Rights Agreement]
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INVESTORS:
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/s/ Kevin J. Knopp
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Kevin Knopp
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[Signature
Page to Registration Rights Agreement]
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INVESTORS:
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E. Kevin Hrusovsky 2012 Irrevocable Trust
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By:
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/s/
E. Kevin Hrusovsky
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Name: Kevin Hrusovsky
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Title: Trustee
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[Signature
Page to Registration Rights Agreement]
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INVESTORS:
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/s/
E. Kevin Hrusovsky
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Kevin Hrusovsky
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[Signature
Page to Registration Rights Agreement]
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INVESTORS:
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CASDIN PARTNERS MASTER FUND LP
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/s/ Eli
Casdin
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Name: Eli Casdin
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Title: Chief Investment Officer
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[Signature
Page to Registration Rights Agreement]
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INVESTORS:
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Sands Capital Life Sciences Pulse Fund,
L.P.
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By: Sands Capital Life Sciences Pulse Fund-GP,
L.P., its general partner
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By: Sands Capital Life Sciences Pulse Fund-GP, LLC, its general
partner
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By:
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/s/
Jonathan Goodman
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Name: Jonathan Goodman
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Title: General Counsel
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[Signature
Page to Registration Rights Agreement]
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INVESTORS:
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SCHLUMBERGER TECHNOLOGY CORPORATION
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By:
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/s/
Chad Peterson ,v
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Name: Chad
Peterson ,v
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Title: NAL
WP
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[Signature
Page to Registration Rights Agreement)
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INVESTORS:
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PEI Investments, LLC
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By:
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/s/
Peter Andrew Pappas
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Name: Peter Andrew Pappas
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Title : Manager
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[Signature
Page to Registration Rights Agreement)
Exhibit 10.2
908 DEVICES INC.
2020 STOCK OPTION AND INCENTIVE PLAN
SECTION 1. GENERAL
PURPOSE OF THE PLAN; DEFINITIONS
The name of the plan is the 908 Devices
Inc. 2020 Stock Option and Incentive Plan (as amended from time to time, the “Plan”). The purpose of the Plan is to
encourage and enable the officers, employees, Non-Employee Directors and Consultants of 908 Devices Inc. (the “Company”)
and its Affiliates upon whose judgment, initiative and efforts the Company largely depends for the successful conduct of its business
to acquire a proprietary interest in the Company. It is anticipated that providing such persons with a direct stake in the Company’s
welfare will assure a closer identification of their interests with those of the Company and its stockholders, thereby stimulating
their efforts on the Company’s behalf and strengthening their desire to remain with the Company.
The following terms shall be defined as
set forth below:
“Act” means the Securities
Act of 1933, as amended, and the rules and regulations thereunder.
“Administrator” means
either the Board or the compensation committee of the Board or a similar committee performing the functions of the compensation
committee and which is comprised of not less than two Non-Employee Directors who are independent.
“Affiliate” means, at
the time of determination, any “parent” or “subsidiary” of the Company as such terms are defined in Rule 405
of the Act. The Board will have the authority to determine the time or times at which “parent” or “subsidiary”
status is determined within the foregoing definition.
“Award” or “Awards,”
except where referring to a particular category of grant under the Plan, shall include Incentive Stock Options, Non-Qualified Stock
Options, Stock Appreciation Rights, Restricted Stock Units, Restricted Stock Awards, Unrestricted Stock Awards, Cash-Based Awards,
and Dividend Equivalent Rights.
“Award Certificate” means
a written or electronic document setting forth the terms and provisions applicable to an Award granted under the Plan. Each Award
Certificate is subject to the terms and conditions of the Plan.
“Board” means the Board
of Directors of the Company.
“Cash-Based Award” means
an Award entitling the recipient to receive a cash-denominated payment.
“Code” means the Internal
Revenue Code of 1986, as amended, and any successor Code, and related rules, regulations and interpretations.
“Consultant” means a
consultant or adviser who provides bona fide services to the Company or an Affiliate as an independent contractor and who
qualifies as a consultant or advisor under Instruction A.1.(a)(1) of Form S-8 under the Act.
“Dividend Equivalent Right”
means an Award entitling the grantee to receive credits based on ordinary cash dividends that would have been paid on the shares
of Stock specified in the Dividend Equivalent Right (or other award to which it relates) if such shares had been issued to and
held by the grantee.
“Effective Date” means
the date on which the Plan becomes effective as set forth in Section 19.
“Exchange Act” means
the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder.
“Fair Market Value” of
the Stock on any given date means the fair market value of the Stock determined in good faith by the Administrator; provided, however,
that if the Stock is listed on the National Association of Securities Dealers Automated Quotation System (“NASDAQ”),
NASDAQ Global Market, The New York Stock Exchange or another national securities exchange or traded on any established market,
the determination shall be made by reference to market quotations. If there are no market quotations for such date, the determination
shall be made by reference to the last date preceding such date for which there are market quotations; provided further, however,
that if the date for which Fair Market Value is determined is the Registration Date, the Fair Market Value shall be the “Price
to the Public” (or equivalent) set forth on the cover page for the final prospectus relating to the Company’s
initial public offering.
“Incentive Stock Option”
means any Stock Option designated and qualified as an “incentive stock option” as defined in Section 422 of the
Code.
“Non-Employee Director”
means a member of the Board who is not also an employee of the Company or any Subsidiary.
“Non-Qualified Stock Option”
means any Stock Option that is not an Incentive Stock Option.
“Option” or “Stock
Option” means any option to purchase shares of Stock granted pursuant to Section 5.
“Registration Date” means
the date upon which the registration statement on Form S-1 that is filed by the Company with respect to its initial public
offering is declared effective by the Securities and Exchange Commission.
“Restricted Shares” means
the shares of Stock underlying a Restricted Stock Award that remain subject to a risk of forfeiture or the Company’s right
of repurchase.
“Restricted Stock Award”
means an Award of Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time
of grant.
“Restricted Stock Units”
means an Award of stock units subject to such restrictions and conditions as the Administrator may determine at the time of grant.
“Sale Event” means (i) the
sale of all or substantially all of the assets of the Company on a consolidated basis to an unrelated person or entity, (ii) a
merger, reorganization or consolidation pursuant to which the holders of the Company’s outstanding voting power and outstanding
stock immediately prior to such transaction do not own a majority of the outstanding voting power and outstanding stock or other
equity interests of the resulting or successor entity (or its ultimate parent, if applicable) immediately upon completion of such
transaction, (iii) the sale of all of the Stock of the Company to an unrelated person, entity or group thereof acting in concert,
or (iv) any other transaction in which the owners of the Company’s outstanding voting power immediately prior to such
transaction do not own at least a majority of the outstanding voting power of the Company or any successor entity immediately upon
completion of the transaction other than as a result of the acquisition of securities directly from the Company.
“Sale Price” means the
value as determined by the Administrator of the consideration payable, or otherwise to be received by stockholders, per share of
Stock pursuant to a Sale Event.
“Section 409A” means
Section 409A of the Code and the regulations and other guidance promulgated thereunder.
“Service Relationship” means
any relationship as an employee, director or Consultant of the Company or any Affiliate (e.g., a Service Relationship shall be
deemed to continue without interruption in the event an individual’s status changes from full-time employee to part-time
employee or Consultant).
“Stock” means the Common
Stock, par value $0.001 per share, of the Company, subject to adjustments pursuant to Section 3.
“Stock Appreciation Right”
means an Award entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable
Award Certificate) having a value equal to the excess of the Fair Market Value of the Stock on the date of exercise over the exercise
price of the Stock Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock Appreciation
Right shall have been exercised.
“Subsidiary” means any
corporation or other entity (other than the Company) in which the Company has at least a 50 percent interest, either directly or
indirectly.
“Ten Percent Owner” means
an employee who owns or is deemed to own (by reason of the attribution rules of Section 424(d) of the Code) more
than 10 percent of the combined voting power of all classes of stock of the Company or any parent or subsidiary corporation.
“Unrestricted Stock Award”
means an Award of shares of Stock free of any restrictions.
SECTION 2. ADMINISTRATION
OF PLAN; ADMINISTRATOR AUTHORITY TO SELECT GRANTEES AND DETERMINE AWARDS
(a) Administration
of Plan. The Plan shall be administered by the Administrator.
(b) Powers
of Administrator. The Administrator shall have the power and authority to grant Awards consistent with the terms of the Plan,
including the power and authority:
(i) to
select the individuals to whom Awards may from time to time be granted;
(ii) to
determine the time or times of grant, and the extent, if any, of Incentive Stock Options, Non-Qualified Stock Options, Stock Appreciation
Rights, Restricted Stock Awards, Restricted Stock Units, Unrestricted Stock Awards, Cash-Based Awards, and Dividend Equivalent
Rights, or any combination of the foregoing, granted to any one or more grantees;
(iii) to
determine the number of shares of Stock to be covered by any Award;
(iv) to
determine and modify from time to time the terms and conditions, including restrictions, not inconsistent with the terms of the
Plan, of any Award, which terms and conditions may differ among individual Awards and grantees, and to approve the forms of Award
Certificates;
(v) to
accelerate at any time the exercisability or vesting of all or any portion of any Award;
(vi) subject
to the provisions of Section 5(c) or Section 6(d), as applicable, to extend at any time the period in which Stock
Options and Stock Appreciation Rights may be exercised; and
(vii) at
any time to adopt, alter and repeal such rules, guidelines and practices for administration of the Plan and for its own acts and
proceedings as it shall deem advisable; to interpret the terms and provisions of the Plan and any Award (including related written
instruments); to make all determinations it deems advisable for the administration of the Plan; to decide all disputes arising
in connection with the Plan; and to otherwise supervise the administration of the Plan.
All decisions and interpretations of the
Administrator shall be binding on all persons, including the Company and Plan grantees.
(c) Delegation
of Authority to Grant Awards. Subject to applicable law, the Administrator, in its discretion, may delegate to a committee
consisting of one or more officers of the Company, including the Chief Executive Officer of the Company, all or part of the Administrator’s
authority and duties with respect to the granting of Awards to individuals who are (i) not subject to the reporting and other
provisions of Section 16 of the Exchange Act and (ii) not members of the delegated committee. Any such delegation by
the Administrator shall include a limitation as to the amount of Stock underlying Awards that may be granted during the period
of the delegation and shall contain guidelines as to the determination of the exercise price and the vesting criteria. The Administrator
may revoke or amend the terms of a delegation at any time but such action shall not invalidate any prior actions of the Administrator’s
delegate or delegates that were consistent with the terms of the Plan.
(d) Award
Certificate. Awards under the Plan shall be evidenced by Award Certificates that set forth the terms, conditions and limitations
for each Award which may include, without limitation, the term of an Award and the provisions applicable in the event employment
or service terminates.
(e) Indemnification.
Neither the Board nor the Administrator, nor any member of either or any delegate thereof, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in connection with the Plan, and the members of the Board and
the Administrator (and any delegate thereof) shall be entitled in all cases to indemnification and reimbursement by the Company
in respect of any claim, loss, damage or expense (including, without limitation, reasonable attorneys’ fees) arising or resulting
therefrom to the fullest extent permitted by law and/or under the Company’s articles or bylaws or any directors’ and
officers’ liability insurance coverage which may be in effect from time to time and/or any indemnification agreement between
such individual and the Company.
(f) Foreign
Award Recipients. Notwithstanding any provision of the Plan to the contrary, in order to comply with the laws in other countries
in which the Company and its Subsidiaries operate or have employees or other individuals eligible for Awards, the Administrator,
in its sole discretion, shall have the power and authority to: (i) determine which Subsidiaries shall be covered by the Plan;
(ii) determine which individuals outside the United States are eligible to participate in the Plan; (iii) modify the
terms and conditions of any Award granted to individuals outside the United States to comply with applicable foreign laws; (iv) establish
subplans and modify exercise procedures and other terms and procedures, to the extent the Administrator determines such actions
to be necessary or advisable (and such subplans and/or modifications shall be attached to this Plan as appendices); provided, however,
that no such subplans and/or modifications shall increase the share limitations contained in Section 3(a) hereof; and
(v) take any action, before or after an Award is made, that the Administrator determines to be necessary or advisable to obtain
approval or comply with any local governmental regulatory exemptions or approvals. Notwithstanding the foregoing, the Administrator
may not take any actions hereunder, and no Awards shall be granted, that would violate the Exchange Act or any other applicable
United States securities law, the Code, or any other applicable United States governing statute or law.
SECTION 3. STOCK
ISSUABLE UNDER THE PLAN; MERGERS; SUBSTITUTION
(a) Stock
Issuable. The maximum number of shares of Stock reserved and available for issuance under the Plan shall be 3,000,000 shares
(the “Initial Limit”), subject to adjustment as provided in this Section 3, plus on January 1, 2022 and each
January 1 thereafter, the number of shares of Stock reserved and available for issuance under the Plan shall be cumulatively
increased by (i) 4 percent of the number of shares of Stock issued and outstanding on the immediately preceding December 31
or (ii) such lesser number of shares as determined by the Administrator (the “Annual Increase”). Subject to such
overall limitation, the maximum aggregate number of shares of Stock that may be issued in the form of Incentive Stock Options shall
not exceed the Initial Limit, cumulatively increased on January 1, 2022 and each January 1 thereafter by the lesser of
the Annual Increase for such year or 2,000,000 shares of Stock, subject in all cases to adjustment as provided in Section 3.
For purposes of this limitation, the shares of Stock underlying any awards under the Plan and under the Company’s 2012 Stock
Option and Grant Plan, as amended, that are forfeited, canceled, held back upon exercise of an option or settlement of an award
to cover the exercise price or tax withholding, reacquired by the Company prior to vesting, satisfied without the issuance of Stock
or otherwise terminated (other than by exercise) shall be added back to the shares of Stock available for issuance under the Plan
and, to the extent permitted under Section 422 of the Code and the regulations promulgated thereunder, the shares of Stock
that may be issued as Incentive Stock Options. In the event the Company repurchases shares of Stock on the open market, such shares
shall not be added to the shares of Stock available for issuance under the Plan. Subject to such overall limitations, shares of
Stock may be issued up to such maximum number pursuant to any type or types of Award. The shares available for issuance under the
Plan may be authorized but unissued shares of Stock or shares of Stock reacquired by the Company.
(b) Changes
in Stock. Subject to Section 3(c) hereof, if, as a result of any reorganization, recapitalization, reclassification,
stock dividend, extraordinary cash dividend, stock split, reverse stock split or other similar change in the Company’s capital
stock, the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or
other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash
assets are distributed with respect to such shares of Stock or other securities, or, if, as a result of any merger or consolidation,
sale of all or substantially all of the assets of the Company, the outstanding shares of Stock are converted into or exchanged
for securities of the Company or any successor entity (or a parent or subsidiary thereof), the Administrator shall make an appropriate
or proportionate adjustment in (i) the maximum number of shares reserved for issuance under the Plan, including the maximum
number of shares that may be issued in the form of Incentive Stock Options, (ii) the number and kind of shares or other securities
subject to any then outstanding Awards under the Plan, (iii) the repurchase price, if any, per share subject to each outstanding
Restricted Stock Award, and (iv) the exercise price for each share subject to any then outstanding Stock Options and Stock
Appreciation Rights under the Plan, without changing the aggregate exercise price (i.e., the exercise price multiplied by the number
of shares subject to Stock Options and Stock Appreciation Rights) as to which such Stock Options and Stock Appreciation Rights
remain exercisable. The Administrator shall also make equitable or proportionate adjustments in the number of shares subject to
outstanding Awards and the exercise price and the terms of outstanding Awards to take into consideration cash dividends paid other
than in the ordinary course or any other extraordinary corporate event. The adjustment by the Administrator shall be final, binding
and conclusive. No fractional shares of Stock shall be issued under the Plan resulting from any such adjustment, but the Administrator
in its discretion may make a cash payment in lieu of fractional shares.
(c) Mergers
and Other Transactions. In the case of and subject to the consummation of a Sale Event, the parties thereto may cause the assumption
or continuation of Awards theretofore granted by the successor entity, or the substitution of such Awards with new Awards of the
successor entity or parent thereof, with appropriate adjustment as to the number and kind of shares and, if appropriate, the per
share exercise prices, as such parties shall agree. To the extent the parties to such Sale Event do not provide for the assumption,
continuation or substitution of Awards, upon the effective time of the Sale Event, the Plan and all outstanding Awards granted
hereunder shall terminate. In such case, except as may be otherwise provided in the relevant Award Certificate, all Awards with
time-based vesting, conditions or restrictions shall become fully vested and exercisable or nonforfeitable as of the effective
time of the Sale Event, and all Awards with conditions and restrictions relating to the attainment of performance goals may become
vested and exercisable or nonforfeitable in connection with a Sale Event in the Administrator’s discretion or to the extent
specified in the relevant Award Certificate. In the event of such termination, (i) the Company shall have the option (in its
sole discretion) to make or provide for a payment, in cash or in kind, to the grantees holding Options and Stock Appreciation Rights,
in exchange for the cancellation thereof, in an amount equal to the difference between (A) the Sale Price multiplied by the
number of shares of Stock subject to outstanding Options and Stock Appreciation Rights (to the extent then exercisable at prices
not in excess of the Sale Price) and (B) the aggregate exercise price of all such outstanding Options and Stock Appreciation
Rights (provided that, in the case of an Option or Stock Appreciation Right with an exercise price equal to or greater than the
Sale Price, such Option or Stock Appreciation Right shall be cancelled for no consideration); or (ii) each grantee shall be
permitted, within a specified period of time prior to the consummation of the Sale Event as determined by the Administrator, to
exercise all outstanding Options and Stock Appreciation Rights (to the extent then exercisable) held by such grantee. The Company
shall also have the option (in its sole discretion) to make or provide for a payment, in cash or in kind, to the grantees holding
other Awards in an amount equal to the Sale Price multiplied by the number of vested shares of Stock under such Awards.
SECTION 4. ELIGIBILITY
Grantees under the Plan will be such employees,
Non-Employee Directors and Consultants of the Company and its Affiliates as are selected from time to time by the Administrator
in its sole discretion; provided that Awards may not be granted to employees, Directors or Consultants who are providing services
only to any “parent” of the Company, as such term is defined in Rule 405 of the Act, unless (i) the stock
underlying the Awards is treated as “service recipient stock” under Section 409A or (ii) the Company, in
consultation with its legal counsel, has determined that such Awards are exempt from or otherwise comply with Section 409A.
SECTION 5. STOCK
OPTIONS
(a) Award
of Stock Options. The Administrator may grant Stock Options under the Plan. Any Stock Option granted under the Plan shall be
in such form as the Administrator may from time to time approve.
Stock Options granted under the Plan may
be either Incentive Stock Options or Non-Qualified Stock Options. Incentive Stock Options may be granted only to employees of the
Company or any Subsidiary that is a “subsidiary corporation” within the meaning of Section 424(f) of the
Code. To the extent that any Option does not qualify as an Incentive Stock Option, it shall be deemed a Non-Qualified Stock Option.
Stock Options granted pursuant to this Section 5
shall be subject to the following terms and conditions and shall contain such additional terms and conditions, not inconsistent
with the terms of the Plan, as the Administrator shall deem desirable. If the Administrator so determines, Stock Options may be
granted in lieu of cash compensation at the optionee’s election, subject to such terms and conditions as the Administrator
may establish.
(b) Exercise
Price. The exercise price per share for the Stock covered by a Stock Option granted pursuant to this Section 5 shall be
determined by the Administrator at the time of grant but shall not be less than 100 percent of the Fair Market Value on the date
of grant. In the case of an Incentive Stock Option that is granted to a Ten Percent Owner, the exercise price of such Incentive
Stock Option shall be not less than 110 percent of the Fair Market Value on the grant date. Notwithstanding the foregoing, Stock
Options may be granted with an exercise price per share that is less than 100 percent of the Fair Market Value on the date of grant
(i) pursuant to a transaction described in, and in a manner consistent with, Section 424(a) of the Code, (ii) to
individuals who are not subject to U.S. income tax on the date of grant or (iii) if the Stock Option is otherwise compliant
with Section 409A.
(c) Option
Term. The term of each Stock Option shall be fixed by the Administrator, but no Stock Option shall be exercisable more than
ten years after the date the Stock Option is granted. In the case of an Incentive Stock Option that is granted to a Ten Percent
Owner, the term of such Stock Option shall be no more than five years from the date of grant.
(d) Exercisability;
Rights of a Stockholder. Stock Options shall become exercisable at such time or times, whether or not in installments, as shall
be determined by the Administrator at or after the grant date. The Administrator may at any time accelerate the exercisability
of all or any portion of any Stock Option. An optionee shall have the rights of a stockholder only as to shares acquired upon the
exercise of a Stock Option and not as to unexercised Stock Options.
(e) Method
of Exercise. Stock Options may be exercised in whole or in part, by giving written or electronic notice of exercise to the
Company, specifying the number of shares to be purchased. Payment of the purchase price may be made by one or more of the following
methods except to the extent otherwise provided in the Award Certificate:
(i) In
cash, by certified or bank check or other instrument acceptable to the Administrator;
(ii) Through
the delivery (or attestation to the ownership following such procedures as the Company may prescribe) of shares of Stock that are
not then subject to restrictions under any Company plan. Such surrendered shares shall be valued at Fair Market Value on the exercise
date;
(iii) By
the optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions to a broker to
promptly deliver to the Company cash or a check payable and acceptable to the Company for the purchase price; provided that in
the event the optionee chooses to pay the purchase price as so provided, the optionee and the broker shall comply with such procedures
and enter into such agreements of indemnity and other agreements as the Company shall prescribe as a condition of such payment
procedure; or
(iv) With
respect to Stock Options that are not Incentive Stock Options, by a “net exercise” arrangement pursuant to which the
Company will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market
Value that does not exceed the aggregate exercise price.
Payment instruments will be received subject to collection.
The transfer to the optionee on the records of the Company or of the transfer agent of the shares of Stock to be purchased pursuant
to the exercise of a Stock Option will be contingent upon receipt from the optionee (or a purchaser acting in his stead in accordance
with the provisions of the Stock Option) by the Company of the full purchase price for such shares and the fulfillment of any other
requirements contained in the Award Certificate or applicable provisions of laws (including the satisfaction of any withholding
taxes that the Company is obligated to withhold with respect to the optionee). In the event an optionee chooses to pay the purchase
price by previously-owned shares of Stock through the attestation method, the number of shares of Stock transferred to the optionee
upon the exercise of the Stock Option shall be net of the number of attested shares. In the event that the Company establishes,
for itself or using the services of a third party, an automated system for the exercise of Stock Options, such as a system using
an internet website or interactive voice response, then the paperless exercise of Stock Options may be permitted through the use
of such an automated system.
(f) Annual
Limit on Incentive Stock Options. To the extent required for “incentive stock option” treatment under Section 422
of the Code, the aggregate Fair Market Value (determined as of the time of grant) of the shares of Stock with respect to which
Incentive Stock Options granted under this Plan and any other plan of the Company or its parent and subsidiary corporations become
exercisable for the first time by an optionee during any calendar year shall not exceed $100,000. To the extent that any Stock
Option exceeds this limit, it shall constitute a Non-Qualified Stock Option.
SECTION 6. STOCK
APPRECIATION RIGHTS
(a) Award
of Stock Appreciation Rights. The Administrator may grant Stock Appreciation Rights under the Plan. A Stock Appreciation Right
is an Award entitling the recipient to receive shares of Stock (or cash, to the extent explicitly provided for in the applicable
Award Certificate) having a value equal to the excess of the Fair Market Value of a share of Stock on the date of exercise over
the exercise price of the Stock Appreciation Right multiplied by the number of shares of Stock with respect to which the Stock
Appreciation Right shall have been exercised.
(b) Exercise
Price of Stock Appreciation Rights. The exercise price of a Stock Appreciation Right shall not be less than 100 percent of
the Fair Market Value of the Stock on the date of grant. Notwithstanding the foregoing, Stock Appreciation Rights may be granted
with an exercise price per share that is less than 100 percent of the Fair Market Value on the date of grant (i) pursuant
to a transaction described in, and in a manner consistent with, Section 424(a) of the Code, (ii) to individuals
who are not subject to U.S. income tax on the date of grant, or (iii) if the Stock Appreciation Right is otherwise compliant
with Section 409A
(c) Grant
and Exercise of Stock Appreciation Rights. Stock Appreciation Rights may be granted by the Administrator independently of any
Stock Option granted pursuant to Section 5 of the Plan.
(d) Terms
and Conditions of Stock Appreciation Rights. Stock Appreciation Rights shall be subject to such terms and conditions as shall
be determined on the date of grant by the Administrator. The term of a Stock Appreciation Right may not exceed ten years. The terms
and conditions of each such Award shall be determined by the Administrator, and such terms and conditions may differ among individual
Awards and grantees.
SECTION 7. RESTRICTED
STOCK AWARDS
(a) Nature
of Restricted Stock Awards. The Administrator may grant Restricted Stock Awards under the Plan. A Restricted Stock Award is
any Award of Restricted Shares subject to such restrictions and conditions as the Administrator may determine at the time of grant.
Conditions may be based on continuing employment (or other Service Relationship) and/or achievement of pre-established performance
goals and objectives.
(b) Rights
as a Stockholder. Upon the grant of the Restricted Stock Award and payment of any applicable purchase price, a grantee shall
have the rights of a stockholder with respect to the voting of the Restricted Shares and receipt of dividends; provided that if
the lapse of restrictions with respect to the Restricted Stock Award is tied to the attainment of performance goals, any dividends
paid by the Company during the performance period shall accrue and shall not be paid to the grantee until and to the extent the
performance goals are met with respect to the Restricted Stock Award. Unless the Administrator shall otherwise determine, (i) uncertificated
Restricted Shares shall be accompanied by a notation on the records of the Company or the transfer agent to the effect that they
are subject to forfeiture until such Restricted Shares are vested as provided in Section 7(d) below, and (ii) certificated
Restricted Shares shall remain in the possession of the Company until such Restricted Shares are vested as provided in Section 7(d) below,
and the grantee shall be required, as a condition of the grant, to deliver to the Company such instruments of transfer as the Administrator
may prescribe.
(c) Restrictions.
Restricted Shares may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of except as specifically
provided herein or in the Restricted Stock Award Certificate. Except as may otherwise be provided by the Administrator either in
the Award Certificate or, subject to Section 16 below, in writing after the Award is issued, if a grantee’s employment
(or other Service Relationship) with the Company and its Subsidiaries terminates for any reason, any Restricted Shares that have
not vested at the time of termination shall automatically and without any requirement of notice to such grantee from or other action
by or on behalf of, the Company be deemed to have been reacquired by the Company at their original purchase price (if any) from
such grantee or such grantee’s legal representative simultaneously with such termination of employment (or other Service
Relationship), and thereafter shall cease to represent any ownership of the Company by the grantee or rights of the grantee as
a stockholder. Following such deemed reacquisition of Restricted Shares that are represented by physical certificates, a grantee
shall surrender such certificates to the Company upon request without consideration.
(d) Vesting
of Restricted Shares. The Administrator at the time of grant shall specify the date or dates and/or the attainment of pre-established
performance goals, objectives and other conditions on which the non-transferability of the Restricted Shares and the Company’s
right of repurchase or forfeiture shall lapse. Subsequent to such date or dates and/or the attainment of such pre-established performance
goals, objectives and other conditions, the shares on which all restrictions have lapsed shall no longer be Restricted Shares and
shall be deemed “vested.”
SECTION 8. RESTRICTED
STOCK UNITS
(a) Nature
of Restricted Stock Units. The Administrator may grant Restricted Stock Units under the Plan. A Restricted Stock Unit is an
Award of stock units that may be settled in shares of Stock (or cash, to the extent explicitly provided for in the Award Certificate)
upon the satisfaction of such restrictions and conditions at the time of grant. Conditions may be based on continuing employment
(or other Service Relationship) and/or achievement of pre-established performance goals and objectives. The terms and conditions
of each such Award shall be determined by the Administrator, and such terms and conditions may differ among individual Awards and
grantees. Except in the case of Restricted Stock Units with a deferred settlement date that complies with Section 409A, at
the end of the vesting period, the Restricted Stock Units, to the extent vested, shall be settled in the form of shares of Stock
(or cash, to the extent explicitly provided for in the Award Certificate). Restricted Stock Units with deferred settlement dates
are subject to Section 409A and shall contain such additional terms and conditions as the Administrator shall determine in
its sole discretion in order to comply with the requirements of Section 409A.
(b) Election
to Receive Restricted Stock Units in Lieu of Compensation. The Administrator may, in its sole discretion, permit a grantee
to elect to receive a portion of future cash compensation otherwise due to such grantee in the form of an award of Restricted Stock
Units. Any such election shall be made in writing and shall be delivered to the Company no later than the date specified by the
Administrator and in accordance with Section 409A and such other rules and procedures established by the Administrator.
Any such future cash compensation that the grantee elects to defer shall be converted to a fixed number of Restricted Stock Units
based on the Fair Market Value of Stock on the date the compensation would otherwise have been paid to the grantee if such payment
had not been deferred as provided herein. The Administrator shall have the sole right to determine whether and under what circumstances
to permit such elections and to impose such limitations and other terms and conditions thereon as the Administrator deems appropriate.
Any Restricted Stock Units that are elected to be received in lieu of cash compensation shall be fully vested, unless otherwise
provided in the Award Certificate.
(c) Rights
as a Stockholder. A grantee shall have the rights as a stockholder only as to shares of Stock acquired by the grantee upon
settlement of Restricted Stock Units; provided, however, that the grantee may be credited with Dividend Equivalent Rights with
respect to the stock units underlying his or her Restricted Stock Units, subject to the provisions of Section 11 and such
terms and conditions as the Administrator may determine.
(d) Termination.
Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 16 below,
in writing after the Award is issued, a grantee’s right in all Restricted Stock Units that have not vested shall automatically
terminate upon the grantee’s termination of employment (or cessation of Service Relationship) with the Company and its Subsidiaries
for any reason.
SECTION 9. UNRESTRICTED
STOCK AWARDS
Grant or Sale of Unrestricted Stock.
The Administrator may grant (or sell at par value or such higher purchase price determined by the Administrator) an Unrestricted
Stock Award under the Plan. An Unrestricted Stock Award is an Award pursuant to which the grantee may receive shares of Stock free
of any restrictions under the Plan. Unrestricted Stock Awards may be granted in respect of past services or other valid consideration,
or in lieu of cash compensation due to such grantee.
SECTION 10. CASH-BASED
AWARDS
Grant of Cash-Based Awards. The Administrator
may grant Cash-Based Awards under the Plan. A Cash-Based Award is an Award that entitles the grantee to a payment in cash upon
the attainment of specified performance goals. The Administrator shall determine the maximum duration of the Cash-Based Award,
the amount of cash to which the Cash-Based Award pertains, the conditions upon which the Cash-Based Award shall become vested or
payable, and such other provisions as the Administrator shall determine. Each Cash-Based Award shall specify a cash-denominated
payment amount, formula or payment ranges as determined by the Administrator. Payment, if any, with respect to a Cash-Based Award
shall be made in accordance with the terms of the Award and may be made in cash.
SECTION 11. DIVIDEND
EQUIVALENT RIGHTS
(a) Dividend
Equivalent Rights. The Administrator may grant Dividend Equivalent Rights under the Plan. A Dividend Equivalent Right is an
Award entitling the grantee to receive credits based on cash dividends that would have been paid on the shares of Stock specified
in the Dividend Equivalent Right (or other Award to which it relates) if such shares had been issued to the grantee. A Dividend
Equivalent Right may be granted hereunder to any grantee as a component of an award of Restricted Stock Units or as a freestanding
award. The terms and conditions of Dividend Equivalent Rights shall be specified in the Award Certificate. Dividend equivalents
credited to the holder of a Dividend Equivalent Right may be paid currently or may be deemed to be reinvested in additional shares
of Stock, which may thereafter accrue additional equivalents. Any such reinvestment shall be at Fair Market Value on the date of
reinvestment or such other price as may then apply under a dividend reinvestment plan sponsored by the Company, if any. Dividend
Equivalent Rights may be settled in cash or shares of Stock or a combination thereof, in a single installment or installments.
A Dividend Equivalent Right granted as a component of an Award of Restricted Stock Units shall provide that such Dividend Equivalent
Right shall be settled only upon settlement or payment of, or lapse of restrictions on, such other Award, and that such Dividend
Equivalent Right shall expire or be forfeited or annulled under the same conditions as such other Award.
(b) Termination.
Except as may otherwise be provided by the Administrator either in the Award Certificate or, subject to Section 16 below,
in writing after the Award is issued, a grantee’s rights in all Dividend Equivalent Rights shall automatically terminate
upon the grantee’s termination of employment (or cessation of Service Relationship) with the Company and its Subsidiaries
for any reason.
SECTION 12. Transferability
of Awards
(a) Transferability.
Except as provided in Section 12(b) below, during a grantee’s lifetime, his or her Awards shall be exercisable
only by the grantee, or by the grantee’s legal representative or guardian in the event of the grantee’s incapacity.
No Awards shall be sold, assigned, transferred or otherwise encumbered or disposed of by a grantee other than by will or by the
laws of descent and distribution or pursuant to a domestic relations order. No Awards shall be subject, in whole or in part, to
attachment, execution, or levy of any kind, and any purported transfer in violation hereof shall be null and void.
(b) Administrator
Action. Notwithstanding Section 12(a), the Administrator, in its discretion, may provide either in the Award Certificate
regarding a given Award or by subsequent written approval that the grantee (who is an employee or director) may transfer his or
her Non-Qualified Stock Options to his or her immediate family members, to trusts for the benefit of such family members, or to
partnerships in which such family members are the only partners, provided that the transferee agrees in writing with the Company
to be bound by all of the terms and conditions of this Plan and the applicable Award. In no event may an Award be transferred by
a grantee for value.
(c) Family
Member. For purposes of Section 12(b), “family member” shall mean a grantee’s child, stepchild, grandchild,
parent, stepparent, grandparent, spouse, former spouse, sibling, niece, nephew, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, including adoptive relationships, any person sharing the grantee’s household (other than
a tenant of the grantee), a trust in which these persons (or the grantee) have more than 50 percent of the beneficial interest,
a foundation in which these persons (or the grantee) control the management of assets, and any other entity in which these persons
(or the grantee) own more than 50 percent of the voting interests.
(d) Designation
of Beneficiary. To the extent permitted by the Company, each grantee to whom an Award has been made under the Plan may designate
a beneficiary or beneficiaries to exercise any Award or receive any payment under any Award payable on or after the grantee’s
death. Any such designation shall be on a form provided for that purpose by the Administrator and shall not be effective until
received by the Administrator. If no beneficiary has been designated by a deceased grantee, or if the designated beneficiaries
have predeceased the grantee, the beneficiary shall be the grantee’s estate.
SECTION 13. TAX
WITHHOLDING
(a) Payment
by Grantee. Each grantee shall, no later than the date as of which the value of an Award or of any Stock or other amount received
thereunder first becomes includable in the gross income of the grantee for income tax purposes, pay to the Company, or make arrangements
satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by law to be withheld
by the Company with respect to such income. The Company and its Subsidiaries shall, to the extent permitted by law, have the right
to deduct any such taxes from any payment of any kind otherwise due to the grantee. The Company’s obligation to deliver evidence
of book entry (or stock certificates) to any grantee is subject to and conditioned on tax withholding obligations being satisfied
by the grantee.
(b) Payment
in Stock. The Administrator may require the Company’s tax withholding obligation to be satisfied, in whole or in part,
by the Company withholding from shares of Stock to be issued pursuant to any Award a number of shares with an aggregate Fair Market
Value (as of the date the withholding is effected) that would satisfy the withholding amount due; provided, however, that the amount
withheld does not exceed the maximum statutory tax rate or such lesser amount as is necessary to avoid liability accounting treatment.
For purposes of share withholding, the Fair Market Value of withheld shares shall be determined in the same manner as the value
of Stock includible in income of the grantees. The Administrator may also require the Company’s tax withholding obligation
to be satisfied, in whole or in part, by an arrangement whereby a certain number of shares of Stock issued pursuant to any Award
are immediately sold and proceeds from such sale are remitted to the Company in an amount that would satisfy the withholding amount
due.
SECTION 14. Section 409A
awards
Awards are intended to be exempt from Section 409A
to the greatest extent possible and to otherwise comply with Section 409A. The Plan and all Awards shall be interpreted in
accordance with such intent. To the extent that any Award is determined to constitute “nonqualified deferred compensation”
within the meaning of Section 409A (a “409A Award”), the Award shall be subject to such additional rules and
requirements as specified by the Administrator from time to time in order to comply with Section 409A. In this regard, if
any amount under a 409A Award is payable upon a “separation from service” (within the meaning of Section 409A)
to a grantee who is then considered a “specified employee” (within the meaning of Section 409A), then no such
payment shall be made prior to the date that is the earlier of (i) six months and one day after the grantee’s separation
from service, or (ii) the grantee’s death, but only to the extent such delay is necessary to prevent such payment from
being subject to interest, penalties and/or additional tax imposed pursuant to Section 409A. Further, the settlement of any
409A Award may not be accelerated except to the extent permitted by Section 409A. The Company makes no representation that
any or all of the payments or benefits described in the Plan will be exempt from or comply with Section 409A of the Code and
makes no undertaking to preclude Section 409A of the Code from applying to any such payment. The grantee shall be solely responsible
for the payment of any taxes and penalties incurred under Section 409A.
SECTION 15. TERMINATION
OF SERVICE RELATIONSHIP, TRANSFER, LEAVE OF ABSENCE, ETC.
(a) Termination
of Service Relationship. If the grantee’s Service Relationship is with an Affiliate and such Affiliate ceases to be an
Affiliate, the grantee shall be deemed to have terminated his or her Service Relationship for purposes of the Plan.
(b) For
purposes of the Plan, the following events shall not be deemed a termination of a Service Relationship:
(i) a
transfer to the employment of the Company from an Affiliate or from the Company to an Affiliate, or from one Affiliate to another;
or
(ii) an
approved leave of absence for military service or sickness, or for any other purpose approved by the Company, if the employee’s
right to re-employment is guaranteed either by a statute or by contract or under the policy pursuant to which the leave of absence
was granted or if the Administrator otherwise so provides in writing.
SECTION 16. AMENDMENTS
AND TERMINATION
The Board may, at any time, amend or discontinue
the Plan and the Administrator may, at any time, amend or cancel any outstanding Award for the purpose of satisfying changes in
law or for any other lawful purpose, but no such action shall materially and adversely affect rights under any outstanding Award
without the holder’s consent. The Administrator is specifically authorized to exercise its discretion to reduce the exercise
price of outstanding Stock Options or Stock Appreciation Rights or effect the repricing of such Awards through cancellation and
re-grants. To the extent required under the rules of any securities exchange or market system on which the Stock is listed,
to the extent determined by the Administrator to be required by the Code to ensure that Incentive Stock Options granted under the
Plan are qualified under Section 422 of the Code, Plan amendments shall be subject to approval by Company stockholders. Nothing
in this Section 16 shall limit the Administrator’s authority to take any action permitted pursuant to Section 3(b) or
3(c).
SECTION 17. STATUS
OF PLAN
With respect to the portion of any Award
that has not been exercised and any payments in cash, Stock or other consideration not received by a grantee, a grantee shall have
no rights greater than those of a general creditor of the Company unless the Administrator shall otherwise expressly determine
in connection with any Award or Awards. In its sole discretion, the Administrator may authorize the creation of trusts or other
arrangements to meet the Company’s obligations to deliver Stock or make payments with respect to Awards hereunder, provided
that the existence of such trusts or other arrangements is consistent with the foregoing sentence.
SECTION 18. GENERAL
PROVISIONS
(a) No
Distribution. The Administrator may require each person acquiring Stock pursuant to an Award to represent to and agree with
the Company in writing that such person is acquiring the shares without a view to distribution thereof.
(b) Issuance
of Stock. To the extent certificated, stock certificates to grantees under this Plan shall be deemed delivered for all purposes
when the Company or a stock transfer agent of the Company shall have mailed such certificates in the United States mail, addressed
to the grantee, at the grantee’s last known address on file with the Company. Uncertificated Stock shall be deemed delivered
for all purposes when the Company or a Stock transfer agent of the Company shall have given to the grantee by electronic mail (with
proof of receipt) or by United States mail, addressed to the grantee, at the grantee’s last known address on file with the
Company, notice of issuance and recorded the issuance in its records (which may include electronic “book entry” records).
Notwithstanding anything herein to the contrary, the Company shall not be required to issue or deliver any evidence of book entry
or certificates evidencing shares of Stock pursuant to the exercise or settlement of any Award, unless and until the Administrator
has determined, with advice of counsel (to the extent the Administrator deems such advice necessary or advisable), that the issuance
and delivery is in compliance with all applicable laws, regulations of governmental authorities and, if applicable, the requirements
of any exchange on which the shares of Stock are listed, quoted or traded. Any Stock issued pursuant to the Plan shall be subject
to any stop-transfer orders and other restrictions as the Administrator deems necessary or advisable to comply with federal, state
or foreign jurisdiction, securities or other laws, rules and quotation system on which the Stock is listed, quoted or traded.
The Administrator may place legends on any Stock certificate or notations on any book entry to reference restrictions applicable
to the Stock. In addition to the terms and conditions provided herein, the Administrator may require that an individual make such
reasonable covenants, agreements, and representations as the Administrator, in its discretion, deems necessary or advisable in
order to comply with any such laws, regulations, or requirements. The Administrator shall have the right to require any individual
to comply with any timing or other restrictions with respect to the settlement or exercise of any Award, including a window-period
limitation, as may be imposed in the discretion of the Administrator.
(c) No
Fractional Shares. No fractional shares of Stock shall be issued or delivered pursuant to the Plan or any Award, and the Administrator
shall determine whether cash, other securities or other property shall be paid or transferred in lieu of any fractional shares,
or whether such fractional shares or any rights thereto shall be canceled, terminated or otherwise eliminated
(d) Stockholder
Rights. Until Stock is deemed delivered in accordance with Section 18(b), no right to vote or receive dividends or any
other rights of a stockholder will exist with respect to shares of Stock to be issued in connection with an Award, notwithstanding
the exercise of a Stock Option or any other action by the grantee with respect to an Award.
(e) Other
Compensation Arrangements; No Employment Rights. Nothing contained in this Plan shall prevent the Board from adopting other
or additional compensation arrangements, including trusts, and such arrangements may be either generally applicable or applicable
only in specific cases. The adoption of this Plan and the grant of Awards do not confer upon any employee any right to continued
employment with the Company or any Subsidiary.
(f) Trading
Policy Restrictions. Option exercises and other Awards under the Plan shall be subject to the Company’s insider trading
policies and procedures, as in effect from time to time.
(g) Clawback.
All Awards shall be subject to reduction, cancellation, forfeiture or recoupment to the extent necessary to comply with (i) any
clawback, forfeiture or other similar policy adopted by the Board or Administrator and as in effect from time to time; and (ii) applicable
law.
SECTION 19. EFFECTIVE
DATE OF PLAN
This Plan shall become effective upon the
date immediately preceding the Registration Date, subject to prior stockholder approval in accordance with applicable state law,
the Company’s bylaws and articles of incorporation, and applicable stock exchange rules. No grants of Stock Options and other
Awards may be made hereunder after the tenth anniversary of the Effective Date and no grants of Incentive Stock Options may be
made hereunder after the tenth anniversary of the date the Plan is approved by the Board.
SECTION 20. GOVERNING
LAW
This Plan and all Awards and actions taken
thereunder shall be governed by, and construed in accordance with, the General Corporation Law of the State of Delaware as to matters
within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of
the Commonwealth of Massachusetts, applied without regard to conflict of law principles.
DATE APPROVED BY BOARD OF DIRECTORS: November 23, 2020
DATE APPROVED BY STOCKHOLDERS: _______________
RESTRICTED
STOCK AWARD AGREEMENT
UNDER THE 908 devices INC.
2020 STOCK OPTION AND INCENTIVE PLAN
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Name of Grantee:
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No. of Shares:
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Grant Date:
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Pursuant to the 908 Devices Inc. 2020 Stock
Option and Incentive Plan, as amended through the date hereof (the “Plan”), 908 Devices Inc. (the “Company”)
hereby grants a Restricted Stock Award (an “Award”) to the Grantee named above. Upon acceptance of this Award, the
Grantee shall receive the number of shares of Common Stock, par value $0.001 per share (the “Stock”), of the Company
specified above, subject to the restrictions and conditions set forth herein and in the Plan. The Company acknowledges the receipt
from the Grantee of consideration with respect to the par value of the Stock in the form of cash, past or future services rendered
to the Company by the Grantee or such other form of consideration as is acceptable to the Administrator.
1. Award.
The shares of Restricted Stock awarded hereunder shall be issued and held by the Company’s transfer agent in book entry form,
and the Grantee’s name shall be entered as the stockholder of record on the books of the Company. Thereupon, the Grantee
shall have all the rights of a stockholder with respect to such shares, including voting and dividend rights, subject, however,
to the restrictions and conditions specified in Paragraph 2 below. The Grantee shall (i) sign and deliver to the Company
a copy of this Award Agreement and (ii) deliver to the Company a stock power endorsed in blank.
2. Restrictions
and Conditions.
(a) Any
book entries for the shares of Restricted Stock granted herein shall bear an appropriate legend, as determined by the Administrator
in its sole discretion, to the effect that such shares are subject to restrictions as set forth herein and in the Plan.
(b) Shares
of Restricted Stock granted herein may not be sold, assigned, transferred, pledged or otherwise encumbered or disposed of by the
Grantee prior to vesting.
(c) If
the Grantee’s Service Relationship is voluntarily or involuntarily terminated for any reason (including death) prior to vesting
of shares of Restricted Stock granted herein, all shares of Restricted Stock shall immediately and automatically be forfeited and
returned to the Company.
3. Vesting
of Restricted Stock. The restrictions and conditions in Paragraph 2 of this Agreement shall lapse on the Vesting Date
or Dates specified in the following schedule so long as the Grantee remains in a Service Relationship on such Dates. If a series
of Vesting Dates is specified, then the restrictions and conditions in Paragraph 2 shall lapse only with respect to the number
of shares of Restricted Stock specified as vested on such date.
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Incremental Number
of Shares Vested
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Vesting Date
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Subsequent to such Vesting Date or Dates,
the shares of Stock on which all restrictions and conditions have lapsed shall no longer be deemed Restricted Stock. The Administrator
may at any time accelerate the vesting schedule specified in this Paragraph 3.
4. Dividends.
Dividends on shares of Restricted Stock shall be paid currently to the Grantee.
5. Incorporation
of Plan. Notwithstanding anything herein to the contrary, this Award shall be subject to and governed by all the terms and
conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized
terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
6. Transferability.
This Agreement is personal to the Grantee, is non-assignable and is not transferable in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution.
7. Tax
Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal
income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state,
and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause
the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from shares of Stock to be
issued or released by the transfer agent a number of shares of Stock with an aggregate Fair Market Value that would satisfy the
withholding amount due; or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued or released
by the transfer agent, the number of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to
be withheld from the Grantee on account of such transfer.
8. Election
Under Section 83(b). The Grantee and the Company hereby agree that the Grantee may, within 30 days following the Grant
Date of this Award, file with the Internal Revenue Service and the Company an election under Section 83(b) of the Code.
In the event the Grantee makes such an election, he or she agrees to provide a copy of the election to the Company. The Grantee
acknowledges that he or she is responsible for obtaining the advice of his or her tax advisors with regard to the Section 83(b) election
and that he or she is relying solely on such advisors and not on any statements or representations of the Company or any of its
agents with regard to such election.
9. No
Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan
or this Agreement to continue the Grantee in employment or other Service Relationship and neither the Plan nor this Agreement shall
interfere in any way with the right of the Company or any Subsidiary to terminate the employment or other Service Relationship
of the Grantee at any time.
10. Integration.
This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements
and discussions between the parties concerning such subject matter.
11. Data
Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the
Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process
any and all personal or professional data, including but not limited to Social Security or other identification number, home address
and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or
this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company
to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights
the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit
such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which
the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information.
Relevant Information will only be used in accordance with applicable law.
12. Notices.
Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered
to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently
furnish to the other party in writing.
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908 DEVICES INC.
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By:
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Title:
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The foregoing Agreement is hereby accepted and the terms and
conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the Company’s
instructions to the Grantee (including through an online acceptance process) is acceptable.
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Dated:
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Grantee’s Signature
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Grantee’s name and address:
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RESTRICTED
STOCK UNIT AWARD AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
UNDER THE 908 devices Inc.
2020 STOCK OPTION AND INCENTIVE PLAN
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Name of Grantee:
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No. of Restricted Stock Units:
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Grant Date:
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Pursuant to the 908
Devices Inc. 2020 Stock Option and Incentive Plan, as amended through the date hereof (the “Plan”), 908 Devices Inc.
(the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”)
to the Grantee named above. Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.001 per share (the
“Stock”), of the Company.
1. Restrictions
on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by
the Grantee, and any shares of Stock issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise
encumbered or disposed of until (i) the Restricted Stock Units have vested as provided in Paragraph 2 of this Agreement and
(ii) shares of Stock have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.
2. Vesting
of Restricted Stock Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting
Date or Dates specified in the following schedule so long as the Grantee remains in a Service Relationship on such Vesting Dates.
If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect
to the number of Restricted Stock Units specified as vested on such date.
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Incremental Number of
Restricted Stock Units Vested
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Vesting Date
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_____________ (___%)
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_____________ (___%)
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Notwithstanding anything
to the contrary herein or in the Plan, all outstanding Restricted Stock Units shall become fully vested upon a Sale Event. The
Administrator may at any time accelerate the vesting schedule specified in this Paragraph 2.
3. Termination
of Service Relationship. If the Grantee’s Service Relationship terminates for any reason (including death or disability)
prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested
as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her
successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted
Stock Units.
4. Issuance
of Shares of Stock. As soon as practicable following each Vesting Date (but in no event later than two and one-half months
after the end of the year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of shares of Stock
equal to the aggregate number of Restricted Stock Units that have vested pursuant to Paragraph 2 of this Agreement on such date
and the Grantee shall thereafter have all the rights of a stockholder of the Company with respect to such shares.
5. Incorporation
of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms
and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized
terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
6. Section 409A
of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award
are exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A
of the Code.
7. No
Obligation to Continue Service Relationship. Neither the Plan nor this Award confers upon the Grantee any rights with respect
to continuance as a Non-Employee Director or any other Service Relationship.
8. Integration.
This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements
and discussions between the parties concerning such subject matter.
9. Data
Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the
Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process
any and all personal or professional data, including but not limited to Social Security or other identification number, home address
and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or
this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company
to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights
the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit
such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which
the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information.
Relevant Information will only be used in accordance with applicable law.
10. Notices.
Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered
to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently
furnish to the other party in writing.
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908 DEVICES INC.
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By:
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Title:
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The foregoing Agreement is hereby accepted
and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the
Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.
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Dated:
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Grantee’s Signature
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Grantee’s name and address:
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RESTRICTED
STOCK UNIT AWARD AGREEMENT
FOR COMPANY EMPLOYEES
UNDER THE 908 devices Inc.
2020 STOCK OPTION AND INCENTIVE PLAN
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Name of Grantee:
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No. of Restricted Stock Units:
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Grant Date:
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Pursuant to the 908
Devices Inc. 2020 Stock Option and Incentive Plan, as amended through the date hereof (the “Plan”), 908 Devices Inc.
(the “Company”) hereby grants an award of the number of Restricted Stock Units listed above (an “Award”)
to the Grantee named above. Each Restricted Stock Unit shall relate to one share of Common Stock, par value $0.001 per share (the
“Stock”), of the Company.
1. Restrictions
on Transfer of Award. This Award may not be sold, transferred, pledged, assigned or otherwise encumbered or disposed of by
the Grantee, and any shares of Stock issuable with respect to the Award may not be sold, transferred, pledged, assigned or otherwise
encumbered or disposed of until (i) the Restricted Stock Units have vested as provided in Paragraph 2 of this Agreement and
(ii) shares of Stock have been issued to the Grantee in accordance with the terms of the Plan and this Agreement.
2. Vesting
of Restricted Stock Units. The restrictions and conditions of Paragraph 1 of this Agreement shall lapse on the Vesting
Date or Dates specified in the following schedule so long as the Grantee remains in a Service Relationship on such Vesting Dates.
If a series of Vesting Dates is specified, then the restrictions and conditions in Paragraph 1 shall lapse only with respect
to the number of Restricted Stock Units specified as vested on such date.
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Incremental Number of
Restricted Stock Units Vested
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Vesting Date
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_____________ (__%)
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_____________ (__%)
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_______________
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_____________ (__%)
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The Administrator may
at any time accelerate the vesting schedule specified in this Paragraph 2.
3. Termination
of Service Relationship. If the Grantee’s Service Relationship terminates for any reason (including death or disability)
prior to the satisfaction of the vesting conditions set forth in Paragraph 2 above, any Restricted Stock Units that have not vested
as of such date shall automatically and without notice terminate and be forfeited, and neither the Grantee nor any of his or her
successors, heirs, assigns, or personal representatives will thereafter have any further rights or interests in such unvested Restricted
Stock Units.
4. Issuance
of Shares of Stock. As soon as practicable following each Vesting Date (but in no event later than two and one-half months
after the end of the year in which the Vesting Date occurs), the Company shall issue to the Grantee the number of shares of Stock
equal to the aggregate number of Restricted Stock Units that have vested pursuant to Paragraph 2 of this Agreement on such date
and the Grantee shall thereafter have all the rights of a stockholder of the Company with respect to such shares.
5. Incorporation
of Plan. Notwithstanding anything herein to the contrary, this Agreement shall be subject to and governed by all the terms
and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized
terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
6. Tax
Withholding. The Grantee shall, not later than the date as of which the receipt of this Award becomes a taxable event for Federal
income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal, state,
and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to cause
the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from shares of Stock to be
issued to the Grantee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding amount
due; or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued to the Grantee, the number
of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Grantee on account
of such transfer.
7. Section 409A
of the Code. This Agreement shall be interpreted in such a manner that all provisions relating to the settlement of the Award
are exempt from the requirements of Section 409A of the Code as “short-term deferrals” as described in Section 409A
of the Code.
8. No
Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan
or this Agreement to continue the Grantee’s employment or other Service Relationship with the Company or a Subsidiary and
neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the
Grantee’s employment or other Service Relationship with the Company or a Subsidiary at any time.
9. Integration.
This Agreement constitutes the entire agreement between the parties with respect to this Award and supersedes all prior agreements
and discussions between the parties concerning such subject matter.
10. Data
Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the
Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process
any and all personal or professional data, including but not limited to Social Security or other identification number, home address
and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or
this Agreement (the “Relevant Information”). By entering into this Agreement, the Grantee (i) authorizes the Company
to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy rights
the Grantee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and transmit
such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction in which
the Relevant Companies consider appropriate. The Grantee shall have access to, and the right to change, the Relevant Information.
Relevant Information will only be used in accordance with applicable law.
11. Notices.
Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered
to the Grantee at the address on file with the Company or, in either case, at such other address as one party may subsequently
furnish to the other party in writing.
|
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908 DEVICES INC.
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By:
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Title:
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The foregoing Agreement is hereby accepted
and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the
Company’s instructions to the Grantee (including through an online acceptance process) is acceptable.
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Dated:
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Grantee’s Signature
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Grantee’s name and address:
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NON-QUALIFIED
STOCK OPTION AGREEMENT
FOR COMPANY EMPLOYEES
UNDER THE 908 devices inc. 2020 STOCK OPTION AND INCENTIVE PLAN
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Name of Optionee:
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No.of Option Shares:
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Option Exercise Price per Share:
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$
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[FMV on Grant Date]
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Grant Date:
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Expiration Date:
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[No more than 10 years]
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Pursuant to the 908
Devices Inc. 2020 Stock Option and Incentive Plan, as amended through the date hereof (the “Plan”), 908 Devices Inc.
(the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on
or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.001 per share
(the “Stock”), of the Company specified above at the Option Exercise Price per Share specified above subject to the
terms and conditions set forth herein and in the Plan. This Stock Option is not intended to be an “incentive stock option”
under Section 422 of the Internal Revenue Code of 1986, as amended.
1. Exercisability
Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set
forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability
schedule hereunder, this Stock Option shall be exercisable with respect to the following number of Option Shares on the dates indicated
so long as the Optionee remains in a Service Relationship on such dates:
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Incremental Number of
Option Shares Exercisable
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Exercisability Date
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_____________ (___%)
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____________
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_____________ (___%)
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____________
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_____________ (___%)
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____________
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_____________ (___%)
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____________
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Once exercisable, this
Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject
to the provisions hereof and of the Plan.
2. Manner
of Exercise.
(a) The
Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this
Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option
Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase
price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or
other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of
Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then
subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator;
(iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions
to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase
price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker
shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe
as a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company
will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value
that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment
instruments will be received subject to collection.
The transfer to the
Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s
receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any
other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by
the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock
to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will
be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned
shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of
the Stock Option shall be net of the Shares attested to.
(b) The
shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company
or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or
regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator
as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option
shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to
the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon,
the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
(c) The
minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the
number of shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under
this Stock Option at the time.
(d) Notwithstanding
any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination
of Service Relationship. If the Optionee’s Service Relationship terminates, the period within which to exercise the Stock
Option may be subject to earlier termination as set forth below.
(a) Termination
Due to Death. If the Optionee’s Service Relationship terminates by reason of the Optionee’s death, any portion
of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the
Optionee’s legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date,
if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of
no further force or effect.
(b) Termination
Due to Disability. If the Optionee’s Service Relationship terminates by reason of the Optionee’s disability (as
determined by the Administrator), any portion of this Stock Option outstanding on such date, to the extent exercisable on the date
of such termination, may thereafter be exercised by the Optionee for a period of 12 months from the date of disability or until
the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of disability shall terminate
immediately and be of no further force or effect.
(c) Termination
for Cause. If the Optionee’s Service Relationship terminates for Cause, any portion of this Stock Option outstanding
on such date shall terminate immediately and be of no further force and effect. For purposes hereof, “Cause” shall
mean, unless otherwise provided in an employment or other service agreement between the Company and the Optionee, a determination
by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement
between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to
a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance
(other than by reason of disability) by the Optionee of the Optionee’s duties to the Company.
(d) Other
Termination. If the Optionee’s Service Relationship terminates for any reason other than the Optionee’s death,
the Optionee’s disability or Cause, and unless otherwise determined by the Administrator, any portion of this Stock Option
outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of three months from
the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the
date of termination shall terminate immediately and be of no further force or effect.
The Administrator’s
determination of the reason for termination of the Optionee’s Service Relationship shall be conclusive and binding on the
Optionee and his or her representatives or legatees.
4. Incorporation
of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms
and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized
terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability.
This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime,
only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.
6. Tax
Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event
for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal,
state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to
cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from shares of Stock
to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding
amount due; or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued to the Optionee, the
number of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Optionee
on account of such transfer.
7. No
Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan
or this Agreement to continue the Optionee’s employment or other Service Relationship with the Company or a Subsidiary and
neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the
Optionee’s employment or other Service Relationship with the Company or a Subsidiary at any time.
8. Integration.
This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior
agreements and discussions between the parties concerning such subject matter.
9. Data
Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the
Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process
any and all personal or professional data, including but not limited to Social Security or other identification number, home address
and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or
this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the
Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy
rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and
transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction
in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant
Information. Relevant Information will only be used in accordance with applicable law.
10. Notices.
Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered
to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently
furnish to the other party in writing.
|
|
908 DEVICES INC.
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|
|
By:
|
|
|
|
|
Title:
|
The foregoing Agreement is hereby accepted
and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the
Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
|
Dated:
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Optionee’s Signature
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Optionee’s name and address:
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NON-QUALIFIED
STOCK OPTION AGREEMENT
FOR NON-EMPLOYEE DIRECTORS
UNDER THE 908 devices Inc.
2020 STOCK OPTION AND INCENTIVE PLAN
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Name of Optionee:
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No. of Option Shares:
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Option Exercise Price per Share:
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$
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[FMV on Grant Date]
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Grant Date:
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Expiration Date:
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[No more than 10 years]
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Pursuant to the 908
Devices Inc. 2020 Stock Option and Incentive Plan, as amended through the date hereof (the “Plan”), 908 Devices Inc.
(the “Company”) hereby grants to the Optionee named above, who is a Non-Employee Director of the Company but is not
an employee of the Company, an option (the “Stock Option”) to purchase on or prior to the Expiration Date specified
above all or part of the number of shares of Common Stock, par value $0.001 per share (the “Stock”), of the Company
specified above at the Option Exercise Price per Share specified above subject to the terms and conditions set forth herein and
in the Plan. This Stock Option is not intended to be an “incentive stock option” under Section 422 of the Internal
Revenue Code of 1986, as amended.
1. Exercisability
Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set
forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability
schedule hereunder, this Stock Option shall be exercisable with respect to the following number of Option Shares on the dates indicated
so long as the Optionee remains in a Service Relationship on such dates:
|
|
Incremental Number of
Option Shares Exercisable
|
|
Exercisability Date
|
|
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|
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_____________ (___%)
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____________
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_____________ (___%)
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____________
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_____________ (___%)
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____________
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_____________ (___%)
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____________
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Notwithstanding anything
to the contrary herein or in the Plan, all outstanding Option Shares shall become fully exercisable upon a Sale Event. Once exercisable,
this Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date,
subject to the provisions hereof and of the Plan.
2. Manner
of Exercise.
(a) The
Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this
Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option
Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase
price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or
other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of
Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then
subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator;
(iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions
to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase
price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker
shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe
as a condition of such payment procedure; (iv) by a “net exercise” arrangement pursuant to which the Company
will reduce the number of shares of Stock issuable upon exercise by the largest whole number of shares with a Fair Market Value
that does not exceed the aggregate exercise price; or (v) a combination of (i), (ii), (iii) and (iv) above. Payment
instruments will be received subject to collection.
The transfer to the
Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s
receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any
other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by
the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock
to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will
be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned
shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of
the Stock Option shall be net of the Shares attested to.
(b) The
shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company
or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or
regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator
as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option
shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to
the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon,
the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
(c) The
minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the
number of shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under
this Stock Option at the time.
(d) Notwithstanding
any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination
of Service Relationship. If the Optionee’s Service Relationship terminates, the period within which to exercise the Stock
Option may be subject to earlier termination as set forth below.
(a) Termination
Due to Death. If the Optionee’s Service Relationship terminates by reason of the Optionee’s death, any portion
of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the
Optionee’s legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date,
if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of
no further force or effect.
(b) Other
Termination. If the Optionee’s Service Relationship terminates for any reason other than the Optionee’s death,
any portion of this Stock Option outstanding on such date may be exercised, to the extent exercisable on the date of termination,
for a period of six months from the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option
that is not exercisable on the date of termination shall terminate immediately and be of no further force or effect.
4. Incorporation
of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms
and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized
terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability.
This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime,
only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.
6. No
Obligation to Continue Service Relationship. Neither the Plan nor this Stock Option confers upon the Optionee any rights with
respect to continuance as a Non-Employee Director or any other Service Relationship.
7. Integration.
This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior
agreements and discussions between the parties concerning such subject matter.
8. Data
Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the
Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process
any and all personal or professional data, including but not limited to Social Security or other identification number, home address
and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or
this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the
Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy
rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and
transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction
in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant
Information. Relevant Information will only be used in accordance with applicable law.
9. Notices.
Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered
to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently
furnish to the other party in writing.
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908 DEVICES INC.
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By:
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|
|
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Title:
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The foregoing Agreement is hereby accepted
and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the
Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
|
Dated:
|
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Optionee’s Signature
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Optionee’s name and address:
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|
|
INCENTIVE STOCK OPTION AGREEMENT
UNDER THE 908 DEVICES INC.
2020 STOCK OPTION AND INCENTIVE PLAN
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Name of Optionee:
|
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|
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|
No. of Option Shares:
|
|
|
|
|
|
|
|
|
|
Option Exercise Price per Share:
|
$
|
|
|
|
|
|
[FMV on Grant Date (110% of FMV if a 10% owner)]
|
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Grant Date:
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|
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|
|
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Expiration Date:
|
|
|
|
|
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[No more than 10 years (5 years if a 10% owner)]
|
|
Pursuant to the 908
Devices Inc. 2020 Stock Option and Incentive Plan, as amended through the date hereof (the “Plan”), 908 Devices Inc.
(the “Company”) hereby grants to the Optionee named above an option (the “Stock Option”) to purchase on
or prior to the Expiration Date specified above all or part of the number of shares of Common Stock, par value $0.001 per share
(the “Stock”), of the Company specified above at the Option Exercise Price per Share specified above subject to the
terms and conditions set forth herein and in the Plan.
1. Exercisability
Schedule. No portion of this Stock Option may be exercised until such portion shall have become exercisable. Except as set
forth below, and subject to the discretion of the Administrator (as defined in Section 2 of the Plan) to accelerate the exercisability
schedule hereunder, this Stock Option shall be exercisable with respect to the following number of Option Shares on the dates indicated
so long as the Optionee remains in a Service Relationship on such dates:
|
|
Incremental Number of
Option Shares Exercisable*
|
|
Exercisability Date
|
|
|
|
|
|
|
|
|
|
_____________ (___%)
|
|
____________
|
|
|
|
_____________ (___%)
|
|
____________
|
|
|
|
_____________ (___%)
|
|
____________
|
|
|
|
_____________ (___%)
|
|
____________
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|
_____________ (___%)
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|
____________
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* Max. of $100,000 per yr.
|
|
|
|
Once exercisable, this
Stock Option shall continue to be exercisable at any time or times prior to the close of business on the Expiration Date, subject
to the provisions hereof and of the Plan.
2. Manner
of Exercise.
(a) The
Optionee may exercise this Stock Option only in the following manner: from time to time on or prior to the Expiration Date of this
Stock Option, the Optionee may give written notice to the Administrator of his or her election to purchase some or all of the Option
Shares purchasable at the time of such notice. This notice shall specify the number of Option Shares to be purchased.
Payment of the purchase
price for the Option Shares may be made by one or more of the following methods: (i) in cash, by certified or bank check or
other instrument acceptable to the Administrator; (ii) through the delivery (or attestation to the ownership) of shares of
Stock that have been purchased by the Optionee on the open market or that are beneficially owned by the Optionee and are not then
subject to any restrictions under any Company plan and that otherwise satisfy any holding periods as may be required by the Administrator;
(iii) by the Optionee delivering to the Company a properly executed exercise notice together with irrevocable instructions
to a broker to promptly deliver to the Company cash or a check payable and acceptable to the Company to pay the option purchase
price, provided that in the event the Optionee chooses to pay the option purchase price as so provided, the Optionee and the broker
shall comply with such procedures and enter into such agreements of indemnity and other agreements as the Administrator shall prescribe
as a condition of such payment procedure; or (iv) a combination of (i), (ii) and (iii) above. Payment instruments
will be received subject to collection.
The transfer to the
Optionee on the records of the Company or of the transfer agent of the Option Shares will be contingent upon (i) the Company’s
receipt from the Optionee of the full purchase price for the Option Shares, as set forth above, (ii) the fulfillment of any
other requirements contained herein or in the Plan or in any other agreement or provision of laws, and (iii) the receipt by
the Company of any agreement, statement or other evidence that the Company may require to satisfy itself that the issuance of Stock
to be purchased pursuant to the exercise of Stock Options under the Plan and any subsequent resale of the shares of Stock will
be in compliance with applicable laws and regulations. In the event the Optionee chooses to pay the purchase price by previously-owned
shares of Stock through the attestation method, the number of shares of Stock transferred to the Optionee upon the exercise of
the Stock Option shall be net of the Shares attested to.
(b) The
shares of Stock purchased upon exercise of this Stock Option shall be transferred to the Optionee on the records of the Company
or of the transfer agent upon compliance to the satisfaction of the Administrator with all requirements under applicable laws or
regulations in connection with such transfer and with the requirements hereof and of the Plan. The determination of the Administrator
as to such compliance shall be final and binding on the Optionee. The Optionee shall not be deemed to be the holder of, or to have
any of the rights of a holder with respect to, any shares of Stock subject to this Stock Option unless and until this Stock Option
shall have been exercised pursuant to the terms hereof, the Company or the transfer agent shall have transferred the shares to
the Optionee, and the Optionee’s name shall have been entered as the stockholder of record on the books of the Company. Thereupon,
the Optionee shall have full voting, dividend and other ownership rights with respect to such shares of Stock.
(c) The
minimum number of shares with respect to which this Stock Option may be exercised at any one time shall be 100 shares, unless the
number of shares with respect to which this Stock Option is being exercised is the total number of shares subject to exercise under
this Stock Option at the time.
(d) Notwithstanding
any other provision hereof or of the Plan, no portion of this Stock Option shall be exercisable after the Expiration Date hereof.
3. Termination
of Service Relationship. If the Optionee’s Service Relationship terminates, the period within which to exercise the Stock
Option may be subject to earlier termination as set forth below.
(a) Termination
Due to Death. If the Optionee’s Service Relationship terminates by reason of the Optionee’s death, any portion
of this Stock Option outstanding on such date, to the extent exercisable on the date of death, may thereafter be exercised by the
Optionee’s legal representative or legatee for a period of 12 months from the date of death or until the Expiration Date,
if earlier. Any portion of this Stock Option that is not exercisable on the date of death shall terminate immediately and be of
no further force or effect.
(b) Termination
Due to Disability. If the Optionee’s Service Relationship terminates by reason of the Optionee’s disability (as
determined by the Administrator), any portion of this Stock Option outstanding on such date, to the extent exercisable on the date
of such termination, may thereafter be exercised by the Optionee for a period of 12 months from the date of disability or until
the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the date of disability shall terminate
immediately and be of no further force or effect.
(c) Termination
for Cause. If the Optionee’s Service Relationship terminates for Cause, any portion of this Stock Option outstanding
on such date shall terminate immediately and be of no further force and effect. For purposes hereof, “Cause” shall
mean, unless otherwise provided in an employment or other service agreement between the Company and the Optionee, a determination
by the Administrator that the Optionee shall be dismissed as a result of (i) any material breach by the Optionee of any agreement
between the Optionee and the Company; (ii) the conviction of, indictment for or plea of nolo contendere by the Optionee to
a felony or a crime involving moral turpitude; or (iii) any material misconduct or willful and deliberate non-performance
(other than by reason of disability) by the Optionee of the Optionee’s duties to the Company.
(d) Other
Termination. If the Optionee’s Service Relationship terminates for any reason other than the Optionee’s death,
the Optionee’s disability, or Cause, and unless otherwise determined by the Administrator, any portion of this Stock Option
outstanding on such date may be exercised, to the extent exercisable on the date of termination, for a period of three months from
the date of termination or until the Expiration Date, if earlier. Any portion of this Stock Option that is not exercisable on the
date of termination shall terminate immediately and be of no further force or effect.
The Administrator’s
determination of the reason for termination of the Optionee’s Service Relationship shall be conclusive and binding on the
Optionee and his or her representatives or legatees.
4. Incorporation
of Plan. Notwithstanding anything herein to the contrary, this Stock Option shall be subject to and governed by all the terms
and conditions of the Plan, including the powers of the Administrator set forth in Section 2(b) of the Plan. Capitalized
terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.
5. Transferability.
This Agreement is personal to the Optionee, is non-assignable and is not transferable in any manner, by operation of law or otherwise,
other than by will or the laws of descent and distribution. This Stock Option is exercisable, during the Optionee’s lifetime,
only by the Optionee, and thereafter, only by the Optionee’s legal representative or legatee.
6. Status
of the Stock Option. This Stock Option is intended to qualify as an “incentive stock option” under Section 422
of the Internal Revenue Code of 1986, as amended (the “Code”), but the Company does not represent or warrant that this
Stock Option qualifies as such. The Optionee should consult with his or her own tax advisors regarding the tax effects of this
Stock Option and the requirements necessary to obtain favorable income tax treatment under Section 422 of the Code, including,
but not limited to, holding period requirements and that this Stock Option must be exercised within three months after termination
of employment as an employee (or 12 months in the case of death or disability) to qualify as an “incentive stock option.”
To the extent any portion of this Stock Option does not so qualify as an “incentive stock option,” such portion shall
be deemed to be a non-qualified stock option. If the Optionee intends to dispose or does dispose (whether by sale, gift, transfer
or otherwise) of any Option Shares within the one-year period beginning on the date after the transfer of such shares to him or
her, or within the two-year period beginning on the day after the grant of this Stock Option, he or she will so notify the Company
within 30 days after such disposition.
7. Tax
Withholding. The Optionee shall, not later than the date as of which the exercise of this Stock Option becomes a taxable event
for Federal income tax purposes, pay to the Company or make arrangements satisfactory to the Administrator for payment of any Federal,
state, and local taxes required by law to be withheld on account of such taxable event. The Company shall have the authority to
cause the required tax withholding obligation to be satisfied, in whole or in part, by (i) withholding from shares of Stock
to be issued to the Optionee a number of shares of Stock with an aggregate Fair Market Value that would satisfy the withholding
amount due; or (ii) causing its transfer agent to sell from the number of shares of Stock to be issued to the Optionee, the
number of shares of Stock necessary to satisfy the Federal, state and local taxes required by law to be withheld from the Optionee
on account of such transfer.
8. No
Obligation to Continue Service Relationship. Neither the Company nor any Subsidiary is obligated by or as a result of the Plan
or this Agreement to continue the Optionee’s employment or other Service Relationship with the Company or a Subsidiary and
neither the Plan nor this Agreement shall interfere in any way with the right of the Company or any Subsidiary to terminate the
Optionee’s employment or other Service Relationship with the Company or a Subsidiary at any time.
9. Integration.
This Agreement constitutes the entire agreement between the parties with respect to this Stock Option and supersedes all prior
agreements and discussions between the parties concerning such subject matter.
10. Data
Privacy Consent. In order to administer the Plan and this Agreement and to implement or structure future equity grants, the
Company, its subsidiaries and affiliates and certain agents thereof (together, the “Relevant Companies”) may process
any and all personal or professional data, including but not limited to Social Security or other identification number, home address
and telephone number, date of birth and other information that is necessary or desirable for the administration of the Plan and/or
this Agreement (the “Relevant Information”). By entering into this Agreement, the Optionee (i) authorizes the
Company to collect, process, register and transfer to the Relevant Companies all Relevant Information; (ii) waives any privacy
rights the Optionee may have with respect to the Relevant Information; (iii) authorizes the Relevant Companies to store and
transmit such information in electronic form; and (iv) authorizes the transfer of the Relevant Information to any jurisdiction
in which the Relevant Companies consider appropriate. The Optionee shall have access to, and the right to change, the Relevant
Information. Relevant Information will only be used in accordance with applicable law.
11. Notices.
Notices hereunder shall be mailed or delivered to the Company at its principal place of business and shall be mailed or delivered
to the Optionee at the address on file with the Company or, in either case, at such other address as one party may subsequently
furnish to the other party in writing.
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908 DEVICES INC.
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By:
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Title:
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The foregoing Agreement is hereby accepted
and the terms and conditions thereof hereby agreed to by the undersigned. Electronic acceptance of this Agreement pursuant to the
Company’s instructions to the Optionee (including through an online acceptance process) is acceptable.
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Dated:
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Optionee’s Signature
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Optionee’s name and address:
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Exhibit 10.3
GP Draft dated November 20, 2020
INDEMNIFICATION AGREEMENT
(For Directors
of a Delaware Corporation)
This Indemnification Agreement (“Agreement”)
is made as of ________________ by and between 908 Devices Inc., a Delaware corporation (the “Company”), and
____________ (“Indemnitee”).
RECITALS
WHEREAS, the Company desires to attract
and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company;
WHEREAS, in order to induce Indemnitee to
[provide or continue to provide] services to the Company, the Company wishes to provide for the indemnification of, and advancement
of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Fifth Amended and Restated
Certificate of Incorporation (the “Charter”) and the Amended and Restated Bylaws (the “Bylaws”)
of the Company require indemnification of the officers and directors of the Company, and Indemnitee may also be entitled to indemnification
pursuant to the General Corporation Law of the State of Delaware (the “DGCL”);
WHEREAS, the Charter, the Bylaws and the
DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts
may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification;
WHEREAS, the Board of Directors of the Company
(the “Board”) has determined that the increased difficulty in attracting and retaining highly qualified persons
such as Indemnitee is detrimental to the best interests of the Company’s stockholders;
WHEREAS, it is reasonable and prudent for
the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent
permitted by applicable law, regardless of any amendment or revocation of the Charter or the Bylaws, so that they will [serve or
continue to serve] the Company free from undue concern that they will not be so indemnified;
WHEREAS, this Agreement is a supplement
to and in furtherance of the indemnification provided in the Charter, the Bylaws and any resolutions adopted pursuant thereto,
and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and
WHEREAS, Indemnitee has certain rights
to indemnification and/or insurance provided by [Name of Fund/Sponsor] which Indemnitee and [Name of Fund/Sponsor] intend to be
secondary to the primary obligation of the Company to indemnify Indemnitee as provided in this Agreement, with the Company’s
acknowledgment and agreement to the foregoing being a material condition to Indemnitee’s willingness to [serve or continue
to serve] on the Board.
NOW, THEREFORE, in consideration of the
premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
Section 1. Services
to the Company. Indemnitee agrees to serve as a director of the Company. Indemnitee may at any time and for any reason resign
from such position (subject to any other contractual obligation or any obligation imposed by law), in which event the Company shall
have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment
contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee.
Section 2. Definitions.
As used in this Agreement:
(a) “Affiliate”
and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, as in effect on the date of this Agreement; provided, however,
that no Person who is a director or officer of the Company shall be deemed an Affiliate or an Associate of any other director or
officer of the Company solely as a result of his or her position as director or officer of the Company.
(b) A
Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially Own” and have “Beneficial
Ownership” of, any securities:
(i) which
such Person or any of such Person’s Affiliates or Associates, directly or indirectly, Beneficially Owns (as determined pursuant
to Rule 13d-3 of the Rules under the Exchange Act, as in effect on the date of this Agreement);
(ii) which
such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has: (A) the legal, equitable
or contractual right or obligation to acquire (whether directly or indirectly and whether exercisable immediately or only after
the passage of time, compliance with regulatory requirements, satisfaction of one or more conditions (whether or not within the
control of such Person) or otherwise) upon the exercise of any conversion rights, exchange rights, rights, warrants or options,
or otherwise; (B) the right to vote pursuant to any agreement, arrangement or understanding (whether or not in writing); or
(C) the right to dispose of pursuant to any agreement, arrangement or understanding (whether or not in writing) (other than
customary arrangements with and between underwriters and selling group members with respect to a bona fide public offering
of securities);
(iii) which
are Beneficially Owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person
or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing)
(other than customary agreements with and between underwriters and selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring, holding, voting or disposing of any securities of the Company; or
(iv) that
are the subject of a derivative transaction entered into by such Person or any of such Person’s Affiliates or Associates,
including, for these purposes, any derivative security acquired by such Person or any of such Person’s Affiliates or Associates
that gives such Person or any of such Person’s Affiliates or Associates the economic equivalent of ownership of an amount
of securities due to the fact that the value of the derivative security is explicitly determined by reference to the price or value
of such securities, or that provides such Person or any of such Person’s Affiliates or Associates an opportunity, directly
or indirectly, to profit or to share in any profit derived from any change in the value of such securities, in any case without
regard to whether (A) such derivative security conveys any voting rights in such securities to such Person or any of such
Person’s Affiliates or Associates; (B) the derivative security is required to be, or capable of being, settled through
delivery of such securities; or (C) such Person or any of such Person’s Affiliates or Associates may have entered into
other transactions that hedge the economic effect of such derivative security;
Notwithstanding the foregoing, no Person
engaged in business as an underwriter of securities shall be deemed the Beneficial Owner of any securities acquired through such
Person’s participation as an underwriter in good faith in a firm commitment underwriting.
(c) A
“Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of
any of the following events:
(i) Acquisition
of Stock by Third Party. Any Person is or becomes the Beneficial Owner (as defined above), directly or indirectly, of securities
of the Company representing fifty percent (50%)1 or more of the combined voting power of the Company’s then
outstanding securities unless the change in relative Beneficial Ownership of the Company’s securities by any Person results
solely from a reduction in the aggregate number of outstanding shares of securities entitled to vote generally in the election
of directors, provided that a Change of Control shall be deemed to have occurred if subsequent to such reduction such Person becomes
the Beneficial Owner, directly or indirectly, of any additional securities of the Company conferring upon such Person any additional
voting power;
(ii) Change
in Board of Directors. During any period of two (2) consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 2(c)(i),
2(c)(iii) or 2(c)(iv) whose election by the Board or nomination for election by the Company’s stockholders was
approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority
of the members of the Board;
1
Some companies have gone as low as 25% for this threshold. Generally, 50% would seem to be a more reasonable threshold.
(iii) Corporate
Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or
consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or successor
entity) more than 50% of the combined voting power of the voting securities of the surviving or successor entity outstanding immediately
after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing
body of such surviving or successor entity;
(iv) Liquidation.
The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale, lease, exchange
or other transfer by the Company, in one or a series of related transactions, of all or substantially all of the Company’s
assets; and
(v) Other Events.
There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act
of 1934, as amended, whether or not the Company is then subject to such reporting requirement.
(d) “Corporate
Status” describes the status of a person as a current or former director of the Company or current or former director,
manager, partner, officer, employee, agent or trustee of any other Enterprise which such person is or was serving at the request
of the Company.
(e) “Enforcement
Expenses” shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of experts, travel
expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other out-of-pocket
disbursements or expenses of the types customarily incurred in connection with an action to enforce indemnification or advancement
rights, or an appeal from such action. Expenses, however, shall not include fees, salaries, wages or benefits owed to Indemnitee.
(f) “Enterprise”
shall mean any corporation (other than the Company), partnership, joint venture, trust, employee benefit plan, limited liability
company, or other legal entity of which Indemnitee is or was serving at the request of the Company as a director, manager, partner,
officer, employee, agent or trustee.
(g) “Expenses”
shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of experts, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other out-of-pocket disbursements
or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating,
being or preparing to be a witness in, or otherwise participating in, a Proceeding or an appeal resulting from a Proceeding. Expenses,
however, shall not include amounts paid in settlement by Indemnitee, the amount of judgments or fines against Indemnitee or fees,
salaries, wages or benefits owed to Indemnitee.
(h) “Independent
Counsel” means a law firm, or a partner (or, if applicable, member or shareholder) of such a law firm, that is experienced
in matters of Delaware corporation law and neither presently is, nor in the past five (5) years has been, retained to represent:
(i) the Company, any subsidiary of the Company, any Enterprise or Indemnitee in any matter material to any such party; or
(ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing,
the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct
then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s
rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to
above and to fully indemnify such counsel against any and all expenses, claims, liabilities and damages arising out of or relating
to this Agreement or its engagement pursuant hereto.
(k) “Person”
shall mean (i) an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company,
a trust, a business trust, a government or political subdivision, any unincorporated organization, or any other association or
entity including any successor (by merger or otherwise) thereof or thereto, and (ii) a “group” as that term is
used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
(j) The
term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute
resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether
brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, regulatory or investigative
nature, and whether formal or informal, in which Indemnitee was, is or will be involved as a party or otherwise by reason of the
fact that Indemnitee is or was a director of the Company or is or was serving at the request of the Company as a director, manager,
partner, officer, employee, agent or trustee of any Enterprise or by reason of any action taken by Indemnitee or of any action
taken on his or her part while acting as a director of the Company or while serving at the request of the Company as a director,
manager, partner, officer, employee, agent or trustee of any Enterprise, in each case whether or not serving in such capacity at
the time any liability or expense is incurred for which indemnification, reimbursement or advancement of expenses can be provided
under this Agreement; provided, however, that the term “Proceeding” shall not include any action, suit
or arbitration, or part thereof, initiated by Indemnitee to enforce Indemnitee’s rights under this Agreement as provided
for in Section 12(a) of this Agreement.
Section 3. Indemnity
in Third-Party Proceedings. The Company shall indemnify Indemnitee to the extent set forth in this Section 3 if Indemnitee
is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the
Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified against all Expenses,
judgments, fines, penalties, excise taxes, and amounts paid in settlement actually and reasonably incurred by Indemnitee or on
his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal
proceeding, had no reasonable cause to believe that his or her conduct was unlawful.
Section 4. Indemnity
in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee to the extent set forth in this Section 4
if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company
to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified against all Expenses
actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or
matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim,
issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only
to the extent that the Delaware Court of Chancery (the “Delaware Court”) shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnification for such expenses as the Delaware Court shall deem proper.
Section 5. Indemnification
for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement and except
as provided in Section 7, to the extent that Indemnitee is a party to or a participant in any Proceeding and is successful
in such Proceeding or in defense of any claim, issue or matter therein, the Company shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by him or her in connection therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result
as to such claim, issue or matter.
Section 6. Reimbursement
for Expenses of a Witness or in Response to a Subpoena. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee, by reason of his or her Corporate Status, (i) is a witness in any Proceeding to which Indemnitee is not a
party and is not threatened to be made a party or (ii) receives a subpoena with respect to any Proceeding to which Indemnitee
is not a party and is not threatened to be made a party, the Company shall reimburse Indemnitee for all Expenses actually and reasonably
incurred by him or her or on his or her behalf in connection therewith.
Section 7. Exclusions.
Notwithstanding any provision in this Agreement to the contrary, the Company shall not be obligated under this Agreement:
(a) to
indemnify for amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that
Indemnitee has otherwise actually received such amounts under any insurance policy, contract, agreement or otherwise; provided
that the foregoing shall not [i] apply to any personal or umbrella liability insurance maintained by Indemnitee, [or (ii) affect
the rights of Indemnitee or the Fund Indemnitors as set forth in Section 13(c)];
(b) to
indemnify for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the
Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions
of state statutory law or common law, or from the purchase or sale by Indemnitee of such securities in violation of Section 306
of the Sarbanes-Oxley Act of 2002 (“SOX”);
(c) to
indemnify with respect to any Proceeding, or part thereof, brought by Indemnitee against the Company, any legal entity which it
controls, any director or officer thereof or any third party, unless (i) the Board has consented to the initiation of such
Proceeding or part thereof and (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers
vested in the Company under applicable law; provided, however, that this Section 7(d) shall not apply to
(A) counterclaims or affirmative defenses asserted by Indemnitee in an action brought against Indemnitee or (B) any action
brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and
officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is
being sought as described in Section 12; or
(e) to
provide any indemnification or advancement of expenses that is prohibited by applicable law (as such law exists at the time payment
would otherwise be required pursuant to this Agreement).
Section 8. Advancement
of Expenses. Subject to Section 9(b), the Company shall advance the Expenses incurred by Indemnitee in connection with
any Proceeding, and such advancement shall be made within thirty (30) days after the receipt by the Company of a statement or
statements requesting such advances (including any invoices received by Indemnitee, which such invoices may be redacted as necessary
to avoid the waiver of any privilege accorded by applicable law) from time to time, whether prior to or after final disposition
of any Proceeding. Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s
(i) ability to repay the expenses, (ii) ultimate entitlement to indemnification under the other provisions of this Agreement,
and (iii) entitlement to and availability of insurance coverage, including advancement, payment or reimbursement of defense
costs, expenses or covered loss under the provisions of any applicable insurance policy (including, without limitation, whether
such advancement, payment or reimbursement is withheld, conditioned or delayed by the insurer(s)). Indemnitee shall qualify for
advances upon the execution and delivery to the Company of this Agreement which shall constitute an undertaking providing that
Indemnitee undertakes to the fullest extent required by law to repay the advance if and to the extent that it is ultimately determined
by a court of competent jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified
by the Company. No other form of undertaking shall be required. The right to advances under this paragraph shall in all events
continue until final disposition of any Proceeding, including any appeal therein. Nothing in this Section 8 shall limit Indemnitee’s
right to advancement pursuant to Section 12(e) of this Agreement.
Section 9. Procedure
for Notification and Defense of Claim.
(a) To
obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request therefor specifying
the basis for the claim, the amounts for which Indemnitee is seeking payment under this Agreement, and all documentation related
thereto as reasonably requested by the Company.
(b) In
the event that the Company shall be obligated hereunder to provide indemnification for or make any advancement of Expenses with
respect to any Proceeding, the Company shall be entitled to assume the defense of such Proceeding, or any claim, issue or matter
therein, with counsel approved by Indemnitee (which approval shall not be unreasonably withheld or delayed) upon the delivery to
Indemnitee of written notice of the Company’s election to do so. After delivery of such notice, approval of such counsel
by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement
for any fees or expenses of separate counsel subsequently employed by or on behalf of Indemnitee with respect to the same Proceeding;
provided that (i) Indemnitee shall have the right to employ separate counsel in any such Proceeding at Indemnitee’s
expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company,
(B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee
in the conduct of such defense, (C) the Company shall not continue to retain such counsel to defend such Proceeding, or (D) a
Change in Control shall have occurred, then the fees and expenses actually and reasonably incurred by Indemnitee with respect to
his or her separate counsel shall be Expenses hereunder.
(c) In
the event that the Company does not assume the defense in a Proceeding pursuant to paragraph (b) above, then the Company will
be entitled to participate in the Proceeding at its own expense.
(d) The
Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected
without its prior written consent (which consent shall not be unreasonably withheld or delayed). Without limiting the generality
of the foregoing, the fact that an insurer under an applicable insurance policy delays or is unwilling to consent to such settlement
or is or may be in breach of its obligations under such policy, or the fact that directors’ and officers’ liability
insurance is otherwise unavailable or not maintained by the Company, may not be taken into account by the Company in determining
whether to provide its consent. The Company shall not, without the prior written consent of Indemnitee (which consent shall not
be unreasonably withheld or delayed), enter into any settlement which (i) includes an admission of fault of Indemnitee, any
non-monetary remedy imposed on Indemnitee or any monetary damages for which Indemnitee is not wholly and actually indemnified hereunder
or (ii) with respect to any Proceeding with respect to which Indemnitee may be or is made a party or may be otherwise entitled
to seek indemnification hereunder, does not include the full release of Indemnitee from all liability in respect of such Proceeding.
Section 10. Procedure
Upon Application for Indemnification.
(a) Upon
written request by Indemnitee for indemnification pursuant to Section 9(a), a determination, if such determination is required
by applicable law, with respect to Indemnitee’s entitlement to indemnification hereunder shall be made in the specific case
by one of the following methods: (x) if a Change in Control shall have occurred, by Independent Counsel in a written opinion
to the Board; or (y) if a Change in Control shall not have occurred: (i) by a majority vote of the disinterested directors,
even though less than a quorum; (ii) by a committee of disinterested directors designated by a majority vote of the disinterested
directors, even though less than a quorum; or (iii) if there are no disinterested directors or if the disinterested directors
so direct, by Independent Counsel in a written opinion to the Board. For purposes hereof, disinterested directors are those members
of the Board who are not parties to the action, suit or proceeding in respect of which indemnification is sought. In the case that
such determination is made by Independent Counsel, a copy of Independent Counsel’s written opinion shall be delivered to
Indemnitee and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within
thirty (30) days after such determination. Indemnitee shall cooperate with the Independent Counsel or the Company, as applicable,
in making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such counsel
or the Company, upon reasonable advance request, any documentation or information which is not privileged or otherwise protected
from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. The Company shall
likewise cooperate with Indemnitee and Independent Counsel, if applicable, in making such determination with respect to Indemnitee’s
entitlement to indemnification, including providing to such counsel and Indemnitee, upon reasonable advance request, any documentation
or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Company
and reasonably necessary to such determination. Any out-of-pocket costs or expenses (including reasonable attorneys’ fees
and disbursements) actually and reasonably incurred by Indemnitee in so cooperating with the Independent Counsel or the Company
shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the
Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(b) If
the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(a), the Independent
Counsel shall be selected by the Board if a Change in Control shall not have occurred or, if a Change in Control shall have occurred,
by Indemnitee. Indemnitee or the Company, as the case may be, may, within ten (10) days after written notice of such selection,
deliver to the Company or Indemnitee, as the case may be, a written objection to such selection; provided, however,
that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements
of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity
the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel.
If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel
unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. If, within
twenty (20) days after the later of (i) submission by Indemnitee of a written request for indemnification pursuant to Section 9(a),
and (ii) the final disposition of the Proceeding, including any appeal therein, no Independent Counsel shall have been selected
without objection, either Indemnitee or the Company may petition the Delaware Court for resolution of any objection which shall
have been made by Indemnitee or the Company to the selection of Independent Counsel and/or for the appointment as Independent Counsel
of a person selected by the court or by such other person as the court shall designate. The person with respect to whom all objections
are so resolved or the person so appointed shall act as Independent Counsel under Section 10(a) hereof. Upon the due
commencement of any judicial proceeding or arbitration pursuant to Section 12(a) of this Agreement, Independent
Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
(c) Notwithstanding
anything to the contrary contained in this Agreement, the determination of entitlement to indemnification under this Agreement
shall be made without regard to the Indemnitee’s entitlement to and availability of insurance coverage, including advancement,
payment or reimbursement of defense costs, expenses or covered loss under the provisions of any applicable insurance policy (including,
without limitation, whether such advancement, payment or reimbursement is withheld, conditioned or delayed by the insurer(s)).
Section 11. Presumptions
and Effect of Certain Proceedings.
(a) To
the extent permitted by applicable law, in making a determination with respect to entitlement to indemnification hereunder, it
shall be presumed that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 9(a) of this Agreement, and the Company shall have the burden of proof and
the burden of persuasion by clear and convincing evidence to overcome that presumption in connection with the making of any determination
contrary to that presumption.
(b) The
termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a
plea of guilty, nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement)
of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with
respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.
(c) Indemnitee
shall be deemed to have acted in good faith if Indemnitee’s actions are based on the records or books of account of the Company
or any other Enterprise, including financial statements, or on information supplied to Indemnitee by the directors, officers, agents
or employees of the Company or any other Enterprise in the course of their duties, or on the advice of legal counsel for the Company
or any other Enterprise or on information or records given or reports made to the Company or any other Enterprise by an independent
certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or any other Enterprise.
The provisions of this Section 11(c) shall not be deemed to be exclusive or to limit in any way the other circumstances
in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. In addition, the
knowledge and/or actions, or failure to act, of any director, manager, partner, officer, employee, agent or trustee of the Company,
any subsidiary of the Company, or any Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification
under this Agreement. Whether or not the foregoing provisions of this Section 11(c) are satisfied, it shall in any event
be presumed that Indemnitee has at all times acted in good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the
burden of persuasion by clear and convincing evidence.
Section 12. Remedies
of Indemnitee.
(a) Subject
to Section 12(f), in the event that (i) a determination is made pursuant to Section 10 of this Agreement that Indemnitee
is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 8
of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(a) of
this Agreement within sixty (60) days after receipt by the Company of the request for indemnification for which a determination
is to be made other than by Independent Counsel, (iv) payment of indemnification or reimbursement of expenses is not made
pursuant to Section 5 or 6 or the last sentence of Section 10(a) of this Agreement within thirty (30) days after
receipt by the Company of a written request therefor (including any invoices received by Indemnitee, which such invoices may be
redacted as necessary to avoid the waiver of any privilege accorded by applicable law) or (v) payment of indemnification pursuant
to Section 3 or 4 of this Agreement is not made within thirty (30) days after a determination has been made that Indemnitee
is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Delaware Court of his or her entitlement
to such indemnification or advancement. Alternatively, Indemnitee, at his or her option, may seek an award in arbitration
to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association.
Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date
on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however,
that the foregoing time limitation shall not apply in respect of a proceeding brought by Indemnitee to enforce his or her rights
under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or
award in arbitration.
(b) In
the event that a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is not
entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall be conducted
in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse
determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Company shall have the
burden of proving Indemnitee is not entitled to indemnification or advancement, as the case may be.
(c) If
a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12,
absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s
statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification
under applicable law.
(d) The
Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12
that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court
or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
(e) The
Company shall indemnify Indemnitee to the fullest extent permitted by law against any and all Enforcement Expenses and, if requested
by Indemnitee, shall (within thirty (30) days after receipt by the Company of a written request therefor) advance, to the extent
not prohibited by law, such Enforcement Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action
brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and
officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is
being sought. Such written request for advancement shall include invoices received by Indemnitee in connection with such Enforcement
Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures
made that would cause Indemnitee to waive any privilege accorded by applicable law need not be included with the invoice.
(f) Notwithstanding
anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be
required to be made prior to the final disposition of the Proceeding, including any appeal therein.
Section 13. Non-exclusivity;
Survival of Rights; Insurance; Primacy of Indemnification; Subrogation.
(a) The
rights of indemnification and to receive advancement as provided by this Agreement shall not be deemed exclusive of any other rights
to which Indemnitee may at any time be entitled under applicable law, the Charter, the Bylaws, any agreement, a vote of stockholders
or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall
limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in
his or her Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether
by statute or judicial decision, permits greater indemnification or advancement than would be afforded currently under the Charter,
Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits
so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every
other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other right or remedy.
(b) To
the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, managers, partners,
officers, employees, agents or trustees of the Company or of any other Enterprise, Indemnitee shall be covered by such policy
or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, manager,
partner, officer, employee, agent or trustee under such policy or policies. If, at the time of the receipt of a notice of a claim
pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt
notice of such claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable
as a result of such Proceeding in accordance with the terms of such policies. Upon request of Indemnitee, the Company shall also
promptly provide to Indemnitee: (i) copies of all of the Company’s potentially applicable directors’ and officers’
liability insurance policies, (ii) copies of such notices delivered to the applicable insurers, and (iii) copies of all
subsequent communications and correspondence between the Company and such insurers regarding the Proceeding.
(c) The
Company hereby acknowledges that Indemnitee has certain rights to indemnification, advancement of expenses and/or insurance provided
by [Name of Fund/Sponsor] and certain of [its][their] affiliates (collectively, the “Fund Indemnitors”). The
Company hereby agrees (i) that it is the indemnitor of first resort (i.e., its obligations to Indemnitee are primary
and any obligation of the Fund Indemnitors to advance expenses or to provide indemnification for the same expenses or liabilities
incurred by Indemnitee are secondary), (ii) that it shall be required to advance the full amount of expenses incurred by Indemnitee
and shall be liable for the full amount of all Expenses, judgments, penalties, fines and amounts paid in settlement to the extent
legally permitted and as required by the terms of this Agreement and the Charter and/or Bylaws (or any other agreement between
the Company and Indemnitee), without regard to any rights Indemnitee may have against the Fund Indemnitors, and (iii) that
it irrevocably waives, relinquishes and releases the Fund Indemnitors from any and all claims against the Fund Indemnitors for
contribution, subrogation or any other recovery of any kind in respect thereof. The Company further agrees that no advancement
or payment by the Fund Indemnitors on behalf of Indemnitee with respect to any claim for which Indemnitee has sought indemnification
from the Company shall affect the foregoing and the Fund Indemnitors shall have a right of contribution and/or be subrogated to
the extent of such advancement or payment to all of the rights of recovery of Indemnitee against the Company. The Company and Indemnitee
agree that the Fund Indemnitors are express third party beneficiaries of the terms of this Section 13(c).
(d) Except
as provided in paragraph (c) above, in the event of any payment under this Agreement, the Company shall be subrogated to the
extent of such payment to all of the rights of recovery of Indemnitee [(other than against the Fund Indemnitors)], who shall execute
all papers required and take all action necessary to secure such rights, including execution of such documents as are necessary
to enable the Company to bring suit to enforce such rights.
(e) Except
as provided in paragraph (c) above, the Company’s obligation to provide indemnification or advancement hereunder to
Indemnitee who is or was serving at the request of the Company as a director, manager, partner, officer, employee, agent or trustee
of any other Enterprise shall be reduced by any amount Indemnitee has actually received as indemnification or advancement from
such other Enterprise.
Section 14. Duration
of Agreement. This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date
that Indemnitee shall have ceased to serve as a director of the Company or (b) one (1) year after the final termination
of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of indemnification or advancement
hereunder and of any proceeding commenced by Indemnitee pursuant to Section 12 of this Agreement relating thereto. This Agreement
shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his or her heirs,
executors and administrators. The Company shall require and cause any successor (whether direct or indirect by purchase, merger,
consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written
agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if no such succession had taken place.
Section 15. Severability.
If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation,
each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable
to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary
to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested thereby.
Section 16. Enforcement.
(a) The
Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby
in order to induce Indemnitee to [serve or continue to serve] as a director of the Company, and the Company acknowledges that Indemnitee
is relying upon this Agreement in serving as a director of the Company.
(b) This
Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter
hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Charter, the Bylaws and
applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.
Section 17. Modification
and Waiver. No supplement, modification or amendment, or waiver of any provision, of this Agreement shall be binding unless
executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver. No supplement, modification
or amendment of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement
in respect of any action taken or omitted by such Indemnitee prior to such supplement, modification or amendment.
Section 18. Notice
by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification,
reimbursement or advancement as provided hereunder. The failure of Indemnitee to so notify the Company or any delay in notification
shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise. unless, and
then only to the extent that, the Company did not otherwise learn of the Proceeding and such delay is materially prejudicial to
the Company’s ability to defend such Proceeding or matter; and, provided, further, that notice will be deemed to have been
given without any action on the part of Indemnitee in the event the Company is a party to the same Proceeding.
Section 19. Notices.
All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have
been directed, (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date
on which it is so mailed, (iii) mailed by reputable overnight courier and receipted for by the party to whom said notice
or other communication shall have been directed or (iv) sent by facsimile transmission, with receipt of oral confirmation
that such transmission has been received:
(a) If
to Indemnitee, at such address as Indemnitee shall provide to the Company.
(b) If
to the Company to:
___________________________
___________________________
___________________________
Attention:___________________
or to any other address as may have been furnished to Indemnitee
by the Company.
Section 20. Contribution.
To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred
by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses,
in connection with any Proceeding in such proportion as is deemed fair and reasonable in light of all of the circumstances in order
to reflect (i) the relative benefits received by the Company and Indemnitee in connection with the event(s) and/or transaction(s) giving
rise to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers, employees and agents)
and Indemnitee in connection with such event(s) and/or transactions.
Section 21. Internal
Revenue Code Section 409A. The Company intends for this Agreement to comply with the Indemnification exception under Section 1.409A-1(b)(10) of
the regulations promulgated under the Internal Revenue Code of 1986, as amended (the “Code”), which provides
that indemnification of, or the purchase of an insurance policy providing for payments of, all or part of the expenses incurred
or damages paid or payable by Indemnitee with respect to a bona fide claim against Indemnitee or the Company do not provide for
a deferral of compensation, subject to Section 409A of the Code, where such claim is based on actions or failures to act by
Indemnitee in his or her capacity as a service provider of the Company. The parties intend that this Agreement be interpreted and
construed with such intent.
Section 22. Applicable
Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect
to any arbitration commenced by Indemnitee pursuant to Section 12(a) of this Agreement, the Company and Indemnitee hereby
irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement
shall be brought only in the Delaware Court, and not in any other state or federal court in the United States of America or any
court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any
action or proceeding arising out of or in connection with this Agreement, (iii) consent to service of process at the address
set forth in Section 19 of this Agreement with the same legal force and validity as if served upon such party personally within
the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court,
and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court
has been brought in an improper or inconvenient forum.
Section 23. Headings.
The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
Section 24. Identical
Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to
be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the party
against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
Section 25. Monetary
Damages Insufficient/Specific Enforcement. The Company and Indemnitee agree that a monetary remedy for breach of this Agreement
may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm.
Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance
hereof, without any necessity of showing actual damage or irreparable harm (having agreed that actual and irreparable harm will
result in not forcing the Company to specifically perform its obligations pursuant to this Agreement) and that by seeking injunctive
relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which
he may be entitled. The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and
injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity
of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond
or undertaking may be required of Indemnitee by the Court, and the Company hereby waives any such requirement of a bond or undertaking.
[Remainder of Page Intentionally Left
Blank]
GP Draft dated November 20, 2020
IN WITNESS WHEREOF, the parties have caused
this Agreement to be signed as of the day and year first above written.
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908 Devices Inc.
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By:
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Name:
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Title:
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[Name of Indemnitee]
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Exhibit 10.4
GP Draft dated November 20, 2020
INDEMNIFICATION AGREEMENT
(For Officers of a Delaware Corporation)
This Indemnification Agreement (“Agreement”)
is made as of ________________ by and between 908 Devices Inc., a Delaware corporation (the “Company”), and
____________ (“Indemnitee”).
RECITALS
WHEREAS, the Company desires to attract
and retain the services of highly qualified individuals, such as Indemnitee, to serve the Company;
WHEREAS, in order to induce Indemnitee to
[provide or continue to provide] services to the Company, the Company wishes to provide for the indemnification of, and advancement
of expenses to, Indemnitee to the maximum extent permitted by law;
WHEREAS, the Fifth Amended and Restated
Certificate of Incorporation (the “Charter”) and the Amended and Restated Bylaws (the “Bylaws”)
of the Company require indemnification of the officers and directors of the Company, and Indemnitee may also be entitled to indemnification
pursuant to the General Corporation Law of the State of Delaware (the “DGCL”);
WHEREAS, the Charter, the Bylaws and the
DGCL expressly provide that the indemnification provisions set forth therein are not exclusive, and thereby contemplate that contracts
may be entered into between the Company and members of the board of directors, officers and other persons with respect to indemnification;
WHEREAS, the Board of Directors of the Company
(the “Board”) has determined that the increased difficulty in attracting and retaining highly qualified persons
such as Indemnitee is detrimental to the best interests of the Company’s stockholders;
WHEREAS, it is reasonable and prudent for
the Company contractually to obligate itself to indemnify, and to advance expenses on behalf of, such persons to the fullest extent
permitted by applicable law, regardless of any amendment or revocation of the Charter or the Bylaws, so that they will [serve or
continue to serve] the Company free from undue concern that they will not be so indemnified;
WHEREAS, this Agreement is a supplement
to and in furtherance of the indemnification provided in the Charter, the Bylaws and any resolutions adopted pursuant thereto,
and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder; and
NOW, THEREFORE, in consideration of the
premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:
Section 1. Services
to the Company. Indemnitee agrees to serve as an officer of the Company. Indemnitee may at any time and for any reason resign
from such position (subject to any other contractual obligation or any obligation imposed by law), in which event the Company shall
have no obligation under this Agreement to continue Indemnitee in such position. This Agreement shall not be deemed an employment
contract between the Company (or any of its subsidiaries or any Enterprise) and Indemnitee.
Section 2. Definitions.
As used in this Agreement:
(a) “Affiliate”
and “Associate” shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as amended, as in effect on the date of this Agreement; provided, however,
that no Person who is a director or officer of the Company shall be deemed an Affiliate or an Associate of any other director or
officer of the Company solely as a result of his or her position as director or officer of the Company.
(b) A
Person shall be deemed the “Beneficial Owner” of, and shall be deemed to “Beneficially Own” and have “Beneficial
Ownership” of, any securities:
(i) which
such Person or any of such Person’s Affiliates or Associates, directly or indirectly, Beneficially Owns (as determined pursuant
to Rule 13d-3 of the Rules under the Exchange Act, as in effect on the date of this Agreement);
(ii) which
such Person or any of such Person’s Affiliates or Associates, directly or indirectly, has: (A) the legal, equitable
or contractual right or obligation to acquire (whether directly or indirectly and whether exercisable immediately or only after
the passage of time, compliance with regulatory requirements, satisfaction of one or more conditions (whether or not within the
control of such Person) or otherwise) upon the exercise of any conversion rights, exchange rights, rights, warrants or options,
or otherwise; (B) the right to vote pursuant to any agreement, arrangement or understanding (whether or not in writing); or
(C) the right to dispose of pursuant to any agreement, arrangement or understanding (whether or not in writing) (other than
customary arrangements with and between underwriters and selling group members with respect to a bona fide public offering
of securities);
(iii) which
are Beneficially Owned, directly or indirectly, by any other Person (or any Affiliate or Associate thereof) with which such Person
or any of such Person’s Affiliates or Associates has any agreement, arrangement or understanding (whether or not in writing)
(other than customary agreements with and between underwriters and selling group members with respect to a bona fide public
offering of securities) for the purpose of acquiring, holding, voting or disposing of any securities of the Company; or
(iv) that
are the subject of a derivative transaction entered into by such Person or any of such Person’s Affiliates or Associates,
including, for these purposes, any derivative security acquired by such Person or any of such Person’s Affiliates or Associates
that gives such Person or any of such Person’s Affiliates or Associates the economic equivalent of ownership of an amount
of securities due to the fact that the value of the derivative security is explicitly determined by reference to the price or value
of such securities, or that provides such Person or any of such Person’s Affiliates or Associates an opportunity, directly
or indirectly, to profit or to share in any profit derived from any change in the value of such securities, in any case without
regard to whether (A) such derivative security conveys any voting rights in such securities to such Person or any of such
Person’s Affiliates or Associates; (B) the derivative security is required to be, or capable of being, settled through
delivery of such securities; or (C) such Person or any of such Person’s Affiliates or Associates may have entered into
other transactions that hedge the economic effect of such derivative security;
Notwithstanding the foregoing, no Person
engaged in business as an underwriter of securities shall be deemed the Beneficial Owner of any securities acquired through such
Person’s participation as an underwriter in good faith in a firm commitment underwriting.
(c) A
“Change in Control” shall be deemed to occur upon the earliest to occur after the date of this Agreement of
any of the following events:
(i) Acquisition
of Stock by Third Party. Any Person is or becomes the Beneficial Owner (as defined above), directly or indirectly, of securities
of the Company representing fifty percent (50%) or more of the combined voting power of the Company’s then outstanding securities
unless the change in relative Beneficial Ownership of the Company’s securities by any Person results solely from a reduction
in the aggregate number of outstanding shares of securities entitled to vote generally in the election of directors, provided that
a Change of Control shall be deemed to have occurred if subsequent to such reduction such Person becomes the Beneficial Owner,
directly or indirectly, of any additional securities of the Company conferring upon such Person any additional voting power;
(ii) Change
in Board of Directors. During any period of two (2) consecutive years (not including any period prior to the execution
of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than a director
designated by a person who has entered into an agreement with the Company to effect a transaction described in Sections 2(c)(i),
2(c)(iii) or 2(c)(iv) whose election by the Board or nomination for election by the Company’s stockholders was
approved by a vote of at least two-thirds of the directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority
of the members of the Board;
(iii) Corporate
Transactions. The effective date of a merger or consolidation of the Company with any other entity, other than a merger or
consolidation which would result in the voting securities of the Company outstanding immediately prior to such merger or consolidation
continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or successor
entity) more than 50% of the combined voting power of the voting securities of the surviving or successor entity outstanding immediately
after such merger or consolidation and with the power to elect at least a majority of the board of directors or other governing
body of such surviving or successor entity;
(iv) Liquidation.
The approval by the stockholders of the Company of a complete liquidation of the Company or an agreement for the sale, lease, exchange
or other transfer by the Company, in one or a series of related transactions, of all or substantially all of the Company’s
assets; and
(v) Other Events.
There occurs any other event of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of
Regulation 14A (or a response to any similar item on any similar schedule or form) promulgated under the Securities Exchange Act
of 1934, as amended, whether or not the Company is then subject to such reporting requirement.
(d) “Corporate
Status” describes the status of a person as a current or former officer of the Company or current or former director,
manager, partner, officer, employee, agent or trustee of any other Enterprise which such person is or was serving at the request
of the Company.
(e) “Enforcement
Expenses” shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of experts, travel
expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other out-of-pocket
disbursements or expenses of the types customarily incurred in connection with an action to enforce indemnification or advancement
rights, or an appeal from such action. Expenses, however, shall not include fees, salaries, wages or benefits owed to Indemnitee.
(f) “Enterprise”
shall mean any corporation (other than the Company), partnership, joint venture, trust, employee benefit plan, limited liability
company, or other legal entity of which Indemnitee is or was serving at the request of the Company as a director, manager, partner,
officer, employee, agent or trustee.
(g) “Expenses”
shall include all reasonable attorneys’ fees, court costs, transcript costs, fees of experts, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other out-of-pocket disbursements
or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating,
being or preparing to be a witness in, or otherwise participating in, a Proceeding or an appeal resulting from a Proceeding. Expenses,
however, shall not include amounts paid in settlement by Indemnitee, the amount of judgments or fines against Indemnitee or fees,
salaries, wages or benefits owed to Indemnitee.
(h) “Independent
Counsel” means a law firm, or a partner (or, if applicable, member or shareholder) of such a law firm, that is experienced
in matters of Delaware corporation law and neither presently is, nor in the past five (5) years has been, retained to represent:
(i) the Company, any subsidiary of the Company, any Enterprise or Indemnitee in any matter material to any such party; or
(ii) any other party to the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing,
the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct
then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s
rights under this Agreement. The Company agrees to pay the reasonable fees and expenses of the Independent Counsel referred to
above and to fully indemnify such counsel against any and all expenses, claims, liabilities and damages arising out of or relating
to this Agreement or its engagement pursuant hereto.
(k) “Person”
shall mean (i) an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company,
a trust, a business trust, a government or political subdivision, any unincorporated organization, or any other association or
entity including any successor (by merger or otherwise) thereof or thereto, and (ii) a “group” as that term is
used for purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended.
(j) The
term “Proceeding” shall include any threatened, pending or completed action, suit, arbitration, alternate dispute
resolution mechanism, investigation, inquiry, administrative hearing or any other actual, threatened or completed proceeding, whether
brought in the right of the Company or otherwise and whether of a civil, criminal, administrative, regulatory or investigative
nature, and whether formal or informal, in which Indemnitee was, is or will be involved as a party or otherwise by reason of the
fact that Indemnitee is or was an officer of the Company or is or was serving at the request of the Company as a director, manager,
partner, officer, employee, agent or trustee of any Enterprise or by reason of any action taken by Indemnitee or of any action
taken on his or her part while acting as an officer of the Company or while serving at the request of the Company as a director,
manager, partner, officer, employee, agent or trustee of any Enterprise, in each case whether or not serving in such capacity at
the time any liability or expense is incurred for which indemnification, reimbursement or advancement of expenses can be provided
under this Agreement; provided, however, that the term “Proceeding” shall not include any action, suit
or arbitration, or part thereof, initiated by Indemnitee to enforce Indemnitee’s rights under this Agreement as provided
for in Section 12(a) of this Agreement.
Section 3. Indemnity
in Third-Party Proceedings. The Company shall indemnify Indemnitee to the extent set forth in this Section 3 if Indemnitee
is, or is threatened to be made, a party to or a participant in any Proceeding, other than a Proceeding by or in the right of the
Company to procure a judgment in its favor. Pursuant to this Section 3, Indemnitee shall be indemnified against all Expenses,
judgments, fines, penalties, excise taxes, and amounts paid in settlement actually and reasonably incurred by Indemnitee or on
his or her behalf in connection with such Proceeding or any claim, issue or matter therein, if Indemnitee acted in good faith and
in a manner he or she reasonably believed to be in or not opposed to the best interests of the Company and, in the case of a criminal
proceeding, had no reasonable cause to believe that his or her conduct was unlawful.
Section 4. Indemnity
in Proceedings by or in the Right of the Company. The Company shall indemnify Indemnitee to the extent set forth in this Section 4
if Indemnitee is, or is threatened to be made, a party to or a participant in any Proceeding by or in the right of the Company
to procure a judgment in its favor. Pursuant to this Section 4, Indemnitee shall be indemnified against all Expenses
actually and reasonably incurred by Indemnitee or on his or her behalf in connection with such Proceeding or any claim, issue or
matter therein, if Indemnitee acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Company. No indemnification for Expenses shall be made under this Section 4 in respect of any claim,
issue or matter as to which Indemnitee shall have been finally adjudged by a court to be liable to the Company, unless and only
to the extent that the Delaware Court of Chancery (the “Delaware Court”) shall determine upon application that,
despite the adjudication of liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably
entitled to indemnification for such expenses as the Delaware Court shall deem proper.
Section 5. Indemnification
for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provisions of this Agreement and except
as provided in Section 7, to the extent that Indemnitee is a party to or a participant in any Proceeding and is successful
in such Proceeding or in defense of any claim, issue or matter therein, the Company shall indemnify Indemnitee against all Expenses
actually and reasonably incurred by him or her in connection therewith. If Indemnitee is not wholly successful in such Proceeding
but is successful as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by Indemnitee or on his or her behalf in connection with each
successfully resolved claim, issue or matter. For purposes of this Section and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result
as to such claim, issue or matter.
Section 6. Reimbursement
for Expenses of a Witness or in Response to a Subpoena. Notwithstanding any other provision of this Agreement, to the extent
that Indemnitee, by reason of his or her Corporate Status, (i) is a witness in any Proceeding to which Indemnitee is not a
party and is not threatened to be made a party or (ii) receives a subpoena with respect to any Proceeding to which Indemnitee
is not a party and is not threatened to be made a party, the Company shall reimburse Indemnitee for all Expenses actually and reasonably
incurred by him or her or on his or her behalf in connection therewith.
Section 7. Exclusions.
Notwithstanding any provision in this Agreement to the contrary, the Company shall not be obligated under this Agreement:
(a) to
indemnify for amounts otherwise indemnifiable hereunder (or for which advancement is provided hereunder) if and to the extent that
Indemnitee has otherwise actually received such amounts under any insurance policy, contract, agreement or otherwise; provided
that the foregoing shall not apply to any personal or umbrella liability insurance maintained by Indemnitee;
(b) to
indemnify for an accounting of profits made from the purchase and sale (or sale and purchase) by Indemnitee of securities of the
Company within the meaning of Section 16(b) of the Securities Exchange Act of 1934, as amended, or similar provisions
of state statutory law or common law, or from the purchase or sale by Indemnitee of such securities in violation of Section 306
of the Sarbanes-Oxley Act of 2002 (“SOX”);
(c) to
indemnify for any reimbursement of, or payment to, the Company by Indemnitee of any bonus or other incentive-based or equity-based
compensation or of any profits realized by Indemnitee from the sale of securities of the Company pursuant to Section 304 of
SOX or any formal policy of the Company adopted by the Board (or a committee thereof), or any other remuneration paid to Indemnitee
if it shall be determined by a final judgment or other final adjudication that such remuneration was in violation of law;
(d) to
indemnify with respect to any Proceeding, or part thereof, brought by Indemnitee against the Company, any legal entity which it
controls, any director or officer thereof or any third party, unless (i) the Board has consented to the initiation of such
Proceeding or part thereof and (ii) the Company provides the indemnification, in its sole discretion, pursuant to the powers
vested in the Company under applicable law; provided, however, that this Section 7(d) shall not apply to
(A) counterclaims or affirmative defenses asserted by Indemnitee in an action brought against Indemnitee or (B) any action
brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and
officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is
being sought as described in Section 12; or
(e) to
provide any indemnification or advancement of expenses that is prohibited by applicable law (as such law exists at the time payment
would otherwise be required pursuant to this Agreement).
Section 8. Advancement
of Expenses. Subject to Section 9(b), the Company shall advance the Expenses incurred by Indemnitee in connection with
any Proceeding, and such advancement shall be made within thirty (30) after the receipt by the Company of a statement or statements
requesting such advances (including any invoices received by Indemnitee, which such invoices may be redacted as necessary to avoid
the waiver of any privilege accorded by applicable law) from time to time, whether prior to or after final disposition of any Proceeding.
Advances shall be unsecured and interest free. Advances shall be made without regard to Indemnitee’s (i) ability to
repay the expenses, (ii) ultimate entitlement to indemnification under the other provisions of this Agreement, and (iii) entitlement
to and availability of insurance coverage, including advancement, payment or reimbursement of defense costs, expenses or covered
loss under the provisions of any applicable insurance policy (including, without limitation, whether such advancement, payment
or reimbursement is withheld, conditioned or delayed by the insurer(s)). Indemnitee shall qualify for advances upon the execution
and delivery to the Company of this Agreement which shall constitute an undertaking providing that Indemnitee undertakes to the
fullest extent required by law to repay the advance if and to the extent that it is ultimately determined by a court of competent
jurisdiction in a final judgment, not subject to appeal, that Indemnitee is not entitled to be indemnified by the Company. No other
form of undertaking shall be required. The right to advances under this paragraph shall in all events continue until final disposition
of any Proceeding, including any appeal therein. Nothing in this Section 8 shall limit Indemnitee’s right to advancement
pursuant to Section 12(e) of this Agreement.
Section 9. Procedure
for Notification and Defense of Claim.
(a) To
obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request therefor specifying
the basis for the claim, the amounts for which Indemnitee is seeking payment under this Agreement, and all documentation related
thereto as reasonably requested by the Company.
(b) In
the event that the Company shall be obligated hereunder to provide indemnification for or make any advancement of Expenses with
respect to any Proceeding, the Company shall be entitled to assume the defense of such Proceeding, or any claim, issue or matter
therein, with counsel approved by Indemnitee (which approval shall not be unreasonably withheld or delayed) upon the delivery to
Indemnitee of written notice of the Company’s election to do so. After delivery of such notice, approval of such counsel
by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement
for any fees or expenses of separate counsel subsequently employed by or on behalf of Indemnitee with respect to the same Proceeding;
provided that (i) Indemnitee shall have the right to employ separate counsel in any such Proceeding at Indemnitee’s
expense and (ii) if (A) the employment of separate counsel by Indemnitee has been previously authorized by the Company,
(B) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee
in the conduct of such defense, (C) the Company shall not continue to retain such counsel to defend such Proceeding, or (D) a
Change in Control shall have occurred, then the fees and expenses actually and reasonably incurred by Indemnitee with respect to
his or her separate counsel shall be Expenses hereunder.
(c) In
the event that the Company does not assume the defense in a Proceeding pursuant to paragraph (b) above, then the Company will
be entitled to participate in the Proceeding at its own expense.
(d) The
Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any Proceeding effected
without its prior written consent (which consent shall not be unreasonably withheld or delayed). Without limiting the generality
of the foregoing, the fact that an insurer under an applicable insurance policy delays or is unwilling to consent to such settlement
or is or may be in breach of its obligations under such policy, or the fact that directors’ and officers’ liability
insurance is otherwise unavailable or not maintained by the Company, may not be taken into account by the Company in determining
whether to provide its consent. The Company shall not, without the prior written consent of Indemnitee (which consent shall not
be unreasonably withheld or delayed), enter into any settlement which (i) includes an admission of fault of Indemnitee, any
non-monetary remedy imposed on Indemnitee or any monetary damages for which Indemnitee is not wholly and actually indemnified hereunder
or (ii) with respect to any Proceeding with respect to which Indemnitee may be or is made a party or may be otherwise entitled
to seek indemnification hereunder, does not include the full release of Indemnitee from all liability in respect of such Proceeding.
Section 10. Procedure
Upon Application for Indemnification.
(a) Upon
written request by Indemnitee for indemnification pursuant to Section 9(a), a determination, if such determination is required
by applicable law, with respect to Indemnitee’s entitlement to indemnification hereunder shall be made in the specific case
by one of the following methods: (x) if a Change in Control shall have occurred, by Independent Counsel in a written opinion
to the Board; or (y) if a Change in Control shall not have occurred: (i) by a majority vote of the disinterested directors,
even though less than a quorum; (ii) by a committee of disinterested directors designated by a majority vote of the disinterested
directors, even though less than a quorum; or (iii) if there are no disinterested directors or if the disinterested directors
so direct, by Independent Counsel in a written opinion to the Board. For purposes hereof, disinterested directors are those members
of the Board who are not parties to the action, suit or proceeding in respect of which indemnification is sought. In the case that
such determination is made by Independent Counsel, a copy of Independent Counsel’s written opinion shall be delivered to
Indemnitee and, if it is so determined that Indemnitee is entitled to indemnification, payment to Indemnitee shall be made within
thirty (30) days after such determination. Indemnitee shall cooperate with the Independent Counsel or the Company, as applicable,
in making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such counsel
or the Company, upon reasonable advance request, any documentation or information which is not privileged or otherwise protected
from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. The Company shall
likewise cooperate with Indemnitee and Independent Counsel, if applicable, in making such determination with respect to Indemnitee’s
entitlement to indemnification, including providing to such counsel and Indemnitee, upon reasonable advance request, any documentation
or information which is not privileged or otherwise protected from disclosure and which is reasonably available to the Company
and reasonably necessary to such determination. Any out-of-pocket costs or expenses (including reasonable attorneys’ fees
and disbursements) actually and reasonably incurred by Indemnitee in so cooperating with the Independent Counsel or the Company
shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the
Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(b) If
the determination of entitlement to indemnification is to be made by Independent Counsel pursuant to Section 10(a), the Independent
Counsel shall be selected by the Board if a Change in Control shall not have occurred or, if a Change in Control shall have occurred,
by Indemnitee. Indemnitee or the Company, as the case may be, may, within ten (10) days after written notice of such selection,
deliver to the Company or Indemnitee, as the case may be, a written objection to such selection; provided, however,
that such objection may be asserted only on the ground that the Independent Counsel so selected does not meet the requirements
of “Independent Counsel” as defined in Section 2 of this Agreement, and the objection shall set forth with particularity
the factual basis of such assertion. Absent a proper and timely objection, the person so selected shall act as Independent Counsel.
If such written objection is so made and substantiated, the Independent Counsel so selected may not serve as Independent Counsel
unless and until such objection is withdrawn or the Delaware Court has determined that such objection is without merit. If, within
twenty (20) days after the later of (i) submission by Indemnitee of a written request for indemnification pursuant to Section 9(a),
and (ii) the final disposition of the Proceeding, including any appeal therein, no Independent Counsel shall have been selected
without objection, either Indemnitee or the Company may petition the Delaware Court for resolution of any objection which shall
have been made by Indemnitee or the Company to the selection of Independent Counsel and/or for the appointment as Independent Counsel
of a person selected by the court or by such other person as the court shall designate. The person with respect to whom all objections
are so resolved or the person so appointed shall act as Independent Counsel under Section 10(a) hereof. Upon the due
commencement of any judicial proceeding or arbitration pursuant to Section 12(a) of this Agreement, Independent
Counsel shall be discharged and relieved of any further responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
(c) Notwithstanding
anything to the contrary contained in this Agreement, the determination of entitlement to indemnification under this Agreement
shall be made without regard to the Indemnitee’s entitlement to and availability of insurance coverage, including advancement,
payment or reimbursement of defense costs, expenses or covered loss under the provisions of any applicable insurance policy (including,
without limitation, whether such advancement, payment or reimbursement is withheld, conditioned or delayed by the insurer(s)).
Section 11. Presumptions
and Effect of Certain Proceedings.
(a) To
the extent permitted by applicable law, in making a determination with respect to entitlement to indemnification hereunder, it
shall be presumed that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for
indemnification in accordance with Section 9(a) of this Agreement, and the Company shall have the burden of proof and
the burden of persuasion by clear and convincing evidence to overcome that presumption in connection with the making of any determination
contrary to that presumption.
(b) The
termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement or conviction, or upon a
plea of guilty, nolo contendere or its equivalent, shall not (except as otherwise expressly provided in this Agreement)
of itself adversely affect the right of Indemnitee to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the Company or, with
respect to any criminal Proceeding, that Indemnitee had reasonable cause to believe that his or her conduct was unlawful.
(c) Indemnitee
shall be deemed to have acted in good faith if Indemnitee’s actions are based on the records or books of account of the Company
or any other Enterprise, including financial statements, or on information supplied to Indemnitee by the directors, officers, agents
or employees of the Company or any other Enterprise in the course of their duties, or on the advice of legal counsel for the Company
or any other Enterprise or on information or records given or reports made to the Company or any other Enterprise by an independent
certified public accountant or by an appraiser or other expert selected with reasonable care by the Company or any other Enterprise.
The provisions of this Section 11(c) shall not be deemed to be exclusive or to limit in any way the other circumstances
in which Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement. In addition, the
knowledge and/or actions, or failure to act, of any director, manager, partner, officer, employee, agent or trustee of the Company,
any subsidiary of the Company, or any Enterprise shall not be imputed to Indemnitee for purposes of determining the right to indemnification
under this Agreement. Whether or not the foregoing provisions of this Section 11(c) are satisfied, it shall in any event
be presumed that Indemnitee has at all times acted in good faith and in a manner Indemnitee reasonably believed to be in or not
opposed to the best interests of the Company. Anyone seeking to overcome this presumption shall have the burden of proof and the
burden of persuasion by clear and convincing evidence.
Section 12. Remedies
of Indemnitee.
(a) Subject
to Section 12(f), in the event that (i) a determination is made pursuant to Section 10 of this Agreement that Indemnitee
is not entitled to indemnification under this Agreement, (ii) advancement of Expenses is not timely made pursuant to Section 8
of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 10(a) of
this Agreement within sixty (60) days after receipt by the Company of the request for indemnification for which a determination
is to be made other than by Independent Counsel, (iv) payment of indemnification or reimbursement of expenses is not made
pursuant to Section 5 or 6 or the last sentence of Section 10(a) of this Agreement within thirty (30) days after
receipt by the Company of a written request therefor (including any invoices received by Indemnitee, which such invoices may be
redacted as necessary to avoid the waiver of any privilege accorded by applicable law) or (v) payment of indemnification pursuant
to Section 3 or 4 of this Agreement is not made within thirty (30) days after a determination has been made that Indemnitee
is entitled to indemnification, Indemnitee shall be entitled to an adjudication by the Delaware Court of his or her entitlement
to such indemnification or advancement. Alternatively, Indemnitee, at his or her option, may seek an award in arbitration
to be conducted by a single arbitrator pursuant to the Commercial Arbitration Rules of the American Arbitration Association.
Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date
on which Indemnitee first has the right to commence such proceeding pursuant to this Section 12(a); provided, however,
that the foregoing time limitation shall not apply in respect of a proceeding brought by Indemnitee to enforce his or her rights
under Section 5 of this Agreement. The Company shall not oppose Indemnitee’s right to seek any such adjudication or
award in arbitration.
(b) In
the event that a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is not
entitled to indemnification, any judicial proceeding or arbitration commenced pursuant to this Section 12 shall be conducted
in all respects as a de novo trial, or arbitration, on the merits and Indemnitee shall not be prejudiced by reason of that adverse
determination. In any judicial proceeding or arbitration commenced pursuant to this Section 12, the Company shall have the
burden of proving Indemnitee is not entitled to indemnification or advancement, as the case may be.
(c) If
a determination shall have been made pursuant to Section 10(a) of this Agreement that Indemnitee is entitled to indemnification,
the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 12,
absent (i) a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s
statement not materially misleading, in connection with the request for indemnification, or (ii) a prohibition of such indemnification
under applicable law.
(d) The
Company shall be precluded from asserting in any judicial proceeding or arbitration commenced pursuant to this Section 12
that the procedures and presumptions of this Agreement are not valid, binding and enforceable and shall stipulate in any such court
or before any such arbitrator that the Company is bound by all the provisions of this Agreement.
(e) The
Company shall indemnify Indemnitee to the fullest extent permitted by law against any and all Enforcement Expenses and, if requested
by Indemnitee, shall (within thirty (30) days after receipt by the Company of a written request therefor) advance, to the extent
not prohibited by law, such Enforcement Expenses to Indemnitee, which are incurred by Indemnitee in connection with any action
brought by Indemnitee for indemnification or advancement from the Company under this Agreement or under any directors’ and
officers’ liability insurance policies maintained by the Company in the suit for which indemnification or advancement is
being sought. Such written request for advancement shall include invoices received by Indemnitee in connection with such Enforcement
Expenses but, in the case of invoices in connection with legal services, any references to legal work performed or to expenditures
made that would cause Indemnitee to waive any privilege accorded by applicable law need not be included with the invoice.
(f) Notwithstanding
anything in this Agreement to the contrary, no determination as to entitlement to indemnification under this Agreement shall be
required to be made prior to the final disposition of the Proceeding, including any appeal therein.
Section 13. Non-exclusivity;
Survival of Rights; Insurance; Subrogation.
(a) The
rights of indemnification and to receive advancement as provided by this Agreement shall not be deemed exclusive of any other rights
to which Indemnitee may at any time be entitled under applicable law, the Charter, the Bylaws, any agreement, a vote of stockholders
or a resolution of directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall
limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in
his or her Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Delaware law, whether
by statute or judicial decision, permits greater indemnification or advancement than would be afforded currently under the Charter,
Bylaws and this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits
so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and every
other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter
existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not
prevent the concurrent assertion or employment of any other right or remedy.
(b) To
the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, managers, partners,
officers, employees, agents or trustees of the Company or of any other Enterprise, Indemnitee shall be covered by such policy
or policies in accordance with its or their terms to the maximum extent of the coverage available for any such director, manager,
partner, officer, employee, agent or trustee under such policy or policies. If, at the time of the receipt of a notice of a claim
pursuant to the terms hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt
notice of such claim to the insurers in accordance with the procedures set forth in the respective policies. The Company shall
thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable
as a result of such Proceeding in accordance with the terms of such policies. Upon request of Indemnitee, the Company shall also
promptly provide to Indemnitee: (i) copies of all of the Company’s potentially applicable directors’ and officers’
liability insurance policies, (ii) copies of such notices delivered to the applicable insurers, and (iii) copies of all
subsequent communications and correspondence between the Company and such insurers regarding the Proceeding.
(c) In
the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including
execution of such documents as are necessary to enable the Company to bring suit to enforce such rights.
(d) The
Company’s obligation to provide indemnification or advancement hereunder to Indemnitee who is or was serving at the request
of the Company as a director, manager, partner, officer, employee, agent or trustee of any other Enterprise shall be reduced by
any amount Indemnitee has actually received as indemnification or advancement from such other Enterprise.
Section 14. Duration
of Agreement. This Agreement shall continue until and terminate upon the later of: (a) ten (10) years after the date
that Indemnitee shall have ceased to serve as an officer of the Company or (b) one (1) year after the final termination
of any Proceeding, including any appeal, then pending in respect of which Indemnitee is granted rights of indemnification or advancement
hereunder and of any proceeding commenced by Indemnitee pursuant to Section 12 of this Agreement relating thereto. This Agreement
shall be binding upon the Company and its successors and assigns and shall inure to the benefit of Indemnitee and his or her heirs,
executors and administrators. The Company shall require and cause any successor (whether direct or indirect by purchase, merger,
consolidation or otherwise) to all, substantially all or a substantial part, of the business and/or assets of the Company, by written
agreement in form and substance satisfactory to Indemnitee, expressly to assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform if no such succession had taken place.
Section 15. Severability.
If any provision or provisions of this Agreement shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of this Agreement (including, without limitation,
each portion of any section of this Agreement containing any such provision held to be invalid, illegal or unenforceable, that
is not itself invalid, illegal or unenforceable) shall not in any way be affected or impaired thereby and shall remain enforceable
to the fullest extent permitted by law; (b) such provision or provisions shall be deemed reformed to the extent necessary
to conform to applicable law and to give the maximum effect to the intent of the parties hereto; and (c) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each portion of any section of this Agreement containing
any such provision held to be invalid, illegal or unenforceable, that is not itself invalid, illegal or unenforceable) shall be
construed so as to give effect to the intent manifested thereby.
Section 16. Enforcement.
(a) The
Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on it hereby
in order to induce Indemnitee to [serve or continue to serve] as an officer of the Company, and the Company acknowledges that Indemnitee
is relying upon this Agreement in serving as an officer of the Company.
(b) This
Agreement constitutes the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes
all prior agreements and understandings, oral, written and implied, between the parties hereto with respect to the subject matter
hereof; provided, however, that this Agreement is a supplement to and in furtherance of the Charter, the Bylaws and
applicable law, and shall not be deemed a substitute therefor, nor to diminish or abrogate any rights of Indemnitee thereunder.
Section 17. Modification
and Waiver. No supplement, modification or amendment, or waiver of any provision, of this Agreement shall be binding unless
executed in writing by the parties thereto. No waiver of any of the provisions of this Agreement shall be deemed or shall constitute
a waiver of any other provisions of this Agreement nor shall any waiver constitute a continuing waiver. No supplement, modification
or amendment of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement
in respect of any action taken or omitted by such Indemnitee prior to such supplement, modification or amendment.
Section 18. Notice
by Indemnitee. Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding or matter which may be subject to indemnification,
reimbursement or advancement as provided hereunder. The failure of Indemnitee to so notify the Company or any delay in notification
shall not relieve the Company of any obligation which it may have to Indemnitee under this Agreement or otherwise, unless, and
then only to the extent that, the Company did not otherwise learn of the Proceeding and such delay is materially prejudicial to
the Company’s ability to defend such Proceeding or matter; and, provided, further, that notice will be deemed to have been
given without any action on the part of Indemnitee in the event the Company is a party to the same Proceeding.
Section 19. Notices.
All notices, requests, demands and other communications under this Agreement shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said notice or other communication shall have been
directed, (ii) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which
it is so mailed, (iii) mailed by reputable overnight courier and receipted for by the party to whom said notice or other communication
shall have been directed or (iv) sent by facsimile transmission, with receipt of oral confirmation that such transmission
has been received:
(a) If
to Indemnitee, at such address as Indemnitee shall provide to the Company.
(b) If
to the Company to:
___________________________
___________________________
___________________________
Attention:___________________
or to any other address as may have been furnished to Indemnitee
by the Company.
Section 20. Contribution.
To the fullest extent permissible under applicable law, if the indemnification provided for in this Agreement is unavailable to
Indemnitee for any reason whatsoever, the Company, in lieu of indemnifying Indemnitee, shall contribute to the amount incurred
by Indemnitee, whether for judgments, fines, penalties, excise taxes, amounts paid or to be paid in settlement and/or for Expenses,
in connection with any Proceeding in such proportion as is deemed fair and reasonable in light of all of the circumstances in
order to reflect (i) the relative benefits received by the Company and Indemnitee in connection with the event(s) and/or
transaction(s) giving rise to such Proceeding; and/or (ii) the relative fault of the Company (and its directors, officers,
employees and agents) and Indemnitee in connection with such event(s) and/or transactions.
Section 21. Internal
Revenue Code Section 409A. The Company intends for this Agreement to comply with the Indemnification exception under Section 1.409A-1(b)(10) of
the regulations promulgated under the Internal Revenue Code of 1986, as amended (the “Code”), which provides
that indemnification of, or the purchase of an insurance policy providing for payments of, all or part of the expenses incurred
or damages paid or payable by Indemnitee with respect to a bona fide claim against Indemnitee or the Company do not provide for
a deferral of compensation, subject to Section 409A of the Code, where such claim is based on actions or failures to act by
Indemnitee in his or her capacity as a service provider of the Company. The parties intend that this Agreement be interpreted and
construed with such intent.
Section 22. Applicable
Law and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed by, and construed
and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Except with respect
to any arbitration commenced by Indemnitee pursuant to Section 12(a) of this Agreement, the Company and Indemnitee hereby
irrevocably and unconditionally (i) agree that any action or proceeding arising out of or in connection with this Agreement
shall be brought only in the Delaware Court, and not in any other state or federal court in the United States of America or any
court in any other country, (ii) consent to submit to the exclusive jurisdiction of the Delaware Court for purposes of any
action or proceeding arising out of or in connection with this Agreement, (iii) consent to service of process at the address
set forth in Section 19 of this Agreement with the same legal force and validity as if served upon such party personally within
the State of Delaware, (iv) waive any objection to the laying of venue of any such action or proceeding in the Delaware Court,
and (v) waive, and agree not to plead or to make, any claim that any such action or proceeding brought in the Delaware Court
has been brought in an improper or inconvenient forum.
Section 23. Headings.
The headings of the paragraphs of this Agreement are inserted for convenience only and shall not be deemed to constitute part of
this Agreement or to affect the construction thereof.
Section 24. Identical
Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be deemed to
be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart signed by the
party against whom enforceability is sought needs to be produced to evidence the existence of this Agreement.
Section 25. Monetary
Damages Insufficient/Specific Enforcement. The Company and Indemnitee agree that a monetary remedy for breach of this Agreement
may be inadequate, impracticable and difficult of proof, and further agree that such breach may cause Indemnitee irreparable harm.
Accordingly, the parties hereto agree that Indemnitee may enforce this Agreement by seeking injunctive relief and/or specific performance
hereof, without any necessity of showing actual damage or irreparable harm (having agreed that actual and irreparable harm will
result in not forcing the Company to specifically perform its obligations pursuant to this Agreement) and that by seeking injunctive
relief and/or specific performance, Indemnitee shall not be precluded from seeking or obtaining any other relief to which
he may be entitled. The Company and Indemnitee further agree that Indemnitee shall be entitled to such specific performance and
injunctive relief, including temporary restraining orders, preliminary injunctions and permanent injunctions, without the necessity
of posting bonds or other undertaking in connection therewith. The Company acknowledges that in the absence of a waiver, a bond
or undertaking may be required of Indemnitee by the Court, and the Company hereby waives any such requirement of a bond or undertaking.
[Remainder of Page Intentionally Left
Blank]
GP Draft dated November 20, 2020
IN WITNESS WHEREOF, the parties have caused
this Agreement to be signed as of the day and year first above written.
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908 Devices Inc.
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By:
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Name:
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Title:
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[Name of Indemnitee]
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Exhibit 10.5
MODEL
EMPLOYMENT
AGREEMENT
This Employment Agreement (“Agreement”)
is made between 908 Devices Inc. a Delaware corporation (the “Company”), and _____________________ (“You”)
and is effective as of the closing of the Company’s first underwritten public offering of its equity securities pursuant
to an effective registration statement under the Securities Act of 1933, as amended (the “Effective Date”). [Except
with respect to the Restrictive Covenants Agreement and the Equity Documents (each as defined below), this Agreement supersedes
in all respects all prior agreements between you and the Company regarding the subject matter herein, including without limitation
[(i) the Employment Agreement between you and the Company dated ______ (the “Prior Agreement”), and (ii)] any
offer letter, employment agreement or severance agreement.]
[WHEREAS, the Company desires to employ
you and you desire to be employed by the Company beginning on ______________, ____ (the “Effective Date”) on the terms
contained herein.] [OR] [WHEREAS, the Company desires to continue to employ you and you desire to continue to be employed
by the Company on the new terms and conditions contained herein.]
NOW, THEREFORE, in consideration of the
mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which
is hereby acknowledged, the parties agree as follows:
1. Employment.
(a) Term.
The Company shall employ you and you shall be employed by the Company pursuant to this Agreement commencing as of the Effective
Date and continuing until such employment is terminated in accordance with the provisions hereof (the “Term”). Your
employment with the Company shall [be/continue to be] “at will,” meaning that your employment may be terminated
by the Company or you at any time and for any reason subject to the terms of this Agreement.
(b) Position
and Duties. You shall serve as the [Title] of the Company and shall have such powers and duties as may from
time to time be prescribed by the [Board of Directors (the “Board”)/Chief Executive Officer (the “CEO”)
or other duly authorized executive], provided that such duties are consistent with your position or other positions that you
may hold from time to time. You shall devote your full working time and efforts to the business and affairs of the Company. Notwithstanding
the foregoing, you may (i) serve on other boards of directors or serve as an advisor to non-competitive private or public
companies, in each case subject to the advance written approval of the [Board/CEO], which approval shall not unreasonably
be withheld; and (ii) engage in religious, charitable or other community activities, as long as such services and activities
((i) and (ii)) do not materially interfere with your performance of your duties to the Company as provided in this Agreement.
2. Compensation
and Related Matters.
(a) Base
Salary. Your initial base salary under this Agreement shall be paid at the rate of $[__________] per year. Your base
salary shall be subject to periodic review by the Board or the Compensation Committee of the Board (the “Compensation Committee”),
but no less frequently than annually. The base salary in effect at any given time is referred to herein as “Base Salary.”
The Base Salary shall be payable in a manner that is consistent with the Company’s usual payroll practices for executive
officers, but no less frequently than monthly.
(b) Incentive
Compensation. You shall be eligible to receive annual cash incentive compensation for each calendar year which ends during
the Term and for each partial year, on a pro rata basis, in each case as determined by the Board or the Compensation Committee.
Commencing in calendar year 2021, your initial target annual incentive compensation, including bonuses and/or commissions as applicable,
shall be [___] percent of your Base Salary. The target annual incentive compensation in effect at any given time is referred to
herein as “Target Bonus.” The actual amount of your annual incentive compensation, if any, shall be based on the Company’s
and your performance against objectives to be developed and set from time to time, and determined in the sole discretion of the
Board or the Compensation Committee, subject to the terms of any applicable incentive compensation plan that may be approved by
the Board or the Compensation Committee and in effect from time to time. Except as provided in Sections 5(a) and 6(a)(i) of
this Agreement, to earn incentive compensation, you must be employed by the Company on the day such incentive compensation is
paid.
(c) Expenses.
You shall be entitled to receive prompt reimbursement for all reasonable expenses incurred by you during the Term in performing
services hereunder, in accordance with and subject to the policies and procedures then in effect and established by the Company
for its executive officers.
(d) Other
Benefits. You shall be eligible to participate in or receive benefits under the Company’s employee benefit plans in
effect from time to time, subject to the terms of such plans.
(e) Vacations
and Other Paid Time Off. You shall be entitled to take paid time off in accordance with and subject to the Company’s
applicable paid time off policy for executives, as may be in effect from time to time.
(f) Equity.
The equity awards held by you shall continue to be governed by the terms and conditions of the Company’s applicable equity
incentive plan(s) and the applicable award agreement(s) governing the terms of such equity awards held by you (collectively,
the “Equity Documents”).
3. Termination.
Your employment hereunder may be terminated without any breach of this Agreement under the following circumstances;
(a) Death.
Your employment hereunder shall terminate upon death.
(b) Disability.
The Company may terminate your employment if you are disabled and unable to perform or expected to be unable to perform the essential
functions of your then existing position or positions under this Agreement with or without reasonable accommodation for a period
of 180 days (which need not be consecutive) in any 12-month period. If any question shall arise as to whether during any period
you are disabled so as to be unable to perform the essential functions of your then existing position or positions with or without
reasonable accommodation, you may, and at the request of the Company shall, submit to the Company a certification in reasonable
detail by a physician selected by the Company to whom you or your guardian has no reasonable objection as to whether you are disabled
or how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive
of the issue. You shall cooperate with any reasonable request of the physician in connection with such certification. If such
question shall arise and you shall fail to submit such certification, the Company’s determination of such issue shall be
binding on you. Nothing in this Section 3(b) shall be construed to waive your rights, if any, under existing law including,
without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq. and the Americans with Disabilities
Act, 42 U.S.C. §12101 et seq.
(c) Termination
by Company for Cause. The Company may terminate your employment hereunder for Cause. For purposes of this Agreement,
“Cause” shall mean any of the following:
(i) conduct
by you constituting a material act of misconduct in connection with the performance of your duties that has caused, or is reasonably
likely to cause, the Company material economic harm;
(ii) your
conviction or indictment of, or plea of no contest to, any felony, or any misdemeanor involving moral turpitude, deceit, dishonesty
or fraud;
(iii) a
material breach by you of any of the provisions contained in the Restrictive Covenants Agreement; or
(iv) a
knowing and material violation by you of any of the Company’s material written employment policies.
provided, however, that for Cause to exist for the purposes
of (iii) and (iv) above: (I) you must have failed to cure such breach or violation within 10 days after notice
of such breach or violation from the [Board/CEO] in the case of (iii), and within 30 days after such notice in the case
of (iv), and (II) such breach or violation must have caused, or in the case of (iii) caused or be imminently likely
to cause, the Company material harm.
(d) Termination
Without Cause. The Company may terminate your employment hereunder at any time without Cause. Any termination by the
Company of your employment under this Agreement which does not constitute a termination for Cause under Section 3(c) and
does not result from the death or disability of you under Section 3(a) or (b) shall be deemed a termination without
Cause.
(e) Termination
by You. You may terminate your employment hereunder at any time for any reason, including but not limited to Good Reason.
For purposes of this Agreement, “Good Reason” shall mean that you have complied with the “Good Reason Process”
(hereinafter defined) following the occurrence of any of the following events without your consent (each, a “Good Reason
Condition”):
(i) a
material diminution in your responsibilities, authority or duties;
(ii) a
material diminution in your Base Salary or annual cash incentive compensation opportunity, in each case, except for across-the-board
reductions based on the Company’s financial performance similarly affecting all or substantially all senior management employees
of the Company;
(iii) a
material change in the geographic location at which you provide services to the Company such that your one-way commute increases
by more than 30 miles; or
(iv) the
material breach of this Agreement by the Company.
The “Good Reason Process” consists of the following
steps:
(i) you
reasonably determine in good faith that a “Good Reason Condition” has occurred;
(ii) you
notify the Company in writing of the occurrence of the Good Reason Condition within 90 days of the first occurrence of such condition;
(iii) you
cooperate in good faith with the Company’s efforts, if any, for a period of not less than 30 days following such notice
(the “Cure Period”), to remedy the Good Reason Condition;
(iv) notwithstanding
such efforts, the Good Reason Condition continues to exist; and
(v) you
terminate your employment within 90 days after the end of the Cure Period.
If the Company cures the Good Reason Condition identified in
the notice during the Cure Period, that Good Reason Condition shall be deemed not to have occurred.
(f) If
your employment with the Company is terminated for any reason, the Company shall pay or provide to you (or to your authorized
representative or estate) (i) any Base Salary earned through the Date of Termination, (ii) unpaid expense reimbursements
(subject to, and in accordance with, Section 2(c) of this Agreement) and (iii) any vested benefits you may have
under any employee benefit plan of the Company through the Date of Termination, which vested benefits shall be paid and/or provided
in accordance with the terms of such employee benefit plans (collectively, the “Accrued Obligations”).
4. Notice
and Date of Termination.
(a) Notice
of Termination. Except for termination as specified in Section 3(a), any termination of your employment by the
Company or any such termination by you shall be communicated by written Notice of Termination to the other party hereto. For purposes
of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision
in this Agreement relied upon.
(b) Date
of Termination. “Date of Termination” shall mean: (i) if your employment is terminated by your death,
the date of your death; (ii) if your employment is terminated on account of disability under Section 3(b), the date
on which Notice of Termination is given; (iii) if your employment is terminated by the Company for Cause under Section 3(c),
the date on which Notice of Termination is given after the end of any Cure Period; (iv) if your employment is terminated
by the Company without Cause under Section 3(d), the date on which a Notice of Termination is given or the date otherwise
specified by the Company in the Notice of Termination; (v) if your employment is terminated by you under Section 3(e) other
than for Good Reason, 30 days after the date on which a Notice of Termination is given, and (vi) if your employment is terminated
by you under Section 3(e) for Good Reason, the date on which a Notice of Termination is given after the end of the Cure
Period. Notwithstanding the foregoing, in the event that you give a Notice of Termination to the Company, the Company may unilaterally
accelerate the Date of Termination and such acceleration shall not result in a termination by the Company for purposes of this
Agreement; provided, however, that, notwithstanding the above, it is understood that if the Company accelerates the Date of Termination
after a Good Reason Process has been initiated by you, and the termination by the Company is prior to the end of the Cure Period,
then Good Reason shall be deemed to occur as of such termination.
5. Severance
Pay and Benefits Upon Termination by the Company without Cause or by You for Good Reason Outside the Change in Control Period.
If your employment is terminated by the Company without Cause as provided in Section 3(d), or you terminate your employment
for Good Reason as provided in Section 3(e), in either case outside of the Change in Control Period (as defined below), then,
in addition to the Accrued Obligations, and in either case subject to (i) you signing the release agreement attached hereto as
Exhibit A (the “Separation Agreement and Release”) and (ii) the Separation Agreement and Release becoming irrevocable,
all within the time period required in the Separation Agreement and Release but in no event later than 60 days after the Date
of Termination:
(a) if
the Date of Termination occurs after the last day of the year to which a bonus applies but before the Company pays such bonus,
and if you have earned such bonus under Section 2(b), the Company shall determine the amount and pay you such bonus in a
lump sum when the Company determines and pays bonuses to senior executives for the applicable year (the “Prior Year Earned
Bonus”);
(b) the
Company shall pay you your annual bonus for the year in which the Date of Termination occurs, if such bonus is earned under Section 2(b),
prorated by multiplying such bonus by a fraction, the numerator of which is the number of days you were employed by the Company
during the year in which the Date of Termination occurs and the denominator of which is the number of days in such year (the “Current
Year Prorated Bonus”). The Company shall determine the amount and pay you any Current Year Prorated Bonus in a lump sum
when the Company determines and pays bonuses to senior executives for the applicable year;
(c) the
Company shall pay you Base Salary, in accordance with the Company’s regular payroll practices, for a period of [___] months
following the date of termination (together with any Prior Year Earned Bonus and Current Year Prorated Bonus, the “Severance
Amount”);
(d) subject
to your copayment of premium amounts at the applicable active employees’ rate and your proper election to receive benefits
under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”), the Company shall pay to the
group health plan provider, the COBRA provider or you a monthly payment equal to the monthly employer contribution that the Company
would have made to provide health insurance to you if you had remained employed by the Company until the earliest of (A) the
[__] month anniversary of the Date of Termination; (B) your eligibility for group medical plan benefits under any other employer’s
group medical plan; or (C) the cessation of your continuation rights under COBRA; provided, however, if the Company determines
that it cannot pay such amounts to the group health plan provider or the COBRA provider (if applicable) without potentially violating
applicable law (including, without limitation, Section 2716 of the Public Health Service Act), then the Company shall convert
such payments to payroll payments directly to you for the time period specified above. Such payments shall be subject to tax-related
deductions and withholdings and paid on the Company’s regular payroll dates. You agree that you shall remain responsible
for the employee portion of the health insurance contribution. You authorize the deduction of such employee portion from the Severance
Amount.
(e) The
amounts payable under Sections 5(c) and (d), to the extent taxable, shall be paid out in substantially equal installments
in accordance with the Company’s payroll practice over [__] months commencing within 60 days after the Date of Termination;
provided, however, that if the 60-day period begins in one calendar year and ends in a second calendar year, the Severance Amount,
to the extent it qualifies as “non-qualified deferred compensation” within the meaning of Section 409A of the
Internal Revenue Code of 1986, as amended (the “Code”), shall begin to be paid in the second calendar year by the
last day of such 60-day period; provided, further, that the initial payment shall include a catch-up payment to cover amounts
retroactive to the day immediately following the Date of Termination. Each payment pursuant to this Agreement is intended to constitute
a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2).
6. Severance
Pay and Benefits Upon Termination by the Company without Cause or by the You for Good Reason within the Change in Control Period.
The provisions of this Section 6 shall apply in lieu of, and expressly supersede, the provisions of Section 5 if (i) your
employment is terminated either (a) by the Company without Cause as provided in Section 3(d), or (b) by you for
Good Reason as provided in Section 3(e), and (ii) the Date of Termination is within 12 months after the occurrence of
the first event constituting a Change in Control (such period, the “Change in Control Period”). These provisions shall
terminate and be of no further force or effect after a Change in Control Period.
(a) If
your employment is terminated by the Company without Cause as provided in Section 3(d) or you terminate employment for
Good Reason as provided in Section 3(e) and in either case the Date of Termination occurs during the Change in Control
Period, then, in addition to the Accrued Obligations, and subject to the signing of the Separation Agreement and Release by you
and the Separation Agreement and Release becoming fully effective, all within the time frame set forth in the Separation Agreement
and Release but in no event more than 60 days after the Date of Termination:
(i) the
Company shall pay you any Prior Year Earned Bonus, at the time and in the manner provided in Section 5(a);
(ii) the
Company shall pay you any Current Year Prorated Bonus, at the time and in the manner provided in Section 5(b);
(iii) the
Company shall pay you a lump sum in cash in an amount equal to [___] times the sum of: (A) your then current Base Salary
(or your Base Salary in effect immediately prior to the Change in Control, if higher), plus (B) your Average Bonus. “Average
Bonus” means the average of the annual cash bonuses and commission payments per year, if applicable, received by you for
the three (3) full calendar years immediately preceding the Date of Termination. If you have been employed by the Company
for less than three (3) full calendar years as of the Date of Termination, the Average Bonus shall be calculated using the
prior one (1) or two (2) full calendar years, as applicable. If you have been employed by the Company for less than
one (1) full calendar year as of the Date of Termination, you shall not receive any Average Bonus. To avoid doubt, the Average
Bonus calculation shall not include any “change of control” bonus, “sale of the Company” bonus, signing
bonus or other special bonus (other than annual bonuses and commission payments per year), in each case that you have received
or for which you are eligible.
(iv) notwithstanding
anything to the contrary in any applicable option agreement or other stock-based award agreement, all time-based stock options
and other stock-based awards subject to time-based vesting held by you (the “Time-Based Equity Awards”) shall immediately
accelerate and become fully exercisable or nonforfeitable as of the later of (i) the Date of Termination or (ii) the
effective date of the Separation Agreement and Release (the “Accelerated Vesting Date”); provided that any
termination or forfeiture of the unvested portion of such Time-Based Equity Awards that would otherwise occur on the Date of Termination
in the absence of this Agreement will be delayed until the effective date of the Separation Agreement and Release and will only
occur if the vesting pursuant to this subsection does not occur due to the absence of the Separation Agreement and Release becoming
fully effective within the time period set forth therein. Notwithstanding the foregoing, no additional vesting of the Time-Based
Equity Awards shall occur during the period between your Date of Termination and the Accelerated Vesting Date; and
(v) subject
to your copayment of premium amounts at the applicable active employees’ rate and your proper election to receive benefits
under COBRA, the Company shall pay to the group health plan provider, the COBRA provider or you a monthly payment equal to the
monthly employer contribution that the Company would have made to provide health insurance to you if you had remained employed
by the Company until the earliest of (A) the [__] month anniversary of the Date of Termination; (B) your eligibility
for group medical plan benefits under any other employer’s group medical plan; or (C) the cessation of your continuation
rights under COBRA; provided, however, if the Company determines that it cannot pay such amounts to the group health plan provider
or the COBRA provider (if applicable) without potentially violating applicable law (including, without limitation, Section 2716
of the Public Health Service Act), then the Company shall convert such payments to payroll payments directly to you for the time
period specified above. Such payments shall be subject to tax-related deductions and withholdings and paid on the Company’s
regular payroll dates. You agree that you shall remain responsible for the employee portion of the health insurance contribution.
The amounts payable under Sections 6(a)(iii), (iv) and
(v), to the extent taxable, shall be paid or provided within 60 days after the Date of Termination; provided, however, that if
the 60-day period begins in one calendar year and ends in a second calendar year, such payments to the extent they qualify as
“non-qualified deferred compensation” within the meaning of Section 409A of the Code, shall be paid or commence
to be paid in the second calendar year by the last day of such 60-day period.
(b) Additional
Limitation.
(i) Anything
in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by
the Company to or for the benefit of you, whether paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, calculated in a manner consistent with Section 280G of the Code and the applicable regulations thereunder
(the “Aggregate Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, then the
Aggregate Payments shall be reduced (but not below zero) so that the sum of all of the Aggregate Payments shall be $1.00 less
than the amount at which you become subject to the excise tax imposed by Section 4999 of the Code; provided that such reduction
shall only occur if it would result in you receiving a higher After Tax Amount (as defined below) than you would receive if the
Aggregate Payments were not subject to such reduction. In such event, the Aggregate Payments shall be reduced in the following
order, in each case, in reverse chronological order beginning with the Aggregate Payments that are to be paid the furthest in
time from consummation of the transaction that is subject to Section 280G of the Code: (1) cash payments not subject
to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments
and acceleration; and (4) non-cash forms of benefits; provided that in the case of all the foregoing Aggregate Payments all
amounts or payments that are not subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c) shall
be reduced before any amounts that are subject to calculation under Treas. Reg. §1.280G-1, Q&A-24(b) or (c).
(ii) For
purposes of this Section 6(b), the “After Tax Amount” means the amount of the Aggregate Payments less all federal,
state, and local income, excise and employment taxes imposed on you as a result of your receipt of the Aggregate Payments. For
purposes of determining the After Tax Amount, you shall be deemed to pay federal income taxes at the highest marginal rate of
federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and
local income taxes at the highest marginal rates of individual taxation in each applicable state and locality, net of the maximum
reduction in federal income taxes which could be obtained from deduction of such state and local taxes.
(iii) The
determination as to whether a reduction in the Aggregate Payments shall be made pursuant to Section 6(b)(i) shall be
made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”), which shall provide
detailed supporting calculations both to the Company and you within 15 business days of the Date of Termination, if applicable,
or at such earlier time as is reasonably requested by the Company or you. Any determination by the Accounting Firm shall be binding
upon the Company and you.
(c) Definitions.
For purposes of this Section 6, the following terms shall have the following meanings:
“Change in Control” shall mean
any of the following:
(i) any
“person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934,
as amended (the “Act”) (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person
or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries), together with
all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act) of such
person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 50 percent or more of the combined voting power of the Company’s then
outstanding securities having the right to vote in an election of the Board (“Voting Securities”) (in such case other
than as a result of an acquisition of securities directly and exclusively from the Company); or
(ii) the
date a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election
is not endorsed by a majority of the members of the Board before the date of the appointment or election; or
(iii) the
consummation of (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to
the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined
in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than 50 percent of the voting
shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any),
or (B) any sale or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as
a single plan) of all or substantially all of the assets of the Company.
Notwithstanding the foregoing, a “Change
in Control” shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the result
of an acquisition of securities by the Company which, by reducing the number of shares of Voting Securities outstanding, increases
the proportionate number of Voting Securities beneficially owned by any person to 50 percent or more of the combined voting power
of all of the then outstanding Voting Securities; provided, however, that if any person referred to in this sentence shall thereafter
become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split, stock dividend,
or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially
owns 50 percent or more of the combined voting power of all of the then outstanding Voting Securities, then a “Change in
Control” shall be deemed to have occurred for purposes of the foregoing clause (i).
7. Section 409A.
(a) Anything
in this Agreement to the contrary notwithstanding, if at the time of your separation from service within the meaning of Section 409A
of the Code, the Company determines that you are a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of
the Code, then to the extent any payment or benefit that you become entitled to under this Agreement or otherwise on account of
your separation from service would be considered deferred compensation otherwise subject to the 20 percent additional tax imposed
pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the
Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six
months and one day after your separation from service, or (B) your death. If any such delayed cash payment is otherwise payable
on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid
during the six-month period but for the application of this provision, and the balance of the installments shall be payable in
accordance with their original schedule.
(b) All
in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred
by you during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable,
but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the
expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not
affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year (except for any
lifetime or other aggregate limitation applicable to medical expenses). Such right to reimbursement or in-kind benefits is not
subject to liquidation or exchange for another benefit.
(c) To
the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation”
under Section 409A of the Code, and to the extent that such payment or benefit is payable upon your termination of employment,
then such payments or benefits shall be payable only upon your “separation from service.” The determination of whether
and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation
Section 1.409A--1(h).
(d) The
parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any
provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read
in such a manner so that all payments hereunder comply with Section 409A of the Code. Each payment pursuant to this Agreement
is intended to constitute a separate payment for purposes of Treasury Regulation Section 1.409A-2(b)(2). The parties agree
that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A
of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without
additional cost to either party.
(e) The
Company makes no representation or warranty and shall have no liability to you or any other person if any provisions of this Agreement
are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from,
or the conditions of, such Section.
8. Continuing
Obligations.
(a) Restrictive
Covenants Agreement. [FOR EXISTING EXECS] [The terms of [Section 7 of the Prior Agreement] [the Employee Confidentiality,
Assignment and Non-Solicitation Agreement, dated [______________] between the Company and you, attached hereto as Exhibit B,]
(the “Restrictive Covenants Agreement”) continue to be in full force and effect, are unamended and unaltered by this
Agreement.][FOR NEW MA-BASED EXECS] [As a condition of employment, you are required to enter into the Employee Confidentiality,
Assignment and Non-Solicitation Agreement, attached hereto as Exhibit B (the “Restrictive Covenants Agreement”).
You acknowledge and agree that you received the Restrictive Covenants Agreement with this Agreement and at least ten (10) business
days before the commencement of your employment.] For purposes of this Agreement, the obligations in this Section 8 and
those that arise in the Restrictive Covenants Agreement and any other agreement between you and the Company relating to confidentiality,
assignment of inventions, or other restrictive covenants shall collectively be referred to as the “Continuing Obligations.
(b) Third
Party Agreements and Rights. You hereby confirm that you are not bound by the terms of any agreement with any previous employer
or other party which restricts in any way your use or disclosure of information, other than confidentiality restrictions (if any),
or your engagement in any business. You represent to the Company that your execution of this Agreement, your employment with the
Company and the performance of your proposed duties for the Company will not violate any obligations you may have to any such
previous employer or other party. In your work for the Company, you will not disclose or make use of any information in violation
of any agreements with or rights of any such previous employer or other party, and you will not bring to the premises of the Company
any copies or other tangible embodiments of non-public information belonging to or obtained from any such previous employment
or other party.
(c) Litigation
and Regulatory Cooperation. During and after your employment, you shall cooperate with the Company, upon reasonable request
and reasonable notice, in (i) the defense or prosecution of any claims or actions now in existence or which may be brought
in the future against or on behalf of the Company which relate to matters with which you were involved while you were employed
by the Company, and (ii) the investigation, whether internal or external, of any matters about which the Company believes
you may have knowledge or information. Your cooperation in connection with such claims, actions or investigations shall include,
but not be limited to, upon reasonable request and reasonable notice, being available to meet with counsel to answer questions
or to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. The Company
shall reimburse you for any reasonable out-of-pocket expenses incurred in connection with your performance of obligations pursuant
to this Section 8(c).
(d) Relief.
You agree that it would be difficult to measure any damages caused to the Company which might result from any breach by you of
the Continuing Obligations, and that in any event money damages would be an inadequate remedy for any such breach. Accordingly,
you agree that if you breach, or propose to breach, any portion of the Continuing Obligations, the Company shall be entitled,
in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such
breach without showing or proving any actual damage to the Company.
(e) Protected
Disclosures and Other Protected Action. Nothing in this Agreement shall be interpreted or applied to prohibit you from making
any good faith report to any governmental agency or other governmental entity (a “Government Agency”) concerning any
act or omission that you reasonably believe constitutes a possible violation of federal or state law or making other disclosures
that are protected under the anti-retaliation or whistleblower provisions of applicable federal or state law or regulation. In
addition, nothing contained in this Agreement limits your ability to communicate with any Government Agency or otherwise participate
in any investigation or proceeding that may be conducted by any Government Agency, including your ability to provide documents
or other information, without notice to the Company. In addition, for the avoidance of doubt, pursuant to the federal Defend Trade
Secrets Act of 2016, you shall not be held criminally or civilly liable under any federal or state trade secret law or under this
Agreement or the Restrictive Covenants Agreement for the disclosure of a trade secret that (a) is made (i) in confidence
to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for
the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document filed
in a lawsuit or other proceeding, if such filing is made under seal.
9. Arbitration
of Disputes.
(a) Arbitration
Generally. Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising
out of your employment or the termination of that employment (including, without limitation, any claims of unlawful employment
discrimination or retaliation, whether based on race, religion, national origin, sex, gender, age, disability, sexual orientation,
or any other protected class under applicable law, including without limitation Massachusetts General Laws Chapter 151B) shall,
to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the
absence of such an agreement, under the auspices of JAMS in Boston, Massachusetts in accordance with the JAMS Employment Arbitration
Rules, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. You understand
that you may only bring such claims in your individual capacity, and not as a plaintiff or class member in any purported class
proceeding or any purported representative proceeding. You further understand that, by signing this Agreement, the Company and
you are giving up any right they may have to a jury trial on all claims they may have against each other. Judgment upon the award
rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 9 shall be specifically
enforceable. Notwithstanding the foregoing, this Section 9 shall not preclude either party from pursuing a court action for
the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief
is appropriate, including without limitation relief sought under the Restrictive Covenants Agreement; provided that any other
relief shall be pursued through an arbitration proceeding pursuant to this Section 9.
(b) Arbitration
Fees and Costs. You shall be required to pay an arbitration fee to initiate any arbitration equal to what you would be charged
as a first appearance fee in court. The Company shall advance the remaining fees and costs of the arbitrator. However, to the
extent permissible under the law, and following the arbitrator’s ruling on the matter, the arbitrator may rule that
the arbitrator’s fees and costs be distributed in an alternative manner. Each party shall pay its own costs and attorneys’
fees, if any. If, however, any party prevails on a statutory or contractual claim that affords the prevailing party attorneys’
fees (including pursuant to this Agreement), the arbitrator may award attorneys’ fees to the prevailing party to the extent
permitted by law.
10. Consent
to Jurisdiction. To the extent that any court action is permitted consistent with or to enforce Section 9 of this
Agreement, the parties hereby consent to the jurisdiction of the state and federal courts of the Commonwealth of Massachusetts.
Accordingly, with respect to any such court action, you (a) submit to the personal jurisdiction of such courts; (b) consent
to service of process; and (c) waive any other requirement (whether imposed by statute, rule of court, or otherwise)
with respect to personal jurisdiction or service of process.
11. Integration.
This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all
prior agreements between the parties concerning such subject matter[, including the Prior Agreement, provided that the Continuing
Obligations (including the Restrictive Covenants Agreement) and the Equity Documents remain in full force and effect].
12. Withholding;
Tax Effect. All payments made by the Company to you under this Agreement shall be net of any tax or other amounts required
to be withheld by the Company under applicable law. Nothing in this Agreement shall be construed to require the Company to make
any payments to compensate you for any adverse tax effect associated with any payments or benefits or for any deduction or withholding
from any payment or benefit.
13. Assignment.
Neither you nor the Company may make any assignment of this Agreement or any interest in it, by operation of law or otherwise,
without the prior written consent of the other; provided, however, that the Company may assign its rights and obligations under
this Agreement (including the Restrictive Covenants Agreement) without your consent to any affiliate or to any person or entity
with whom the Company shall hereafter effect a reorganization, consolidate with, or merge into or to whom it transfers all or
substantially all of its properties or assets; provided further that if you remain employed or become employed by the Company,
the purchaser or any of their affiliates in connection with any such transaction, then you shall not be entitled to any payments,
benefits or vesting pursuant to Section 5 or pursuant to Section 6 of this Agreement. This Agreement shall inure to
the benefit of and be binding upon you and the Company, and each of yours and the Company’s respective successors, executors,
administrators, heirs and permitted assigns.
14. Enforceability.
If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of this
Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of
this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared
illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable
to the fullest extent permitted by law.
15. Survival.
The provisions of this Agreement shall survive the termination of this Agreement and/or the termination of your employment to
the extent necessary to effectuate the terms contained herein.
16. Waiver.
No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any
party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this
Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.
17. Notices.
Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by registered or certified mail, postage prepaid, return
receipt requested, to you at the last address you have filed in writing with the Company or, in the case of the Company, at its
main offices, attention of the Board.
18. Amendment.
This Agreement may be amended or modified only by a written instrument signed by you and by a duly authorized representative of
the Company.
19. Effect
on Other Plans and Agreements. In the event that you are a party to an agreement with the Company providing for payments
or benefits under such plan or agreement and under this Agreement, the terms of this Agreement shall govern and you may receive
payment under this Agreement only and not both. Further, Section 5 and Section 6 of this Agreement are mutually exclusive
and in no event shall you be entitled to payments or benefits pursuant to both Section 5 and Section 6 of this Agreement.
20. Governing
Law. This is a Massachusetts contract and shall be construed under and be governed in all respects by the laws of the
Commonwealth of Massachusetts, without giving effect to the conflict of laws principles of such State. With respect to any disputes
concerning federal law, such disputes shall be determined in accordance with the law as it would be interpreted and applied by
the United States Court of Appeals for the First Circuit.
21. Counterparts.
This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same document.
IN WITNESS WHEREOF, the parties have executed
this Agreement effective on the Effective Date.
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908 DEVICES INC.
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By:
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By
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Its:
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Date:
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EXECUTIVE
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[Name]
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Date:
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Exhibit A
RELEASE OF CLAIMS
This Release of Claims (the “Release”
or the “Agreement”) is entered into by and between ________ (“You”) and 908 Devices Inc. (the “Company”),
in connection with the “Employment Agreement” between you and the Company dated __________. This is the Release referenced
in the Employment Agreement. Terms with initial capitalization that are not otherwise defined in this Release have the meanings
set forth in the Employment Agreement. The consideration for your agreement to this Release consists of the severance benefits
provided under the Employment Agreement.
1. Tender
of Release. This Release is automatically tendered to you upon the date of the termination of your employment as a result
of the termination of your employment by the Company without Cause or by you for Good Reason.
2. Release
of Claims. In consideration for your severance benefits under the Employment Agreement (which shall be paid or provided in
accordance with, and subject to, the Employment Agreement), and for other valuable and sufficient consideration, you voluntarily
release and forever discharge the Company, its affiliated and related entities, its and their respective predecessors, successors
and assigns, its and their respective employee benefit plans and fiduciaries of such plans, and the current and former members,
partners, directors, officers, managers, unitholders, shareholders, other interest holders, employees, attorneys, accountants,
other agents and agents of each of the foregoing in their official and personal capacities (collectively referred to as the “Releasees”)
generally from all claims, demands, debts, damages and liabilities of every name and nature, known or unknown (collectively, “Claims”)
that, as of the date when you sign this Release, you have, ever had, now claims to have or ever claimed to have had against any
or all of the Releasees. This general release of Claims includes, without implication of limitation, the release of all Claims:
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relating to
your employment by and termination from employment with the Company or any related entity;
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of wrongful discharge or violation of public policy;
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of breach of contract;
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of discrimination or retaliation under federal, state or
local law (including, without limitation, Claims of age discrimination or retaliation
under the Age Discrimination in Employment Act, Claims of disability discrimination or
retaliation under the Americans with Disabilities Act, and Claims of discrimination or
retaliation under Title VII of the Civil Rights Act of 1964;
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under any other federal or state statute or constitution
or local ordinance, [including without limitation the California Fair Employment and
Housing Act, the California Family Rights Act and the California Labor Code1;]
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of defamation or other torts;
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1
If the Executive is located in California, or was located in California during the Executive’s employment with
the Company, this bracketed language shall apply.
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for wages,
bonuses, incentive compensation, commissions, stock, stock options, vacation pay or any
other compensation or benefits, either under the Massachusetts Wage Act, M.G.L. c. 149,
§§148-150C, or otherwise; and
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for damages or other remedies of any sort, including, without
limitation, compensatory damages, punitive damages, injunctive relief and attorney’s
fees.
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provided that, in no event shall the foregoing be deemed
to waive or release (i) your rights under this Release; (ii) any right of indemnification I may have under contract
or law, including, without limitation, for any liabilities arising from your actions within the course and scope of your employment
with the Company; (iii) any rights which cannot be waived as a matter of law; (iv) to the Accrued Obligations and to
any rights you have to severance under the Agreement and (v) any rights you have under the Equity Documents.
[In furtherance of your release of Claims,
known and unknown, you hereby expressly waive any and all benefits you may have, if any, under Section 1542 of the California
Civil Code (“Section 1542”). The Company represents that Section 1542 states the following:
A general release does not extend
to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which
if known by him or her must have materially affected his or her settlement with the debtor.
The Company further states that for purposes
of this Agreement, the term “creditor” in Section 1542 refers to you and the term “debtor” in Section 1542
refers to the Company. You acknowledge that you are releasing unknown claims and waiving all rights you have or may have under
Section 1542 or under any other statute or common law principle of similar effect; provided that you are not waiving
any rights or claims that may arise out of acts or events that occur after the date on which you sign this Agreement.2]
You agree not to accept damages of any nature,
other equitable or legal remedies for your own benefit or attorney’s fees or costs from any of the Releasees with respect
to any Claim released by this Agreement. As a material inducement to the Company to enter into this Agreement, you represent that
you have not assigned any Claim to any third party.
3. Your
Ongoing Obligations. You hereby reaffirm your ongoing obligations to the Company, including, without limitation, (i) your
restrictive covenant obligations and other ongoing obligations under the Employment Agreement (which include, for the avoidance
of doubt Section 8 of the Employment Agreement) and the Restrictive Covenants Agreement; and (ii) any other restrictive
covenant obligation you have to the Company and/or any of its affiliates (collectively, the “Restrictive Covenant Obligations”).
The Restrictive Covenant Obligations are incorporated herein by reference. Notwithstanding anything to the contrary in the Restrictive
Covenants Agreement or other Restrictive Covenant Obligations, you hereby further agree that you are not entitled to or eligible
for any garden leave pay or other noncompetition consideration under the Restrictive Covenant Obligations, and that your Restrictive
Covenant Obligations (including without limitation your post-employment noncompetition obligations) nevertheless remain in full
effect.
2
If the Executive is located in California, or was located in California during the Executive’s employment with
the Company, this bracketed language shall apply:
4. Nondisparagement.
You agree not to make any disparaging, critical or otherwise detrimental statements to any person or entity concerning any Releasee,
any Releasee’s affiliates, employees, directors, officers, managers, members or other agents, or the products or services
of any Releasee. The Company agrees to instruct its officers and directors not to make any disparaging, critical or otherwise
detrimental statements about you. This obligation shall not in any way affect the above-referenced persons’ obligation to
testify truthfully in any legal proceeding. The Restrictive Covenant Obligations and this Section 4 are referred to as the
“Ongoing Obligations.”
5. Confidentiality
of Agreement-Related Information. You agree, to the fullest extent permitted by law, to keep all Agreement-Related Information
completely confidential. “Agreement-Related Information” means the negotiations leading to this Agreement and the
terms of this Agreement. Notwithstanding the foregoing, you may disclose Agreement-Related Information to your spouse, your attorney
and your financial advisors, and to them only provided that they first agree for the benefit of the Company to keep Agreement-Related
Information confidential. You represent that during the period since the date of this Release, you have not made any disclosures
that would have been contrary to the foregoing obligation if it had then been in effect. Nothing in this section shall be
construed to prevent you from disclosing Agreement-Related Information to the extent required by a lawfully issued subpoena or
duly issued court order; provided that you provide the Company with advance written notice and a reasonable opportunity
to contest such subpoena or court order.
6. Return
of Property. You confirm that, to the best of your knowledge, you have returned to the Company all Company property, including,
without limitation, computer equipment, software, keys and access cards, credit cards, files and any documents (including computerized
data and any copies made of any computerized data or software) containing information concerning the Company, its business or
its business relationships. You also commit to deleting and finally purging any duplicates of files or documents that may contain
Company information from any computer or other device that remains your property after the Date of Termination. In the event that
you discover that you continue to retain any such property, you shall return it to the Company immediately.
7. Protected
Disclosures and Other Protected Actions. Nothing contained in this Agreement limits your ability to file a charge or complaint
with any federal, state or local governmental agency or commission (a “Government Agency”). In addition, nothing contained
in this Agreement limits your ability to communicate with any Government Agency or otherwise participate in any investigation
or proceeding that may be conducted by any Government Agency, including your ability to provide documents or other information,
without notice to the Company, nor does anything contained in this Agreement apply to truthful testimony in litigation. If you
file any charge or complaint with any Government Agency and if the Government Agency pursues any claim on your behalf, or if any
other third party pursues any claim on your behalf, you waive any right to monetary or other individualized relief (either individually,
or as part of any collective or class action).
8. Defend
Trade Secrets Act. For the avoidance of doubt, pursuant to the federal Defend Trade Secrets Act of 2016, you shall not be
held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (a) is
made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney;
and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint
or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
9. No
Assignment. You represent that you have not assigned to any other person or entity any Claims against any Releasee.
10. Right
to Consider and Revoke Release. You acknowledge that you have been given the opportunity to consider this Release for a period
of 213 days (the “Consideration Period”).
In the event you executed this Release before the end of the Consideration Period, you acknowledge that such decision was entirely
voluntary and that you had the opportunity to consider this Release until the end of the Consideration Period. To accept this
Release, you shall deliver a signed Release to the undersigned Company representative before the end of the Consideration Period.
For a period of seven (7) business days from the date when you execute this Release (the “Revocation Period”),
you shall retain the right to revoke this Release by written notice that is received by the undersigned on or before the last
day of the Revocation Period. This Release shall take effect only if it is executed within the Consideration Period as set forth
above and if it is not revoked pursuant to the preceding sentence. If the conditions set forth in this Section are satisfied,
this Release shall become effective and enforceable on the date immediately following the last day of the Revocation Period. You
acknowledge that you have been advised by the Company to discuss all aspects of this Release with your attorney, that you have
carefully read and fully understands all of the provisions of this Release and that you are voluntarily entering into this Release.
11. Other
Terms.
a. Termination
of Payments. If you materially breach any of the Ongoing Obligations, in addition to any other legal or equitable remedies
the Company may have for such breach, the Company shall have the right to terminate its payments to you or for your benefit under
this Release. The termination of such payments in the event of your breach will not affect your Ongoing Obligations.
b. Binding
Nature of Release. This Release shall be binding upon you and upon your heirs, administrators, representatives and executors.
c. Modification
of Release; Waiver. This Release may be amended only upon a written agreement executed by you and an authorized representative
of the Company.
3
The parties agree that this 21-day period shall be extended to 45 days in the event you are terminated in connection
with an “exit incentive or other employment termination program,” as defined and described in the regulations issued
under the Older Workers’ Benefits Protection Act.
d. Severability.
In the event that at any future time it is determined by a court of competent jurisdiction that any covenant, clause, provision
or term of this Release is illegal, invalid or unenforceable, (i) the parties agree that the court should reform the applicable
provision and enforce it to the maximum permissible extent; (ii) if such reformation is not permissible, the illegal, invalid
or unenforceable term or provision shall be severed from the remainder of this Release; and (iii) in any event, the remaining
provisions and terms of this Release shall not be affected by such reformation or severance.
e. Governing
Law and Interpretation; Jurisdiction. This Release shall be deemed to be made and entered into in Massachusetts,4
and shall in all respects be interpreted, enforced and governed under such state’s laws, without giving effect
to its conflict of laws provisions. The parties hereby submit to the exclusive jurisdiction and exclusive venue of the courts
of such state for the resolution of all disputes related to or arising under (i) this Release; and/or (ii) your employment
with, and termination of employment from, the Company. The language of all parts of this Release shall in all cases be construed
as a whole, according to its fair meaning, and not strictly for or against either of the parties.
f. Entire
Agreement; Absence of Reliance. This Release, any documents governing any of your equity rights, and the Ongoing Obligations
constitute the entire agreement between you and the Company and supersede any previous agreements or understandings between you
and the Company. You acknowledge that you are not relying on any promises or representations by the Company or the agents, representatives
or attorneys of any of the entities within the definition of Company regarding any subject matter addressed in this Release.
IN WITNESS WHEREOF, the parties have executed this Release:
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908 Devices Inc.
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[NAME]
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[Name]
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4
If the Executive is located in California as of the date of termination, replace Massachusetts with California.
[Exhibit B
Restrictive Covenants Agreement5]
5
Remove if not applicable to Mr. Basarky and Mr. Griffith.
Exhibit 10.9
908 DEVICES INC.
SIGNATURE BANK
LOAN AND SECURITY AGREEMENT
This LOAN AND SECURITY
AGREEMENT (this "Agreement") is entered into as of August 29, 2019 by and between SIGNATURE BANK ("Bank")
and 908 DEVICES INC. ("Borrower").
RECITALS
Borrower wishes to
obtain credit from time to time from Bank, and Bank desires to extend credit to Borrower. This Agreement sets forth the terms on
which Bank will advance credit to Borrower, and Borrower will repay the amounts owing to Bank.
AGREEMENT
The parties agree as follows:
1. DEFINITIONS
AND CONSTRUCTION.
1.1 Definitions.
As used in this Agreement, the following terms shall have the following definitions:
"Accounts"
means all presently existing and hereafter arising accounts, contract rights, payment intangibles, and all other forms of obligations
owing to Borrower arising out of the sale or lease of goods (including, without limitation, the licensing of software and other
technology) or the rendering of services by Borrower, whether or not earned by performance, and any and all credit insurance, guaranties,
and other security therefor, as well as all merchandise returned to or reclaimed by Borrower and Borrower's Books relating to any
of the foregoing.
"Affiliate"
means, with respect to any Person, any Person that owns or controls directly or indirectly such Person, any Person that controls
or is controlled by or is under common control with such Person, and each of such Person's senior executive officers, directors,
and partners.
"Amortization
Start Date" is the first (1st) day of the calendar month immediately following the end of the Draw Period.
"Bank Expenses"
means all: reasonable costs or expenses (including reasonable documented attorneys' fees and expenses) incurred by Bank in
connection with the preparation, negotiation, administration, and enforcement of the Loan Documents; reasonable Collateral audit
fees; and Bank's reasonable documented attorneys' fees and expenses incurred in amending, enforcing or defending the Loan Documents
(including fees and expenses of appeal), incurred before, during and after an Insolvency Proceeding, whether or not suit is brought.
"Borrower's
Books" means all of Borrower's books and records including: ledgers; records concerning Borrower's assets or liabilities,
the Collateral, business operations or financial condition; and all computer programs, or tape files, and the equipment, containing
such information.
"Business Day"
means any day that is not a Saturday, Sunday, or other day on which banks in the State of New York are authorized or required
to close.
"Change in
Control" shall mean a transaction in which any "person" or "group" (within the meaning of Section
13(d) and 14(d)(2) of the Securities Exchange Act of 1934) becomes the "beneficial owner" (as defined in Rule 13d-3 under
the Securities Exchange Act of 1934), directly or indirectly, of a sufficient number of shares of all classes of stock then outstanding
of Borrower ordinarily entitled to vote in the election of directors, empowering such "person" or "group" to
elect a majority of the Board of Directors of Borrower, who did not have such power before such transaction.
"Client Reporting
File" means that certain Client Reporting File provided to Borrower by Bank in connection with the execution hereof, as
may be amended from time to time.
"Closing Date" means the date of
this Agreement.
"Code" means the New York Uniform
Commercial Code.
"Collateral" means the property described
on Exhibit A attached hereto.
"Contingent
Obligation" means, as applied to any Person, any direct or indirect liability, contingent or otherwise, of that Person
with respect to (i) any indebtedness, lease, dividend, letter of credit or other obligation of another; (ii) any obligations with
respect to undrawn letters of credit, corporate credit cards, or merchant services issued or provided for the account of that Person;
and (iii) all obligations arising under any agreement or arrangement designed to protect such Person against fluctuation in interest
rates, currency exchange rates or commodity prices; provided, however, that the term "Contingent Obligation" shall not
include endorsements for collection or deposit in the ordinary course of business. The amount of any Contingent Obligation shall
be deemed to be an amount equal to the stated or determined amount of the primary obligation in respect of which such Contingent
Obligation is made or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof as determined
by Bank in good faith; provided, however, that such amount shall not in any event exceed the maximum amount of the obligations
under the guarantee or other support arrangement.
"Copyrights"
means any and all copyright rights, copyright applications, copyright registrations and like protections in each work or authorship
and derivative work thereof.
"Credit Extension"
means each Term Loan Advance or any other extension of credit by Bank for the benefit of Borrower hereunder.
"Daily Balance" means the amount
of the Obligations owed at the end of a given day.
"Draw Period" is the period of time from the Closing Date through
February 28, 2021.
"Equipment"
means all present and future machinery, equipment, tenant improvements, furniture, fixtures, vehicles, tools, parts and attachments
in which Borrower has any interest.
"ERISA"
means the Employee Retirement Income Security Act of 1974, as amended, and the regulations thereunder.
"Event of Default" has the meaning
assigned in Article 8.
"GAAP" means generally accepted accounting
principles as in effect from time to time.
"Indebtedness"
means (a) all indebtedness for borrowed money or the deferred purchase price of property or services, including without limitation
reimbursement and other obligations with respect to surety bonds and letters of credit, (b) all obligations evidenced by notes,
bonds, debentures or similar instruments, (c) all capital lease obligations and (d) all Contingent Obligations.
"Insolvency
Proceeding" means any proceeding commenced by or against any person or entity under any provision of the United States
Bankruptcy Code, as amended, or under any other bankruptcy or insolvency law, including assignments for the benefit of creditors,
formal or informal moratoria, compositions, extension generally with its creditors, or proceedings seeking reorganization, arrangement,
or other relief.
"Intellectual
Property" means all of Borrower's right, title, and interest in and to the following: Copyrights, Trademarks and Patents;
all trade secrets, all design rights, claims for damages by way of past, present and future infringement of any of the rights included
above, all licenses or other rights to use any of the Copyrights, Patents or Trademarks, and all license fees and royalties arising
from such use to the extent permitted by such license or rights; all amendments, renewals and extensions of any of the Copyrights,
Trademarks or Patents; and all proceeds and products of the foregoing, including without limitation all payments under insurance
or any indemnity or warranty payable in respect of any of the foregoing.
"Inventory" means
all inventory in which Borrower has or acquires any interest, including work in process and finished products intended for
sale or lease or to be furnished under a contract of service, of every kind and description now or at any time hereafter
owned by or in the custody or possession, actual or constructive, of Borrower, including such inventory as is temporarily out
of its custody or possession or in transit and including any returns upon any accounts or other proceeds, including insurance
proceeds, resulting from the sale or disposition of any of the foregoing and any documents of title representing any of the
above, and Borrower's Books relating to any of the foregoing.
"Investment"
means any beneficial ownership of (including stock, partnership interest or other securities) any Person, or any loan, advance
or capital contribution to any Person.
"IRC" means the Internal
Revenue Code of 1986, as amended, and the regulations thereunder.
"Lien" means any mortgage,
lien, deed of trust, charge, pledge, security interest or other encumbrance.
"Liquidity
Ratio" is a ratio of (a) the sum of (i) unrestricted cash held by Borrower in accounts at Bank, plus (ii) an amount equal
to fifty percent (50%) of Borrower's net trade accounts receivable, to (b) all Obligations owing from Borrower to Bank.
"Loan Documents"
means, collectively, this Agreement, the Warrant, any note or notes executed by Borrower, and any other agreement entered into
in connection with this Agreement, all as amended or extended from time to time.
"Material Adverse
Effect" means the occurrence of any circumstance which would be reasonably likely to have a material adverse effect on
(i) the operations, business or financial condition of Borrower and its Subsidiaries taken as a whole, (ii) the ability of Borrower
to repay the Obligations or otherwise perform its obligations under the Loan Documents, or (iii) Borrower's interest in, or the
value, perfection or priority of Bank's security interest in the Collateral.
"Negotiable
Collateral" means all letters of credit of which Borrower is a beneficiary, notes, drafts, instruments, securities, documents
of title, and chattel paper, and Borrower's Books relating to any of the foregoing.
"Obligations"
means all debt, principal, interest, Bank Expenses and other amounts owed to Bank by Borrower pursuant to this Agreement or
any other agreement, whether absolute or contingent, due or to become due, now existing or hereafter arising, including any interest
that accrues after the commencement of an Insolvency Proceeding and including any debt, liability, or obligation owing from Borrower
to others that Bank may have obtained by assignment or otherwise.
"Patents"
means all patents, patent applications and like protections including without limitation improvements, divisions, continuations,
renewals, reissues, extensions and continuations-in-part of the same.
"Periodic Payments"
means all installments or similar recurring payments that Borrower may now or hereafter become obligated to pay to Bank pursuant
to the terms and provisions of any instrument, or agreement now or hereafter in existence between Borrower and Bank.
"Permitted Indebtedness" means:
(a)
Indebtedness of Borrower in favor of Bank arising under this Agreement or any other Loan Document;
(b)
Indebtedness existing on the Closing Date and disclosed in the Schedule;
(c) Indebtedness secured by a lien described in clause (c) of the defined term "Permitted Liens," provided (i) such Indebtedness
does not exceed the lesser of the cost or fair market value of the equipment financed with such Indebtedness and (ii) such Indebtedness
does not exceed Five Hundred Thousand Dollars ($500,000) in the aggregate at any given time;
(d)
Subordinated Debt;
(e)
trade accounts payable incurred in the ordinary course of business;
(f)
Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business; and
(g) extensions,
refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through (e) above, provided
that the principal amount thereof is not increased or the terms thereof are not modified to impose more burdensome terms upon Borrower
or its Subsidiary, as the case may be.
"Permitted Investment" means:
(a) Investments
existing on the Closing Date disclosed in the Schedule;
(b) (i)
marketable direct obligations issued or unconditionally guaranteed by the United States of America or any agency or any State thereof
maturing within one (1) year from the date of acquisition thereof, (ii) commercial paper maturing no more than one (1) year from
the date of creation thereof and currently having rating of at least A-2 or P-2 from either Standard & Poor's Corporation or
Moody's Investors Service,
(iii)
certificates of deposit maturing no more than one (1) year from the date of investment therein issued by Bank and
(iv)
money market funds at least ninety-five percent (95.0%) of the assets of which constitute Cash Equivalents of the kinds
described in clauses (i) through (iii) of this paragraph (b);
(c) Investments
consisting of the endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course
of Borrower;
(d) Investments
accepted in connection with Transfers permitted by Section 7.1;
(e) Investments
consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary course of
business and in an amount not to exceed One Hundred Thousand Dollars ($100,000) per year, and (ii) loans to employees, officers
or directors relating to the purchase of equity securities of Borrower or its Subsidiaries pursuant to employee stock purchase
plans or agreements approved by Borrower's Board and in an amount not to exceed One Hundred Dollars ($100,000) per year;
(f) Investments
(including debt obligations) received in connection with the bankruptcy or reorganization of customers or suppliers and in settlement
of delinquent obligations of, and other disputes with, customers or suppliers arising in the ordinary course of business; and
(g) Investments
consisting of notes receivable of, or prepaid royalties and other credit extensions, to customers and suppliers who are not Affiliates,
in the ordinary course of business; provided that this paragraph (h) shall not apply to Investments of Borrower in any Subsidiary.
"Permitted Liens" means the following:
(a)
Any Liens existing on the Closing Date and disclosed in the Schedule or arising under this Agreement or the other Loan Documents;
(b)
Liens for taxes, fees, assessments or other governmental charges or levies, either not delinquent or being contested in
good faith by appropriate proceedings, provided the same have no priority over any of Bank's security interests;
(c)
Liens (i) upon or in any equipment which was not financed by Bank acquired or held by Borrower or any of its Subsidiaries
to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition of
such equipment, or (ii) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to
the property so acquired and improvements thereon, and the proceeds of such equipment;
(d)
Liens of carriers, warehousemen, suppliers, or other Persons that are possessory in nature arising in the ordinary course
of business so long as such Liens attach only to Inventory, securing liabilities in the aggregate amount not to exceed One Hundred
Thousand Dollars ($100,000) and which are not delinquent or remain payable without penalty or which are being contested in good
faith and by appropriate proceedings which proceedings have the effect of preventing the forfeiture or sale of the property subject
thereto;
(e)
Liens to secure payment of workers' compensation, employment insurance, old-age pensions, social security and other like
obligations incurred in the ordinary course of business (other than Liens imposed by ERISA);
(f)
Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type
described in clauses (a) through (e) above, provided that any extension, renewal or replacement Lien shall be limited to the property
encumbered by the existing Lien and the principal amount of the indebtedness being extended, renewed or refinanced does not increase;
(g)
leases or subleases of real property granted in the ordinary course of Borrower's business (or, if referring to another
Person, in the ordinary course of such Person's business), and leases, subleases, non-exclusive licenses or sublicenses of personal
property (other than Intellectual Property) granted in the ordinary course of Borrower's business (or, if referring to another
Person, in the ordinary course of such Person's business), if the leases, subleases, licenses and sublicenses do not prohibit granting
Bank a security interest therein;
(h)
non-exclusive licenses of Intellectual Property granted to third parties in the ordinary course of business, and licenses
of Intellectual Property that could not result in a legal transfer of title of the licensed property that may be exclusive in respects
other than territory and that may be exclusive as to territory only as to discreet geographical areas outside of the United States;
and
(i)
Liens arising from attachments or judgments, orders, or decrees in circumstances not constituting an Event of Default under
Sections 8.4 and 8.7.
"Person"
means any individual, sole proprietorship, partnership, limited liability company, joint venture, trust, unincorporated organization,
association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or governmental agency.
"Prime Rate"
means the variable rate of interest, per annum, most recently announced by Bank, as its "prime rate," whether or
not such announced rate is the lowest rate available from Bank.
"Reg W Affiliate"
means an "affiliate" as such term is set forth in Section 23A(b)(1) of the Federal Reserve Act (12 USC 371c).
"Responsible
Officer" means each of the Chief Executive Officer, the Chief Operating Officer, the Chief Financial Officer and the Controller
of Borrower.
"Schedule" means the schedule
of exceptions attached hereto and approved by Bank, if any.
"Subordinated
Debt" means any debt incurred by Borrower that is subordinated to the debt owing by Borrower to Bank on terms acceptable
to Bank (and identified as being such by Borrower and Bank).
"Subsidiary"
means any corporation, company or partnership in which (i) any general partnership interest or (ii) more than 50% of the stock
or other units of ownership which by the terms thereof has the ordinary voting power to elect the Board of Directors, managers
or trustees of the entity, at the time as of which any determination is being made, is owned by Borrower, either directly or through
an Affiliate.
"Term Loan Advance" and "Term
Loan Advances" are defined in Section 2.1(a)(i).
"Term Loan Advance Payment" is defined in Section 2.1(a)(ii).
"Term Line" means a credit extension
of up to Fifteen Million Dollars ($15,000,000).
"Term Loan Maturity Date" means August 1, 2023.
"Trademarks"
means any trademark and servicemark rights, whether registered or not, applications to register and registrations of the same
and like protections, and the entire goodwill of the business of Borrower connected with and symbolized by such trademarks.
"Transition Accounts" is defined
in Section 6.7.
"Warrant"
is that certain Warrant to Purchase Stock dated as of the Closing Date issued by Borrower in favor of Bank, together with any
other Warrant issued by Borrower in favor of Bank theretofore or thereafter.
1.2 Accounting
Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP and all calculations
made hereunder shall be made in accordance with GAAP. When used herein, the terms "financial statements" shall include
the notes and schedules thereto.
2. LOAN
AND TERMS OF PAYMENT.
2.1 Credit
Extensions.
Borrower promises to
pay to the order of Bank, in lawful money of the United States of America, the aggregate unpaid principal amount of all Credit
Extensions made by Bank to Borrower hereunder. Borrower shall also pay interest on the unpaid principal amount of such Credit Extensions
at rates in accordance with the terms hereof.
(a) Term
Loan Advances.
(i) Subject
to and upon the terms and conditions of this Agreement, during the Draw Period, Borrower may request and Bank shall make term
loan advances in an aggregate amount not to exceed the Term Line (each a "Term Loan Advance" and collectively,
the "Term Loan Advances"). Each Term Loan Advance shall be in an amount not less than Two Hundred Fifty Thousand
Dollars ($250,000). The aggregate outstanding amount of the Term Loan Advances shall not, at any time, exceed the Term Line.
(ii) The
Term Loan Advances shall be "interest-only" during the Draw Period, with interest due and payable in accordance with
Section 2.3 hereof. Beginning on the Amortization Start Date and continuing on the first (1st) day of each month thereafter, the
Term Loan Advances shall be payable in thirty (30) equal monthly installments of principal plus accrued and unpaid interest (each
a "Term Loan Advance Payment"). Borrower's final Term Loan Advance Payment, due on the Term Loan Maturity Date,
shall include all outstanding principal and accrued and unpaid interest on the Term Loan Advances. Term Loan Advances, once repaid,
may not be reborrowed. Borrower may prepay any Term Loan Advances at any time without penalty or premium.
(iii) When
Borrower desires to obtain a Term Loan Advance, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail
or facsimile transmission to be received no later than 2:00 p.m. Eastern time three (3) Business Days before the day on which
the Term Loan Advance is to be made. Such notice shall be substantially in the form set forth in the Client Reporting File. The
notice shall be signed by a Responsible Officer or its designee.
2.2 Aggregate
Limit on Credit Extensions. Notwithstanding anything else set forth in this Agreement, the aggregate principal amount of the
Credit Extensions shall not exceed Fifteen Million Dollars ($15,000,000) at any time.
2.3 Interest
Rates, Payments, and Calculations.
(a)
Interest Rate for Term Loan Advances. Except as set forth in Section 2.3(b), the Term Loan Advances shall bear interest,
on the outstanding Daily Balance thereof, at a rate equal to the greater of (i) one half of one percentage point (0.50%) above
the Prime Rate or (ii) six percentage points (6.00%).
(b)
Late Fee; Default Rate. If any payment is not made within ten (10) days after the date such payment is due, Borrower
shall pay Bank a late fee equal to the lesser of (i) five percent (5.00%) of the amount of such unpaid amount or (ii) the maximum
amount permitted to be charged under applicable law, not in any case to be less than Twenty-Five Dollars ($25.00). All Obligations
shall bear interest, from and after the occurrence and during the continuance of an Event of Default, at a rate equal to five percentage
points (5.00%) above the interest rate applicable immediately prior to the occurrence of the Event of Default.
(c) Payments. Interest
hereunder shall be due and payable on the first (1st) calendar day of each month during the term hereof. Bank shall, at its
option, charge such interest, all Bank Expenses, and all Periodic Payments against any of Borrower's deposit accounts (other
than trust, agency or escrow accounts). Any interest not paid when due shall be compounded by becoming a part of the
Obligations, and such interest shall thereafter accrue interest at the rate then applicable hereunder. All payments shall be
free and clear of any taxes, withholdings, duties, impositions or other charges, to the end that Bank will receive the entire
amount of any Obligations payable hereunder, regardless of source of payment.
(d) Computation.
In the event the Prime Rate is changed from time to time hereafter, the applicable rate of interest hereunder shall be increased
or decreased, effective as of the day the Prime Rate is changed, by an amount equal to such change in the Prime Rate. All interest
chargeable under the Loan Documents shall be computed on the basis of a three hundred sixty (360) day year for the actual number
of days elapsed.
2.4 Crediting
Payments. Prior to the occurrence and continuance of an Event of Default, Bank shall credit a wire transfer of funds, check
or other item of payment to such deposit account or Obligation as Borrower specifies. After the occurrence and during the continuance
of an Event of Default, the receipt by Bank of any wire transfer of funds, check, or other item of payment shall be immediately
applied to conditionally reduce Obligations, but shall not be considered a payment on account unless such payment is of immediately
available federal funds or unless and until such check or other item of payment is honored when presented for payment. Notwithstanding
anything to the contrary contained herein, any wire transfer or payment received by Bank after 2:00 noon Eastern time shall be
deemed to have been received by Bank as of the opening of business on the immediately following Business Day. Whenever any payment
to Bank under the Loan Documents would otherwise be due (except by reason of acceleration) on a date that is not a Business Day,
such payment shall instead be due on the next Business Day, and additional fees or interest, as the case may be, shall accrue and
be payable for the period of such extension.
2.5 Fees.
Borrower shall pay to Bank the following:
(a) Facility
Fee. On the Closing Date, a facility fee equal to Twenty-Five Thousand Dollars ($25,000), which shall be nonrefundable;
(b) Good
Faith Deposit. Borrower has paid to Bank a deposit of Twenty-Five Thousand Dollars ($25,000) (the "Good Faith Deposit"),
to initiate Bank's due diligence review process. The Good Faith Deposit shall be utilized to pay Bank Expenses and, if any amount
remains thereafter, the facility fee described in clause (a) of this Section 2.5; and
(c) Bank
Expenses. On the Closing Date, all Bank Expenses incurred through the Closing Date, including reasonable attorneys' fees and
expenses and, after the Closing Date, all Bank Expenses, including reasonable attorneys' fees and expenses, as and when they are
incurred by Bank.
2.6 Term.
This Agreement shall become effective on the Closing Date and, subject to Section 13.7, shall continue in full force and effect
for so long as any Obligations (other than inchoate indemnification or reimbursement obligations) remain outstanding or Bank has
any obligation to make Credit Extensions under this Agreement. Notwithstanding the foregoing, Bank shall have the right to terminate
its obligation to make Credit Extensions under this Agreement immediately and without notice upon the occurrence and during the
continuance of an Event of Default. Notwithstanding termination, Bank's Lien on the Collateral shall remain in effect for so long
as any Obligations (other than inchoate indemnification or reimbursement obligations) are outstanding.
3. CONDITIONS
OF LOANS.
3.1 Conditions
Precedent to Effectiveness. The effectiveness of the Loan Documents is subject to the condition precedent that Bank shall have
received, in form and substance satisfactory to Bank, the following:
(a)
this Agreement;
(b)
a certificate of the Secretary of Borrower with respect to incumbency and resolutions authorizing the execution and delivery
of this Agreement;
(c)
UCC National Form Financing Statement;
(d)
a Warrant to Purchase Stock;
(e)
payment of the fees and Bank Expenses then due specified in Section 2.5 hereof;
(f)
current financial statements of Borrower;
(g)
evidence that Borrower in compliance with all covenants set forth in Section 6.7 as of the Closing Date;
(h)
evidence satisfactory to Bank that the insurance policies required by Section 6.6 hereof are in full force and effect (except
evidence of endorsements and evidence showing lender loss payable and/or additional insured clauses or endorsements in favor of
Bank, as set forth in Section 6.11(a));
(i)
a payoff letter from Hercules Capital;
(j)
confirmation that Borrower is not involved in material litigation;
(k)
the representations and warranties contained in Section 5 shall be true and correct in all material respects on and as
of Closing Date, and no Event of Default shall have occurred and be continuing, or would exist after giving effect to the closing
of the Loan Documents; and
(l) such
other documents, and completion of such other matters, as Bank may have
reasonably requested.
3.2 Conditions
Precedent to all Credit Extensions. The obligation of Bank to make each Credit Extension, including the initial Credit Extension,
is further subject to the following conditions:
(a)
Borrower shall be in compliance with Section 6.7 hereof;
(b)
the representations and warranties contained in Section 5 shall be true and correct in all material respects on and as
of the date of such Revolving Advance Request Form and on the effective date of each Credit Extension as though made at and as
of each such date, and no Event of Default shall have occurred and be continuing, or would exist after giving effect to such Credit
Extension. The making of each Credit Extension shall be deemed to be a representation and warranty by Borrower on the date of
such Credit Extension as to the accuracy of the facts referred to in this Section 3.2; and
(c)
Bank determines to its satisfaction that there has not been a Material Adverse Change.
4. CREATION
OF SECURITY INTEREST.
4.1 Grant
of Security Interest. Borrower grants and pledges to Bank a continuing security interest in all presently existing and hereafter
acquired or arising Collateral in order to secure prompt repayment of any and all Obligations and in order to secure prompt performance
by Borrower of each of its covenants and duties under the Loan Documents. Except as set forth in the Schedule, such security interest
constitutes a valid, first priority security interest in the presently existing Collateral, and will constitute a valid, first
priority security interest in Collateral acquired after the date hereof, in each case subject only to Permitted Liens.
4.2 Delivery
of Additional Documentation Required. Borrower shall from time to time execute and deliver to Bank, at the request of Bank,
all Negotiable Collateral, all financing statements and other documents that Bank may reasonably request, in form satisfactory to
Bank, to perfect and continue the perfection of Bank's security interests in the Collateral and in order to fully consummate all
of the transactions contemplated under the Loan Documents. Borrower from time to time may deposit with Bank specific time deposit
accounts to secure specific Obligations. Borrower authorizes Bank to hold such balances in pledge and to decline to honor any drafts
thereon or any request by Borrower or any other Person to pay or otherwise transfer any part of such balances for so long as the
Obligations (other than inchoate indemnification or reimbursement obligations) are outstanding.
4.3 Right
to Inspect. Bank (through any of its officers, employees, or agents) shall have the right, upon reasonable prior notice, from
time to time during Borrower's usual business hours but no more than once a year (unless an Event of Default has occurred and is
continuing), to inspect Borrower's Books and to make copies thereof and to check, test, and appraise the Collateral in order to
verify Borrower's financial condition or the amount, condition of, or any other matter relating to, the Collateral.
5. REPRESENTATIONS
AND WARRANTIES.
Borrower represents and warrants as follows:
5.1 Due
Organization and Qualification. Borrower and each Subsidiary is a corporation duly existing under the laws of its state of
incorporation and qualified and licensed to do business in any state in which the conduct of its business or its ownership of property
requires that it be so qualified, except where the failure to be so qualified or licensed could not reasonably be expected to have
a Material Adverse Effect.
5.2 Due
Authorization; No Conflict. The execution, delivery, and performance of the Loan Documents by Borrower are within Borrower's
powers, have been duly authorized, and are not in conflict with nor constitute a breach of any provision contained in Borrower's
Certificate of Incorporation or Bylaws, nor will they constitute an event of default under any material agreement to which Borrower
is a party or by which Borrower is bound. Borrower is not in default under any material agreement to which it is a party or by
which it is bound.
5.3 No
Prior Encumbrances. Borrower has good and marketable title to its property, free and clear of Liens, except for Permitted Liens.
5.4 Intentionally
Omitted
5.5 Merchantable
Inventory. All Inventory is in all material respects of good and marketable quality, free from all material defects, except
for Inventory for which adequate reserves have been made.
5.6 Intellectual
Property. Borrower is the sole owner of the Intellectual Property, except for non-exclusive licenses granted by Borrower to
its customers in the ordinary course of business. Each of the Patents is valid and enforceable, and no part of the Intellectual
Property has been judged invalid or unenforceable, in whole or in part, and to the best of Borrower's knowledge, no claim has been
made that any part of the Intellectual Property violates the rights of any third party. Except as set forth in the Schedule, Borrower's
rights as a licensee of intellectual property do not give rise to more than five percent (5%) of its gross revenue in any given
month, including without limitation revenue derived from the sale, licensing, rendering or disposition of any product or service.
Except as set forth in the Schedule, Borrower is not a party to, or bound by, any agreement that prohibits the grant by Borrower
of a security interest in Borrower's rights under such agreement.
5.7 Name;
Location of Chief Executive Office. Except as disclosed in the Schedule, Borrower has not done business within the five (5)
years prior to the Closing Date under any name other than that specified on the signature page hereof. The chief executive office
of Borrower is located at the address indicated in Section 10 hereof. All Borrower's Inventory and Equipment (other than mobile
Equipment such as laptop computers that are in the possession of Borrower's employees or agents) is located only at the location
set forth in Section 10 hereof.
5.8 Litigation.
Except as set forth in the Schedule, there are no actions or proceedings pending by or against Borrower or any Subsidiary before
any court or administrative agency in which an adverse decision could reasonably be expected to have a Material Adverse Effect,
or a material adverse effect on Borrower's interest or Bank's security interest in the Collateral.
5.9 No
Material Adverse Change in Financial Statements. All consolidated and consolidating financial statements related to Borrower
and its Subsidiaries that Bank has received from Borrower fairly present in all material respects Borrower's financial condition
as of the date thereof and Borrower's consolidated results of operations for the period then ended. There has not been a material
adverse change in the consolidated financial condition of Borrower and its Subsidiaries since the date of the most recent of such
financial statements submitted by Borrower to Bank.
5.10 Solvency,
Payment of Debts. Borrower is able to pay its debts (including trade debts) as they mature; the fair saleable value of Borrower's
assets (including goodwill minus disposition costs) exceeds the fair value of its liabilities; and Borrower is not left with unreasonably
small capital after the transactions contemplated by this Agreement.
5.11 Regulatory
Compliance. Borrower and each Subsidiary have met the minimum funding requirements of ERISA with respect to any employee benefit
plans subject to ERISA, and no event has occurred resulting from Borrower's failure to comply with ERISA that could reasonably
be expected to result in Borrower's incurring any material liability. Borrower is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment Company Act of 1940. Borrower
is not engaged principally, or as one of the important activities, in the business of extending credit for the purpose of purchasing
or carrying margin stock (within the meaning of Regulations T and U of the Board of Governors of the Federal Reserve System). Borrower
has complied with all the provisions of the Federal Fair Labor Standards Act. Borrower has not violated any statutes, laws, ordinances
or rules applicable to it, violation of which could reasonably be expected to have a Material Adverse Effect.
5.12 Environmental
Condition. Except as disclosed in the Schedule, none of Borrower's or any Subsidiary's properties or assets has ever been used
by Borrower or any Subsidiary or, to Borrower's knowledge, by previous owners or operators, in the disposal of, or to produce,
store, handle, treat, release, or transport, any hazardous waste or hazardous substance other than in accordance with applicable
law; to Borrower's knowledge, none of Borrower's properties or assets has ever been designated or identified in any manner pursuant
to any environmental protection statute as a hazardous waste or hazardous substance disposal site, or a candidate for closure pursuant
to any environmental protection statute; no lien arising under any environmental protection statute has attached to any revenues
or to any real or personal property owned by Borrower or any Subsidiary; and neither Borrower nor any Subsidiary has received a
summons, citation, notice, or directive from the Environmental Protection Agency or any other federal, state or other governmental
agency concerning any action or omission by Borrower or any Subsidiary resulting in the releasing, or otherwise disposing of hazardous
waste or hazardous substances into the environment.
5.13 Taxes.
Borrower and each Subsidiary have filed or caused to be filed all tax returns required to be filed, and have paid, or have
made adequate provision for the payment of, all taxes reflected therein other than immaterial taxes in an amount not to exceed
Ten Thousand Dollars ($10,000) per year.
5.14 Subsidiaries.
Borrower does not own any stock, partnership interest or other equity securities of any Person, except for Permitted Investments.
5.15 Government
Consents. Borrower and each Subsidiary have obtained all material consents, approvals and authorizations of, made all declarations
or filings with, and given all notices to, all governmental authorities that are necessary for the continued operation of Borrower's
business as currently conducted, except where the failure to do so could not reasonably be expected to have a Material Adverse
Effect.
5.16 Accounts.
Except as set forth on the Schedule, none of Borrower's nor any Subsidiary's deposit accounts or securities accounts is maintained
or invested with a Person other than Bank.
5.17 Full
Disclosure. No representation, warranty or other statement made by Borrower in any certificate or written statement furnished
to Bank in connection with the Loan Documents or the transactions contemplated thereby contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements contained in such certificates or statements not
misleading in light of the circumstances in which it was made.
6. AFFIRMATIVE
COVENANTS.
Borrower shall do all of the following:
6.1 Good
Standing. Borrower shall maintain its and (except as permitted by Section 7.3) each of its Subsidiaries' corporate
existence and good standing in its jurisdiction of incorporation and maintain qualification in each jurisdiction in which it
is required under applicable law, except where the failure to be so qualified could not reasonably be expected to have a
Material Adverse Effect. Borrower shall maintain, and shall cause each of its Subsidiaries to maintain, in force all
licenses, approvals and agreements, the loss of which could reasonably be expected to have a Material Adverse Effect.
6.2 Government Compliance. Borrower
shall meet, and shall cause each Subsidiary to meet, the minimum funding requirements of ERISA with respect to any employee
benefit plans subject to ERISA. Borrower shall comply, and shall cause each Subsidiary to comply, with all statutes, laws,
ordinances and government rules and regulations to which it is subject, noncompliance with which could reasonably be expected
to have a Material Adverse Effect.
6.3 Financial Statements, Reports,
Certificates. Borrower shall deliver the following to Bank: (a) as soon as available, but in any event within thirty (30)
days after the end of each calendar month, a company prepared consolidated balance sheet, income statement, and cash flow
statement covering Borrower's consolidated operations during such period, prepared in accordance with GAAP, consistently
applied, in a form reasonably acceptable to Bank and certified by a Responsible Officer; (b) as soon as available, but in any
event within one hundred eighty (180) days after the end of Borrower's fiscal year, audited consolidated financial statements
of Borrower prepared in accordance with GAAP, consistently applied, together with an unqualified opinion on such financial
statements of an independent certified public accounting firm reasonably acceptable to Bank (or an opinion qualified for
going concern so long as Borrower's investors provide additional equity as needed); (c) copies of all statements, reports and
notices sent or made available generally by Borrower to its security holders or to holders of Subordinated Debt and, if
applicable, all reports on Forms 10-K and 10-Q filed with the Securities and Exchange Commission; (d) promptly upon receipt
of notice thereof, a report of any legal actions pending or, to Borrower's knowledge, threatened against Borrower or any
Subsidiary that could reasonably be expected to result in damages or costs to Borrower or any Subsidiary of Two Hundred
Thousand Dollars ($200,000) or more; (e) as soon as available, but in any event within forty-five (45) days after the
beginning of each fiscal year of Borrower, (i) annual operating budgets (including income statements, balance sheets and cash
flow statements, by month) for the upcoming fiscal year of Borrower, and (ii) annual financial projections for the following
fiscal year as approved by Borrower's board of directors, together with any related business forecasts used in the
preparation of such annual financial projections; and (f) such budgets, sales projections, operating plans or other financial
information of Borrower and/or its Subsidiaries as Bank may reasonably request from time to time.
Within thirty (30)
days after the last day of each month, Borrower shall deliver to Bank aged listings of accounts receivable and accounts payable.
Borrower shall deliver
to Bank with the monthly financial statements a Compliance Certificate signed by a Responsible Officer in substantially the form
set forth in the Client Reporting File.
Bank shall have a right
from time to time hereafter to audit Borrower's Accounts and appraise Collateral at Borrower's expense, provided that such audits
will be conducted no more often than every twelve (12) months unless an Event of Default has occurred and is continuing.
6.4 Inventory; Returns. Borrower shall keep
all Inventory in good and marketable condition, free from all material defects except for Inventory for which adequate
reserves have been made. Returns and allowances, if any, as between Borrower and its account debtors shall be on the same
basis and in accordance with the usual customary practices of Borrower, as they exist at the time of the execution and
delivery of this Agreement. Borrower shall promptly notify Bank of all returns and recoveries and of all disputes and claims,
where the return, recovery, dispute or claim involves more than Two Hundred Thousand Dollars ($200,000).
6.5 Taxes. Borrower shall make, and shall
cause each Subsidiary to make, due and timely payment or deposit of all material federal, state, and local taxes,
assessments, or contributions required of it by law, and will execute and deliver to Bank, on its reasonable request,
appropriate certificates attesting to the payment or deposit thereof; and Borrower will make, and will cause each Subsidiary
to make, timely payment or deposit of all material tax payments and withholding taxes required of it by applicable laws,
including, but not limited to, those laws concerning F.I.C.A., F.U.T.A., state disability, and local, state, and federal
income taxes, and will, upon Bank's reasonable request, furnish Bank with proof reasonably satisfactory to Bank indicating
that Borrower or a Subsidiary has made such payments or deposits; provided that Borrower or a Subsidiary need not make any
payment if the amount or validity of such payment is contested in good faith by appropriate proceedings and is reserved
against (to the extent required by GAAP) by Borrower.
[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is
not material and would likely cause competitive harm to the registrant if publicly disclosed.
6.6 Insurance.
(a)
Borrower, at its expense, shall keep the Collateral insured against loss or damage by fire, theft, explosion, sprinklers,
and all other hazards and risks, and in such amounts, as ordinarily insured against by other owners in similar businesses conducted
in the locations where Borrower's business is conducted on the date hereof. Borrower shall also maintain insurance relating to
Borrower's business, ownership and use of the Collateral in amounts and of a type that are customary to businesses similar to
Borrower's.
(b)
All such policies of insurance shall be in such form, with such companies, and in such amounts as are reasonably satisfactory
to Bank. All such policies of property insurance shall contain a lender's loss payable endorsement, in a form reasonably satisfactory
to Bank, showing Bank as an additional lender's loss payee thereof, and all general liability insurance policies shall show Bank
as an additional insured and shall specify that the insurer must give at least thirty (30) days' notice to Bank before canceling
its policy for any reason. Upon Bank's reasonable request, Borrower shall deliver to Bank certified copies of such policies of
insurance and evidence of the payments of all premiums therefor. Upon the occurrence and during the continuance of an Event of
Default, all proceeds payable under any such policy shall, at the option of Bank, be payable to Bank to be applied on account
of the Obligations.
6.7 Accounts. Borrower shall, (i) maintain
and shall cause each of its Subsidiaries to maintain all its depository and operating accounts, and its primary investment
accounts with Bank and (ii) endeavor to utilize and shall cause each of its Subsidiaries to endeavor to utilize Bank's
International Banking Division for any international banking services required by Borrower, including, but not limited to,
foreign currency wires, hedges, swaps, FX Contracts, and Letters of Credit; provided, however, notwithstanding the foregoing,
so long as Borrower has, on or prior to the Closing Date, transferred at least Nine Million Dollars ($9,000,000) to its
accounts at Bank, for a period of time not to exceed one hundred twenty (120) days from the Closing Date, Borrower may
maintain up to Two Million Dollars ($2,000,000) in its accounts at Silicon Valley Bank listed on the Perfection Certificate
delivered to Bank on or prior to the Effective Date (the "Transition Accounts") provided that beginning on
the date that is thirty (30) days following the Closing Date, all amounts in excess of Five Hundred Thousand Dollars
($500,000) in such accounts shall be swept to Borrower's accounts at Bank no less frequently than weekly, and no control
agreements shall be required in connection with the Transition Accounts.
6.8 Financial Covenants. Borrower shall maintain:
(a)
Minimum Liquidity Ratio. At all times from the Closing Date through December 31, 2019, a Liquidity Ratio of at least
1.00 to 1.00.
(b)
Minimum Cash. At all times beginning on January 1, 2020, a balance of unrestricted cash at Bank in an amount not less
than Three Million Dollars ($3,000,000).
(c) Minimum
Revenue. Borrower and Bank agree to, no later than March 15, 2020, enter into an amendment to this Agreement to set a
cumulative quarterly revenue covenant (determined in accordance with GAAP) which shall be targeted at the greater of [***].
6.9 Intellectual
Property Rights.
(a) If
Borrower applies for any patent or the registration of any trademark or servicemark with the United States Patent and
Trademark Office, Borrower shall give Bank written of such application or registration with the next financial statements to
be delivered to the Bank under Section 6.3(a), including the date of such filing and the registration or application numbers,
if any. Borrower shall (i) give Bank not less than thirty (30) days prior written notice of the filing of any applications or
registrations with the United States Copyright Office, including the title of such intellectual property rights to be
registered, as such title will appear on such applications or registrations, and the date such applications or registrations
will be filed, and (ii) prior to the filing of any such applications or registrations, shall execute such documents as Bank
may reasonably request for Bank to maintain its perfection in such intellectual property rights to be registered by Borrower,
and upon the reasonable request of Bank, shall file such documents simultaneously with the filing of any such applications or
registrations. Upon filing any such applications or registrations with the United States Copyright Office, Borrower shall
promptly provide Bank with (i) a copy of such applications or registrations, without the exhibits, if any, thereto, (ii)
evidence of the filing of any documents reasonably requested by Bank to be filed for Bank to maintain the perfection and
priority of its security interest in such intellectual property rights, and (iii) the date of such filing.
(b) Bank
may audit Borrower's Intellectual Property to confirm compliance with this Section, provided such audit may not occur more often
than once per year, unless an Event of Default has occurred and is continuing. Bank shall have the right, but not the obligation,
to take, at Borrower's sole expense, any actions that Borrower is required under this Section to take but which Borrower fails
to take, after fifteen (15) days' notice to Borrower. Borrower shall reimburse and indemnify Bank for all reasonable costs and
reasonable expenses incurred in the reasonable exercise of its rights under this Section.
6.10 Further
Assurances. At any time and from time to time Borrower shall execute and deliver such further instruments and take such further
action as may reasonably be requested by Bank to effect the purposes of this Agreement.
6.11 Post-Closing
Requirements.
(a)
No later than thirty (30) days after the Closing Date, Borrower shall have delivered to Bank, evidence reasonably satisfactory
to Bank that the endorsements required by Section 6.6 hereof are in full force and effect, together with appropriate evidence
showing lender loss payable and/or additional insured clauses or endorsements in favor of Bank.
(b)
No later than sixty (60) days after the Closing Date, Borrower shall have delivered to Bank, a landlord's waiver in favor
of Bank for Borrower's leased location at 645 Summer St., Boston, MA 02110, by the landlord thereof, together with the duly executed
signatures thereto.
7. NEGATIVE
COVENANTS.
Borrower will not do any of the following:
7.1 Dispositions.
Convey, sell, lease, transfer or otherwise dispose of (collectively, a "Transfer"), or permit any of its Subsidiaries
to Transfer, all or any part of its business or property, other than: (i) Transfers of Inventory in the ordinary course of business;
(ii) Transfers of non-exclusive licenses and similar arrangements for the use of the property of Borrower or its Subsidiaries in
the ordinary course of business; (iii) consisting of Permitted Liens and Permitted Investments; (iv) consisting of the sale or
issuance of any stock of Borrower permitted under Section 7.2 of this Agreement; (v) consisting of Borrower's use or transfer of
money for the purchase of goods and services in the ordinary course of business and in a manner that is not prohibited by the terms
of this Agreement or the other Loan Documents; or (vi) Transfers of worn-out, obsolete or surplus Equipment which was not financed
by Bank.
7.2 Change
in Business; Change in Control or Executive Office. Engage in any business, or permit any of its Subsidiaries to engage in
any business, other than the businesses currently engaged in by Borrower and any business substantially similar or related thereto
(or incidental thereto); or cease to conduct business in the manner conducted by Borrower as of the Closing Date; or suffer or
permit a Change in Control; or without thirty (30) days prior written notification to Bank, relocate its chief executive office
or state of incorporation or change its legal name; or without Bank's prior written consent, change the date on which its fiscal
year ends; or suffer a change on its board of directors which results in the failure of at least one (1) managing director of ARCH
Venture Partners or its Affiliates to serve as a voting member, in such case without the prior written consent of Bank which may
be withheld in Bank's sole discretion.
7.3 Mergers
or Acquisitions. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with or into any other business
organization, or acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property
of another Person, provided that a Subsidiary may merge with or into Borrower or another Subsidiary.
7.4 Indebtedness. Create, incur, assume or be
or remain liable with respect to any Indebtedness, or permit any Subsidiary so to do, other than Permitted Indebtedness.
7.5 Encumbrances. Create, incur, assume or
suffer to exist any Lien with respect to any of its property (including without limitation, its Intellectual Property), or
assign or otherwise convey any right to receive income, including the sale of any Accounts, or permit any of its Subsidiaries
to do so, except for Permitted Liens, or agree with any Person other than Bank not to grant a security interest in, or
otherwise encumber, any of its property (including without limitation, its Intellectual Property), or permit any Subsidiary
to do so.
7.6 Distributions. Pay any dividends or
make any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock, or permit
any of its Subsidiaries to do so, except that Borrower may repurchase the stock of former employees pursuant to stock
repurchase agreements as long as an Event of Default does not exist prior to such repurchase or would not exist after giving
effect to such repurchase.
7.7 Investments. Directly or indirectly
acquire or own, or make any Investment in or to any Person, or permit any of its Subsidiaries so to do, other than Permitted
Investments; or maintain or invest any of its deposit accounts or securities accounts with a Person other than Bank or permit
any of its Subsidiaries to do so unless such Person has entered into an account control agreement with Bank in form and
substance reasonably satisfactory to Bank; or suffer or permit any Subsidiary to be a party to, or be bound by, an agreement
that restricts such Subsidiary from paying dividends or otherwise distributing property to Borrower.
7.8 Transactions with Affiliates. Directly
or indirectly enter into or permit to exist any material transaction with any Affiliate of Borrower except for transactions
that are in the ordinary course of Borrower's business, upon fair and reasonable terms that are no less favorable to Borrower
than would be obtained in an arm's length transaction with a non-affiliated Person. Without the prior written consent of Bank
in its sole and absolute discretion, no part of the proceeds of the Credit Extensions may be used (i) to purchase any asset
or securities (A) issued by an Reg W Affiliate of Bank, (B) in respect of which, and during any period when, any Reg W
Affiliate of Bank has acted as an underwriter, (C) sold by any Reg W Affiliate of Bank acting as a principal, (D) if the
transaction would otherwise result in a violation of Regulation W issued by the Board of Governors of the Federal Reserve
System of the United States, as may be amended from time to time, or (E) if the transaction would not comply with 12 C.F.R.
223.16; (ii) to pay, in whole or in part, directly or indirectly, any loan made by any Reg W Affiliate of Bank; or (iii) for
the benefit of, or to transfer such proceeds to, any Reg W Affiliate of Bank.
7.9 Subordinated Debt. Make any
payment in respect of any Subordinated Debt, or permit any of its Subsidiaries to make any such payment, except in compliance
with the terms of such Subordinated Debt, or amend any provision contained in any documentation relating to the Subordinated
Debt without Bank's prior written consent.
7.10 Inventory and Equipment. Store
the Inventory or the Equipment (other than mobile Equipment such as laptop computers that are in the possession of Borrower's
employees or agents) with a bailee, warehouseman, or other third party unless the third party has been notified of Bank's
security interest and Bank (a) has received an acknowledgment from the third party that it is holding or will hold the
Inventory or Equipment for Bank's benefit or (b) is in pledge possession of the warehouse receipt, where negotiable, covering
such Inventory or Equipment. Store or maintain any Equipment (other than mobile Equipment such as laptop computers that are
in the possession of Borrower's employees or agents) or Inventory at a location other than the location set forth in Section
10 of this Agreement.
7.11 Compliance. Become an
"investment company" or be controlled by an "investment company," within the meaning of the Investment
Company Act of 1940, or become principally engaged in, or undertake as one of its important activities, the business of
extending credit for the purpose of purchasing or carrying margin stock, or use the proceeds of any Credit Extension for such
purpose. Fail to meet the minimum funding requirements of ERISA, permit a Reportable Event or Prohibited Transaction, as
defined in ERISA, to occur, fail to comply with the Federal Fair Labor Standards Act or violate any law or regulation, which
violation could reasonably be expected to have a Material Adverse Effect, or a material adverse effect on the Collateral or
the priority of Bank's Lien on the Collateral, or permit any of its Subsidiaries to do any of the foregoing.
8. EVENTS
OF DEFAULT.
Any one or more of
the following events shall constitute an event of default by Borrower under this Agreement (each an "Event of Default").
8.1 Payment
Default. If Borrower fails to pay, when due, any of the Obligations;
8.2 Covenant
Default.
(a)
If Borrower fails to perform any obligation under Sections 6.1, 6.2, 6.3, 6.5, 6.6, 6.7, 6.8, 6.9 or 6.11 or violates any
of the covenants contained in Article 7 of this Agreement; or
(b)
If Borrower fails or neglects to perform or observe any other material term, provision, condition, covenant contained in
this Agreement, in any of the Loan Documents, or in any other present or future agreement between Borrower and Bank and as to
any default under such other term, provision, condition or covenant that can be cured, has failed to cure such default within
ten days after Borrower receives notice thereof or any officer of Borrower becomes aware thereof; provided, however, that if the
default cannot by its nature be cured within the ten day period or cannot after diligent attempts by Borrower be cured within
such ten day period, and such default is likely to be cured within a reasonable time, then Borrower shall have an additional reasonable
period (which shall not in any case exceed thirty (30) days) to attempt to cure such default, and within such reasonable time
period the failure to have cured such default shall not be deemed an Event of Default but no Credit Extensions will be made.
8.3 Material
Adverse Effect. If there occurs any circumstance or circumstances that could reasonably be expected to have a Material Adverse
Effect;
8.4 Attachment.
If any portion of Borrower's assets is attached, seized, subjected to a writ or distress warrant, or is levied upon, or comes
into the possession of any trustee, receiver or person acting in a similar capacity and such attachment, seizure, writ or distress
warrant or levy has not been removed, discharged or rescinded within ten (10) days, or if Borrower is enjoined, restrained, or
in any way prevented by court order from continuing to conduct all or any material part of its business affairs, or if a judgment
or other claim becomes a lien or encumbrance upon any material portion of Borrower's assets, or if a notice of lien, levy, or assessment
is filed of record with respect to any of Borrower's assets by the United States Government, or any department, agency, or instrumentality
thereof, or by any state, county, municipal, or governmental agency, and the same is not paid within ten (10) days after Borrower
receives notice thereof, provided that none of the foregoing shall constitute an Event of Default where such action or event is
stayed or an adequate bond has been posted pending a good faith contest by Borrower (provided that no Credit Extensions will be
required to be made during such cure period);
8.5 Insolvency.
If Borrower becomes insolvent, or if an Insolvency Proceeding is commenced by Borrower, or if an Insolvency Proceeding is commenced
against Borrower and is not dismissed or stayed within forty-five (45) days (provided that no Credit Extensions will be made prior
to the dismissal of such Insolvency Proceeding);
8.6 Other
Agreements. If there is a default or other failure to perform in any agreement to which Borrower is a party or by which it
is bound resulting in a right by a third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness
in an amount in excess of Two Hundred Thousand Dollars ($200,000) or which could reasonably be expected to have a Material Adverse
Effect;
8.7 Judgments.
If a judgment or judgments for the payment of money in an amount, individually or in the aggregate, of at least Two Hundred
Thousand Dollars ($200,000) shall be rendered against Borrower and shall remain unsatisfied and unstayed for a period of ten (10)
days (provided that no Credit Extensions will be made prior to the satisfaction or stay of such judgment); or
8.8 Misrepresentations.
If any material misrepresentation or material misstatement exists when made now or hereafter in any warranty or representation
set forth herein or in any certificate delivered to Bank by any Responsible Officer pursuant to this Agreement or to induce Bank
to enter into this Agreement or any other Loan Document.
9. BANK'S
RIGHTS AND REMEDIES.
9.1 Rights
and Remedies. Upon the occurrence and during the continuance of an Event of Default, Bank may, at its election, without notice
of its election and without demand, do any one or more of the following (to the extent not prohibited by applicable law), all of
which are authorized by Borrower:
(a)
Declare all Obligations, whether evidenced by this Agreement, by any of the other Loan Documents, or otherwise, immediately
due and payable (provided that upon the occurrence of an Event of Default described in Section 8.5, all Obligations shall become
immediately due and payable without any action by Bank);
(b)
Cease advancing money or extending credit to or for the benefit of Borrower under this Agreement or under any other agreement
between Borrower and Bank;
(c)
Settle or adjust disputes and claims directly with account debtors for amounts, upon terms and in whatever order that Bank
reasonably considers advisable;
(d)
Make such payments and do such acts as Bank considers necessary or reasonable to protect its security interest in the Collateral.
Borrower agrees to assemble the Collateral if Bank so requires, and to make the Collateral available to Bank as Bank may designate
at a location reasonably convenient to Bank and Borrower. Borrower authorizes Bank to enter the premises where the Collateral
is located, to take and maintain possession of the Collateral, or any part of it, and to pay, purchase, contest, or compromise
any encumbrance, charge, or lien which in Bank's determination appears to be prior or superior to its security interest and to
pay all expenses reasonably incurred in connection therewith. With respect to any of Borrower's owned premises, Borrower hereby
grants Bank a license to enter into possession of such premises and to occupy the same, without charge by Borrower, in order to
exercise any of Bank's rights or remedies provided herein, at law, in equity, or otherwise;
(e)
Set off and apply to the Obligations then due any and all (i) balances and deposits of Borrower held by Bank, or (ii) indebtedness
at any time owing to or for the credit or the account of Borrower held by Bank;
(f) Ship,
reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and sell (in the manner provided for
herein) the Collateral. Bank is hereby granted a license or other right, solely pursuant to the provisions of this Section 9.1,
to use, without charge by Borrower, Borrower's labels, patents, copyrights, rights of use of any name, trade secrets, trade names,
trademarks, service marks, and advertising matter, or any property of a similar nature, as it pertains to the Collateral, in completing
production of, advertising for sale, and selling any Collateral and, in connection with Bank's exercise of its rights under this
Section 9.1, Borrower's rights under all licenses and all franchise agreements shall inure to Bank's benefit;
(g)
Dispose of the Collateral by way of one or more contracts or transactions, for cash or on terms, in such manner and at
such places (including Borrower's premises) as Bank determines is commercially reasonable, and apply any proceeds to the Obligations
in whatever manner or order Bank deems appropriate;
(h)
Bank may credit bid and purchase at any public sale; and
(i)
Any deficiency that exists after disposition of the Collateral as provided above will be paid immediately by Borrower.
9.2 Power
of Attorney. Effective only upon the occurrence and during the continuance of an Event of Default, Borrower hereby
irrevocably appoints Bank (and any of Bank's designated officers, or employees) as Borrower's true and lawful attorney to:
(a) send requests for verification of Accounts or notify account debtors of Bank's security interest in the Accounts; (b)
endorse Borrower's name on any checks or other forms of payment or security that may come into Bank's possession; (c) sign
Borrower's name on any invoice or bill of lading relating to any Account, drafts against account debtors, schedules and
assignments of Accounts, verifications of Accounts, and notices to account debtors; (d) dispose of any Collateral; (e) make,
settle, and adjust all claims under and decisions with respect to Borrower's policies of insurance; (f) settle and adjust
disputes and claims respecting the accounts directly with account debtors, for amounts and upon terms which Bank determines
to be reasonable; and (g) to file, in its sole discretion, one or more financing or continuation statements and amendments
thereto, relative to any of the Collateral. The appointment of Bank as Borrower's attorney in fact, and each and every one of
Bank's rights and powers, being coupled with an interest, is irrevocable until all of the Obligations (other than inchoate
indemnification or reimbursement obligations) have been fully repaid and performed and Bank's obligation to provide Credit
Extensions hereunder is terminated.
9.3 Accounts
Collection. At any time after the occurrence of an Event of Default, Bank may notify any Person owing funds to Borrower of
Bank's security interest in such funds and verify the amount of such Account. Borrower shall collect all amounts owing to Borrower
for Bank, receive in trust all payments as Bank's trustee, and immediately deliver such payments to Bank in their original form
as received from the account debtor, with proper endorsements for deposit.
9.4 Bank
Expenses. If Borrower fails to pay any amounts or furnish any required proof of payment due to third persons or entities, as
required under the terms of this Agreement, then Bank may do any or all of the following after reasonable notice to Borrower: (a)
make payment of the same or any part thereof; (b) set up such reserves under a loan facility in Section 2.1 as Bank deems necessary
to protect Bank from the exposure created by such failure; or (c) obtain and maintain insurance policies of the type discussed
in Section 6.6 of this Agreement, and take any action with respect to such policies as Bank deems prudent. Any amounts so paid
or deposited by Bank shall constitute Bank Expenses, shall be immediately due and payable, and shall bear interest at the then
applicable rate hereinabove provided, and shall be secured by the Collateral. Any payments made by Bank shall not constitute an
agreement by Bank to make similar payments in the future or a waiver by Bank of any Event of Default under this Agreement.
9.5 Bank's
Liability for Collateral. So long as Bank complies with applicable law and reasonable banking practices, Bank shall not in
any way or manner be liable or responsible for: (a) the safekeeping of the Collateral; (b) any loss or damage thereto occurring
or arising in any manner or fashion from any cause; (c) any diminution in the value thereof; or (d) any act or default of any carrier,
warehouseman, bailee, forwarding agency, or other person whomsoever. All risk of loss, damage or destruction of the Collateral
shall be borne by Borrower.
9.6 Remedies
Cumulative. Bank's rights and remedies under this Agreement, the Loan Documents, and all other agreements shall be cumulative.
Bank shall have all other rights and remedies not inconsistent herewith as provided under the Code, by law, or in equity. No exercise
by Bank of one right or remedy shall be deemed an election, and no waiver by Bank of any Event of Default on Borrower's part shall
be deemed a continuing waiver. No delay by Bank shall constitute a waiver, election, or acquiescence by it. No waiver by Bank shall
be effective unless made in a written document signed on behalf of Bank and then shall be effective only in the specific instance
and for the specific purpose for which it was given.
9.7 Demand;
Protest. Borrower waives demand, protest, notice of protest, notice of default or dishonor, notice of payment and nonpayment,
notice of any default, nonpayment at maturity, release, compromise, settlement, extension, or renewal of accounts, documents, instruments,
chattel paper, and guarantees at any time held by Bank on which Borrower may in any way be liable.
10. NOTICES.
All notices, consents, requests, approvals, demands, or other communication by any party to this Agreement or any other Loan
Document must be in writing and shall be deemed to have been validly served, given, or delivered: (a) upon the earlier of actual
receipt and three (3) Business Days after deposit in the U.S. mail, first class, registered or certified mail return receipt requested,
with proper postage prepaid; (b) upon transmission, when sent by electronic mail or facsimile transmission; (c) one (1) Business
Day after deposit with a reputable overnight courier with all charges prepaid; or (d) when delivered, if hand-delivered by messenger,
all of which shall be addressed to the party to be notified and sent to the address, facsimile number, or email address indicated
below. Bank or Borrower may change its mailing or electronic mail address or facsimile number by giving the other party written
notice thereof in accordance with the terms of this Section 10.
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If to Borrower:
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908
DEVICES INC.
645
Summer St.
Boston,
MA 02110
Attn:
Joseph H. Griffith, Chief Financial Officer
Email:
jgriffith@908devices.com
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With a copy to:
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Goodwin Procter LLP
100 Northern Ave.
Boston, MA 02210
Attn: Mark D. Smith
Email: marksmith@goodwinlaw.com
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If to Bank:
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SIGNATURE BANK
Signature Bank — Venture Banking Group
565 Fifth Avenue, 12th Floor
New York, New York 10017
Attn: Lisa Foussianes
Email: lfoussianes@signatureny.com
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The parties hereto
may change the address at which they are to receive notices hereunder, by notice in writing in the foregoing manner given to the
other.
11.
GOVERNING LAW. This Agreement shall be deemed to have been made under and shall be governed by the laws of the State
of New York (without regard to choice of law principles except as set forth in Section 5-1401 of the New York General Obligations
Law) in all respects, including matters of construction, validity and performance, and that none of its terms or provisions may
be waived, altered, modified or amended except as Bank may consent thereto in writing duly signed for and on its behalf.
12.
JURISDICTION AND JURY TRIAL WAIVER.
12.1 Borrower hereby irrevocably consents
that any suit, legal action or proceeding against borrower or any of its properties with respect to any of the rights or obligations
arising directly or indirectly under or relating to this note or any other loan document may be brought in any jurisdiction, including,
without limitation, any New York state or United States Federal Court located in the southern district of New York, as Bank may
elect, and by execution and delivery of this note, Borrower hereby irrevocably submits to and accepts with regard to any such
suit, legal action or proceeding, for itself and in respect of its property, generally and unconditionally, the jurisdiction of
the aforesaid courts. Borrower hereby irrevocably consents to the service of process in any such suit, legal action or proceeding
by the mailing of copies thereof by registered or certified mail, postage prepaid, return receipt requested, to borrower at its
address set forth herein. The foregoing shall not limit the right of Bank to serve process in any other manner permitted by law
or to bring any suit, legal action or proceeding or to obtain execution of judgment in any other jurisdiction.
12.2 Borrower
hereby irrevocably waives any objection which borrower may now or hereafter have to the laying of venue of any suit, legal
action or proceeding arising directly or indirectly under or relating to this note or any other loan document in any state or
federal court located in any jurisdiction, including without limitation, any state or federal court located in the southern
district of New York chosen by Bank in accordance with this Section xxii and hereby further irrevocably waives any
claim that a court located in the southern district of New York is not a convenient forum for any such suit, legal action or
proceeding.
12.3 Borrower
hereby irrevocably agrees that any suit, legal action or proceeding commenced by Borrower with respect to any rights or obligations
arising directly or indirectly under or relating to this note or any other loan document (except as expressly set forth therein
to the contrary) shall be brought exclusively in any New York state or United States Federal Court located in the southern district
of New York.
12.4 Borrower
hereby waives any defense or claim based on marshaling of assets or election or remedies or guaranties.
12.5 Borrower
and Bank (by its acceptance of this Agreement) hereby irrevocably waive all right to trial by jury in any action, proceeding or
counterclaim arising out of or relating to any obligation of Borrower or this note or any other loan document.
13. GENERAL
PROVISIONS.
13.1 Successors
and Assigns. This Agreement shall bind and inure to the benefit of the respective successors and permitted assigns of each
of the parties; provided, however, that neither this Agreement nor any rights hereunder may be assigned by Borrower without Bank's
prior written consent, which consent may be granted or withheld in Bank's sole discretion. Bank shall have the right without the
consent of or notice to Borrower to sell, transfer, negotiate, or grant participation in all or any part of, or any interest in,
Bank's obligations, rights and benefits hereunder; provided however so long as no Event of Default has occurred and is continuing
Bank shall not assign its obligations, rights or benefits hereunder to (i) any direct competitor of Borrower or (ii) any vulture
debt fund.
13.2 Indemnification.
Borrower shall defend, indemnify and hold harmless Bank and its officers, employees, and agents against: (a) all obligations,
demands, claims, and liabilities claimed or asserted by any other party in connection with the transactions contemplated by this
Agreement; and (b) all losses or Bank Expenses in any way suffered, incurred, or paid by Bank as a result of or in any way arising
out of, following, or consequential to transactions between Bank and Borrower whether under this Agreement, or otherwise (including
without limitation reasonable attorneys' fees and expenses), except for losses caused by Bank's gross negligence or willful misconduct.
13.3 Time
of Essence. Time is of the essence for the performance of all obligations set forth in this Agreement.
13.4 Severability
of Provisions. Each provision of this Agreement shall be severable from every other provision of this Agreement for the purpose
of determining the legal enforceability of any specific provision.
13.5 Amendments
in Writing, Integration. Neither this Agreement nor the Loan Documents can be amended or terminated orally. All prior agreements,
understandings, representations, warranties, and negotiations between the parties hereto with respect to the subject matter of
this Agreement and the Loan Documents, if any, are merged into this Agreement and the Loan Documents.
13.6 Counterparts/Acceptance.
This Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which,
when executed and delivered, shall be deemed to be an original, and all of which, when taken together, shall constitute but one
and the same Agreement. Bank hereby acknowledges and agrees that this Agreement has been executed and accepted by Bank in the state
of New York.
13.7 Survival.
All covenants, representations and warranties made in this Agreement shall continue in full force and effect so long as any
Obligations (other than inchoate indemnification or reimbursement obligations) remain outstanding or Bank has any obligation to
make Credit Extensions to Borrower. The obligations of Borrower to indemnify Bank with respect to the expenses, damages, losses,
costs and liabilities described in Section 13.2 shall survive until all applicable statute of limitations periods with respect
to actions that may be brought against Bank have run.
13.8 Confidentiality. In
handling any confidential information Bank and all employees and agents of Bank, including but not limited to accountants,
shall exercise the same degree of care that it exercises with respect to its own proprietary information of the same types to
maintain the confidentiality of any non-public information thereby received or received pursuant to this Agreement except
that disclosure of such information may be made (i) to the subsidiaries or affiliates of Bank (who agree to be subject to
comparable confidentiality obligations) in connection with their present or prospective business relations with Borrower,
(ii) to prospective transferees or purchasers of any interest in the Loans who agree to be subject to comparable
confidentiality obligations, (iii) as required by law, regulations, rule or order, subpoena, judicial order or similar order,
(iv) as may be required in connection with the examination, audit or similar investigation of Bank and (v) as Bank may
determine in connection with the enforcement of any remedies hereunder. Confidential information hereunder shall not include
information that either: (a) is in the public domain or in the knowledge or possession of Bank when disclosed to Bank, or
becomes part of the public domain after disclosure to Bank through no fault of Bank; or (b) is disclosed to Bank by a third
party, provided Bank does not have actual knowledge that such third party is prohibited from disclosing such information.
13.9 Patriot
Act Notice. Bank notifies Borrower that, pursuant to the requirements of the USA Patriot Act, Title III of Pub. L.
107-56 (signed into law on October 26, 2001) (the "Patriot Act"), it is required to obtain, verify and record
information that identifies Borrower, which information includes names and addresses and other information that will allow
Bank to identify Borrower in accordance with the Patriot Act.
13.10 Marketing Consent.
Borrower hereby authorizes Bank and its affiliates, at their respective sole expense, and with prior approval by Borrower,
to publish such tombstones and give such other publicity to this Agreement as each may from time to time determine in its sole
discretion. The foregoing authorization shall remain in effect unless Borrower notifies Bank in writing that such authorization
is revoked.
[Balance of Page Intentionally Left
Blank]
IN WITNESS WHEREOF, the parties hereto
have caused this Agreement to be executed as of the date first above written.
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908 DEVICES INC.
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By:
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/s/ Joseph H. Griffith IV
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Name:
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Joseph H. Griffith IV
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Title:
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Treasurer and Chief Financial Officer
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SIGNATURE BANK
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By:
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/s/ Lisa Foussianes
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Name:
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Lisa Foussianes
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Title:
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SVP
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[Signature Page to Loan and Security
Agreement]
EXHIBIT A
DEBTOR: 908 DEVICES INC.
SECURED PARTY: SIGNATURE BANK
COLLATERAL DESCRIPTION ATTACHMENT
TO LOAN AND SECURITY AGREEMENT
All personal property
of Borrower (herein referred to as "Borrower" or "Debtor") whether presently existing or hereafter created
or acquired, and wherever located, including, but not limited to:
(a)
all accounts (including health-care-insurance receivables), chattel paper (including tangible and electronic chattel paper),
deposit accounts, documents (including negotiable documents), equipment (including all accessions and additions thereto), general
intangibles (including payment intangibles and software), goods (including fixtures), instruments (including promissory notes),
inventory (including all goods held for sale or lease or to be furnished under a contract of service, and including returns and
repossessions), investment property (including securities and securities entitlements), letter of credit rights, money, and all
of Debtor's books and records with respect to any of the foregoing, and the computers and equipment containing said books and records;
(b)
any and all cash proceeds and/or noncash proceeds of any of the foregoing, including, without limitation, insurance proceeds,
and all supporting obligations and the security therefor or for any right to payment. All terms above have the meanings given to
them in the New York Uniform Commercial Code, as amended or supplemented from time to time.
Notwithstanding the
foregoing, the Collateral shall not include (1) any permit, approval or license issued or granted by a governmental authority to
the extent that the grant by Borrower of a security interest to Bank therein is prohibited by applicable law or would result in
the termination or revocation thereof, or (2) any copyrights, patents, trademarks, servicemarks and applications therefor, now
owned or hereafter acquired, or any claims for damages by way of any past, present and future infringement of any of the foregoing
(collectively, the "Intellectual Property"); provided, however, that the Collateral shall include all accounts and general
intangibles that consist of rights to payment and proceeds from the sale, licensing or disposition of all or any part, or rights
in, the foregoing (the "Rights to Payment"). Notwithstanding the foregoing, if a judicial authority (including a U.S.
Bankruptcy Court) holds that a security interest in the underlying Intellectual Property is necessary to have a security interest
in the Rights to Payment, then the Collateral shall automatically, and effective as of the Closing Date, include the Intellectual
Property to the extent necessary to permit perfection of Bank's security interest in the Rights to Payment.
[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is
not material and would likely cause competitive harm to the registrant if publicly disclosed.
SCHEDULE OF EXCEPTIONS
[***]
CORPORATE RESOLUTIONS TO BORROW
Borrower:
908 DEVICES INC.
I,
the undersigned Secretary or Assistant Secretary of 908 DEVICES INC. (the "Corporation"), HEREBY CERTIFY that the Corporation
is organized and existing under and by virtue of the laws of the State of Delaware.
I FURTHER CERTIFY that attached
hereto as Attachments 1 and 2 are true and complete copies of the Certificate of Incorporation, as amended, and the Bylaws of the
Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting
of the Directors of the Corporation, duly called and held, at which a quorum was present and voting (or by other duly authorized
corporate action in lieu of a meeting), the following resolutions (the "Resolutions") were adopted.
BE IT RESOLVED, that any one
(1) of the following named officers, employees, or agents of this Corporation, whose actual signatures are shown below:
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NAMES
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POSITION
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ACTUAL SIGNATURES
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Kevin J. Knopp
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President and Chief Execute Officer
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Joseph H. Griffith IV
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Treasurer and Chief Financial Officer
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acting for and on behalf of this Corporation and
as its act and deed be, and they hereby are, authorized and empowered:
Borrow
Money. To borrow from time to time from SIGNATURE BANK ("Bank"), on such terms as may be agreed upon between the
officers, employees, or agents of the Corporation and Bank, such sum or sums of money as in their judgment should be borrowed,
without limitation.
Execute
Loan Documents. To execute and deliver to Bank that certain Loan and Security Agreement dated as of (the "Loan Agreement")
and any other agreement entered into between Corporation and Bank in connection with the Loan Agreement, including any amendments,
all as amended or extended from time to time (collectively, with the Loan Agreement, the "Loan Documents"), and also
to execute and deliver to Bank one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions
for the Loan Documents, or any portion thereof.
Grant
Security. To grant a security interest to Bank in the Collateral described in the Loan Documents, which security interest shall
secure all of the Corporation's Obligations, as described in the Loan Documents.
Negotiate
Items. To draw, endorse, and discount with Bank all drafts, trade acceptances, promissory notes, or other evidences of indebtedness
payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the
same or to cause such proceeds to be credited to the account of the Corporation with Bank, or to cause such other disposition of
the proceeds derived therefrom as they may deem advisable.
Warrants. To issue Bank warrants to purchase
the Corporation's capital stock.
Letters
of Credit. To execute letter of credit applications and other related documents pertaining to Bank's issuance of letters of
credit.
Corporate
Credit Cards. To execute corporate credit card applications and agreements and other related documents pertaining to Bank's
provision of corporate credit cards.
Further
Acts. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances
thereunder, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and
deliver such other documents and agreements as they may in their discretion deem reasonably necessary or proper in order to carry
into effect the provisions of these Resolutions.
BE IT FURTHER
RESOLVED, that any and all acts authorized pursuant to these resolutions and performed prior to the passage of these resolutions
are hereby ratified and approved, that these Resolutions shall remain in full force and effect and Bank may rely on these Resolutions
until written notice of their revocation shall have been delivered to and received by Bank. Any such notice shall not affect any
of the Corporation's agreements or commitments in effect at the time notice is given.
I FURTHER
CERTIFY that the officers, employees, and agents named above are duly elected, appointed, or employed by or for the Corporation,
as the case may be, and occupy the positions set forth opposite their respective names; that the foregoing Resolutions now stand
of record on the books of the Corporation; and that the Resolutions are in full force and effect and have not been modified or
revoked in any manner whatsoever.
IN WITNESS
WHEREOF, I have hereunto set my hand on August 29, 2019 and attest that the signatures set opposite the names listed above are
their genuine signatures.
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CERTIFIED AND ATTESTED BY:
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X
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Christopher Brown
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Secretary of Borrower
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ATTACHMENT A
CERTIFICATE OF INCORPORATION
Attachment A
State
of Delaware
Secretary of State
Division of Corporations
Delivered 03:36 PM 04/11/2019
FILED 03:36 PM 04/11/2019
SR 20192766060 - File Number 5103607
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FIFTH
AMENDED AND RESTATED
CERTIFICATE
OF INCORPORATION
OF
908 DEVICES INC.
908
Devices Inc., a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"),
DOES HEREBY CERTIFY:
FIRST:
The original Certificate of Incorporation of the Corporation was filed with the Secretary of State of Delaware on February 10,
2012 under the name "908 Devices Inc."
SECOND:
The Fifth Amended and Restated Certificate of Incorporation of the Corporation in the form attached hereto as Exhibit A has been
duly adopted in accordance with the provisions of Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware
by the directors and stockholders of the Corporation.
THIRD:
The Fifth Amended and Restated Certificate of Incorporation so adopted reads in full as set forth in Exhibit A attached hereto
and is hereby incorporated herein by this reference.
IN WITNESS
WHEREOF, the Corporation has caused this Certificate to be signed by the President this 11th day of April, 2019.
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908
DEVICES INC.
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By:
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/s/ Kevin Knopp
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Kevin Knopp, President
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EXHIBIT A
FIFTH AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
908 DEVICES INC.
ARTICLE I
The name of the Corporation is 908 Devices Inc.
ARTICLE II
The address of the
Corporation's registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware
19801, County of New Castle. The name of its registered agent at such address is The Corporation Trust Company.
ARTICLE III
The purpose of the
Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law
of the State of Delaware.
ARTICLE IV
The total number of
shares of capital stock which the Corporation shall have authority to issue is 61,061,965, of which (i) 24,121,106 shares shall
be preferred stock, par value $0.001 per share (the "Preferred Stock"), and (ii) 36,940,859 shares shall be common stock,
par value $0.001 per share (the "Common Stock").
The voting powers,
designations, preferences, powers and relative, participating, optional or other special rights, and the qualifications, limitations
or restrictions of each class of capital stock of the Corporation, shall be as provided in this Article IV.
A. PREFERRED
STOCK
1. Designation.
A total of 8,490,778 shares of the Corporation's Preferred Stock shall be designated as a series known as Series A Participating
Convertible Preferred Stock, par value $0.001 per share (the "Series A Preferred Stock"). A total of 4,650,216 shares
of the Corporation's Preferred Stock shall be designated as a series known as Series B Participating Convertible Preferred Stock,
par value $0.001 per share (the "Series B Preferred Stock"). A total of 3,788,068 shares of the Corporation's Preferred
Stock shall be designated as a series known as Series C Participating Convertible Preferred Stock, par value $0.001 per share
(the "Series C Preferred Stock"). A total of 4,409,850 shares of the Corporation's Preferred Stock shall be designated
as a series known as Series D Participating Convertible Preferred Stock, par value $0.001 per share (the "Series D Preferred
Stock"). A total of 2,782,194 shares of the Corporation's Preferred Stock shall be designated as a series known as Series
E Participating Convertible Preferred Stock, par value $0.001 per share (the "Series E Preferred Stock").
2. Voting.
(a) Election
of Series A Director. The holders of outstanding shares of Series A Preferred Stock shall, voting together as a single class,
be entitled to elect one (1) Director of the Corporation (a "Series A Director"). Except as provided in Section A.2(a)(iv)
below, such Director shall be elected by a plurality vote, with the elected candidate being the candidate receiving the greatest
number of affirmative votes (with each holder of Series A Preferred Stock entitled to cast one vote for or against each candidate
with respect to each share of Series A Preferred Stock held by such holder) of the outstanding shares of Series A Preferred Stock,
with votes cast against such candidates and votes withheld having no legal effect. The election of such Director shall occur (i)
at the annual meeting of holders of capital stock, (ii) at any special meeting of holders of capital stock if such meeting is called
for the purpose of electing directors, (iii) at any special meeting of holders of Series A Preferred Stock called by holders of
not less than a majority of the outstanding shares of Series A Preferred Stock or (iv) by the written consent of holders of a majority
of the outstanding shares of Series A Preferred Stock. If at any time when any share of Series A Preferred Stock is outstanding
any such Director should cease to be a Director for any reason, the vacancy shall only be filled by the vote or written consent
of the holders of the outstanding shares of Series A Preferred Stock, voting together as a separate class, in the manner and on
the basis specified above or as otherwise provided by law. The holders of outstanding shares of Series A Preferred Stock may, in
their sole discretion, determine not to elect one or more Directors as provided herein from time to time, and during any such period
the Board of Directors shall not be deemed unduly constituted solely as a result of such vacancy.
(b) Election
of Series B Director. The holders of outstanding shares of Series B Preferred Stock shall, voting together as a single
class, be entitled to elect one (1) Director of the Corporation (a "Series B Director"). Except as provided in
Section A.2(b)(iv) below, such Director shall be elected by a plurality vote, with the elected candidate being the candidate
receiving the greatest number of affirmative votes (with each holder of Series B Preferred Stock entitled to cast one vote
for or against each candidate with respect to each share of Series B Preferred Stock held by such holder) of the outstanding
shares of Series B Preferred Stock, with votes cast against such candidates and votes withheld having no legal effect. The
election of such Directors shall occur (i) at the annual meeting of holders of capital stock, (ii) at any special meeting of
holders of capital stock if such meeting is called for the purpose of electing directors, (iii) at any special meeting of
holders of Series B Preferred Stock called by holders of not less than a majority of the outstanding shares of Series B
Preferred Stock or (iv) by the written consent of holders of a majority of the outstanding shares of Series B Preferred
Stock. If at any time when any share of Series B Preferred Stock is outstanding any such Director should cease to be a
Director for any reason, the vacancy shall only be filled by the vote or written consent of the holders of the outstanding
shares of Series B Preferred Stock, voting together as a separate class, in the manner and on the basis specified above or as
otherwise provided by law. The holders of outstanding shares of Series B Preferred Stock may, in their sole discretion,
determine not to elect such Director as provided herein from time to time, and during any such period the Board of Directors
shall not be deemed unduly constituted solely as a result of such vacancy.
(c) Election
of Series E Director. The holders of outstanding shares of Series E Preferred Stock shall, voting together as a single
class, be entitled to elect one (1) Director of the Corporation (a "Series E Director," and collectively with the
Series A Director and Series B Director, the "Preferred Directors"). Except as provided in Section A.2(c)(iv)
below, such Director shall be elected by a plurality vote, with the elected candidate being the candidate receiving the
greatest number of affirmative votes (with each holder of Series E Preferred Stock entitled to cast one vote for or against
each candidate with respect to each share of Series E Preferred Stock held by such holder) of the outstanding shares of
Series E Preferred Stock, with votes cast against such candidates and votes withheld having no legal effect. The election of
such Directors shall occur (i) at the annual meeting of holders of capital stock, (ii) at any special meeting of holders of
capital stock if such meeting is called for the purpose of electing directors, (iii) at any special meeting of holders of
Series E Preferred Stock called by holders of not less than a majority of the outstanding shares of Series E Preferred Stock
or (iv) by the written consent of holders of a majority of the outstanding shares of Series E Preferred Stock. If at any time
when any share of Series E Preferred Stock is outstanding any such Director should cease to be a Director for any reason, the
vacancy shall only be filled by the vote or written consent of the holders of the outstanding shares of Series E Preferred
Stock, voting together as a separate class, in the manner and on the basis specified above or as otherwise provided by law.
The holders of outstanding shares of Series E Preferred Stock may, in their sole discretion, determine not to elect such
Director as provided herein from time to time, and during any such period the Board of Directors shall not be deemed unduly
constituted solely as a result of such vacancy.
(d)
Election of Remaining Directors. The holders of record of the shares of Common Stock and of any other class or series
of voting stock (including the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock), exclusively and voting together as a single class, shall be entitled to elect the balance
of the total number of directors of the Corporation not elected pursuant to Sections A.2(a), A.2(b), and A.2(c).
(e)
Voting Generally. Each outstanding share of Preferred Stock shall be entitled to a number of votes equal to the number
of shares of Common Stock into which such share of Preferred Stock is then convertible pursuant to Section A.6 hereof as of the
record date for the vote or written consent of stockholders, if applicable. Each holder of outstanding shares of Preferred Stock
shall be entitled to notice of any stockholders' meeting in accordance with the by-laws of the Corporation (the "By-laws")
and shall vote with holders of the Common Stock, voting together as a single class, upon all matters submitted to a vote of stockholders,
excluding those matters required to be submitted to a class or series vote pursuant to the terms hereof (including, without limitation,
Section A.8) or by law.
3. Dividends.
(a)
The holders of shares of Series E Preferred Stock, in preference to the holders of Series D Preferred Stock, Series C Preferred
Stock, Series B Preferred Stock, Series A Preferred Stock and Common Stock, shall be entitled to receive, when, as and if declared
by the Board of Directors out of funds legally available therefor, noncumulative dividends at the rate of eight percent (8%) per
share of the Series E Original Issue Price per annum (as adjusted for subsequent stock dividends, stock splits, combinations, recapitalizations
or the like with respect to such share) from the date of original issuance of such share (the "Closing Date").
(b)
The holders of shares of Series D Preferred Stock, in preference to the holders of Series C Preferred Stock, Series B Preferred
Stock, Series A Preferred Stock and Common Stock, shall be entitled to receive, when, as and if declared by the Board of Directors
out of funds legally available therefor, noncumulative dividends at the rate of eight percent (8%) per share of the Series D Original
Issue Price per annum (as adjusted for subsequent stock dividends, stock splits, combinations, recapitalizations or the like with
respect to such share) from the Closing Date with respect to such share.
(c) The
holders of shares of Series C Preferred Stock, in preference to the holders of Series B Preferred Stock, Series A Preferred
Stock and Common Stock, shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally
available therefor, noncumulative dividends at the rate of eight percent (8%) per share of the Series C Original Issue Price
per annum (as adjusted for subsequent stock dividends, stock splits, combinations, recapitalizations or the like with respect
to such share) from the Closing Date with respect to such share.
(d)
The holders of shares of Series B Preferred Stock and Series A Preferred Stock, in preference to the holders of Common Stock,
shall be entitled to receive, when, as and if declared by the Board of Directors out of funds legally available therefor, noncumulative
dividends at the rate of eight percent (8%) per share of the applicable Original Issue Price of such series of Preferred Stock
per annum (as adjusted for subsequent stock dividends, stock splits, combinations, recapitalizations or the like with respect to
such share) from the Closing Date with respect to such share.
(e)
Subject to obtaining any consent required under Section A.8(f) below, after the foregoing dividends on the Preferred Stock
shall have been paid, then the Corporation may (when, as and if declared by the Board of Directors) declare and distribute in such
year dividends among the holders of Preferred Stock and the holders of Common Stock pro rata based on the number of shares of Common
Stock held by each, determined on an as-if-converted basis (assuming full conversion of all such shares of such series of Preferred
Stock) as of the record date with respect to the declaration of such dividends. For the avoidance of doubt, the holders of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock shall
participate on a pari passu basis in any distribution or dividend declared or paid to the Common Stock or any series of
Preferred Stock ranking junior to the Series A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred
Stock and Series E Preferred Stock on the basis of the number of shares of Common Stock into which it is then convertible.
4. Liquidation;
Merger, etc.
(a)
Series E Preferred Stock Liquidation Preference. Upon any liquidation, dissolution or winding up of the Corporation
and its subsidiaries, whether voluntary or involuntary (a "Liquidation Event"), each holder of outstanding shares of
Series E Preferred Stock shall be entitled to be paid in cash, before any amount shall be paid or distributed to the holders of
the Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock, Common Stock or any
other capital stock ranking on liquidation junior to the Series E Preferred Stock, an amount (the "Series E Preference Amount")
per share equal to (A) $6.29 (as adjusted for any stock splits, stock dividends, combinations, recapitalizations and the like,
the "Series E Original Issue Price"), plus (B) an amount equal to all declared but unpaid dividends on such share of
Series E Preferred Stock (such amount to be adjusted for any stock splits, stock dividends, combinations, recapitalizations and
the like). If the amounts available for distribution by the Corporation to holders of Series E Preferred Stock upon a Liquidation
Event are not sufficient to pay the aggregate Series E Preference Amount due to such holders, such holders of Series E Preferred
Stock shall share ratably on a pari passu basis in any distribution in connection with such Liquidation Event in proportion
to the full respective preferential amounts to which they are entitled with respect to shares of Series E Preferred Stock.
(b)
Series D Preferred Stock Liquidation Preference. Upon any Liquidation Event, following payment of the Series E Preference
Amount, each holder of outstanding shares of Series D Preferred Stock shall be entitled to be paid in cash, before any amount
shall be paid or distributed to the holders of the Series C Preferred Stock, Series B Preferred Stock, Series A Preferred Stock,
Common Stock or any other capital stock ranking on liquidation junior to the Series D Preferred Stock, an amount (the "Series
D Preference Amount") per share equal to (A) $5.6351 (as adjusted for any stock splits, stock dividends, combinations, recapitalizations
and the like, the "Series D Original Issue Price"), plus (B) an amount equal to all declared but unpaid dividends on
such share of Series D Preferred Stock (such amount to be adjusted for any stock splits, stock dividends, combinations, recapitalizations
and the like). If the amounts available for distribution by the Corporation to holders of Series D Preferred Stock upon a Liquidation
Event are not sufficient to pay the aggregate Series D Preference Amount due to such holders, such holders of Series D Preferred
Stock shall share ratably on a pari passu basis in any distribution in connection with such Liquidation Event in proportion
to the full respective preferential amounts to which they are entitled with respect to shares of Series D Preferred Stock.
(c)
Series C Preferred Stock Liquidation Preference. Upon any Liquidation Event, following payment of each of
the Series E Preference Amount and the Series D Preference Amount, each holder of outstanding shares of Series C Preferred Stock
shall be entitled to be paid in cash, before any amount shall be paid or distributed to the holders of the Series B Preferred
Stock, Series A Preferred Stock, Common Stock or any other capital stock ranking on liquidation junior to the Series C Preferred
Stock, an amount (the "Series C Preference Amount") per share equal to (A) $3.45 (as adjusted for any stock splits,
stock dividends, combinations, recapitalizations and the like, the "Series C Original Issue Price"), plus (B) an amount
equal to all declared but unpaid dividends on such share of Series C Preferred Stock (such amount to be adjusted for any stock
splits, stock dividends, combinations, recapitalizations and the like). If the amounts available for distribution by the Corporation
to holders of Series C Preferred Stock upon a Liquidation Event are not sufficient to pay the aggregate Series C Preference Amount
due to such holders, such holders of Series C Preferred Stock shall share ratably on a pari passu basis in any distribution
in connection with such Liquidation Event in proportion to the full respective preferential amounts to which they are entitled
with respect to shares of Series C Preferred Stock.
(d) Series
A and B Preferred Stock Liquidation Preference. Upon a Liquidation Event, following payment of each of the Series E Preference
Amount, Series D Preference Amount and Series C Preference Amount in full, each holder of outstanding shares of Series A Preferred
Stock and Series B Preferred Stock shall be entitled to be paid in cash, before any amount shall be paid or distributed to the
holders of the Common Stock or any other capital stock ranking on liquidation junior to the Series A Preferred Stock and Series
B Preferred Stock (the Common Stock and such other capital stock being referred to collectively as, "Junior Stock"),
an amount per share equal to (x) in the case of the Series A Preferred Stock (the "Series A Preference Amount"), (A)
$1.00 (as adjusted for any stock splits, stock dividends, combinations, recapitalizations and the like, the "Series A Original
Issue Price"), plus (B) an amount equal to all declared but unpaid dividends on such share of Series A Preferred Stock (such
amount to be adjusted for any stock splits, stock dividends, combinations, recapitalizations and the like) and (y) in the case
of the Series B Preferred Stock (the "Series B Preference Amount"), (A) $1.801 (as adjusted for any stock splits, stock
dividends, combinations, recapitalizations and the like, the "Series B Original Issue Price"), plus (B) an amount equal
to all declared but unpaid dividends on such share of Series B Preferred Stock (such amount to be adjusted for any stock splits,
stock dividends, combinations, recapitalizations and the like). The "Original Issue Price" shall mean the Series A Original
Issue Price, in the case of the Series A Preferred Stock, the Series B Original Issue Price, in the case of the Series B Preferred
Stock, the Series C Original Issue Price, in the case of the Series C Preferred Stock, the Series D Original Issue Price, in the
case of the Series D Preferred Stock and the Series E Original Issue Price, in the case of the Series E Preferred Stock. If the
amounts available for distribution by the Corporation to holders of Series A Preferred Stock and Series B Preferred Stock upon
a Liquidation Event are not sufficient to pay the aggregate Series A Preference Amount and Series B Preference Amount due to such
holders, such holders of Series A Preferred Stock and Series B Preferred Stock shall share ratably on a pari passu basis
in any distribution in connection with such Liquidation Event in proportion to the full respective preferential amounts to which
they are entitled with respect to shares of Series A Preferred Stock and/or Series B Preferred Stock.
(e)
Participation Rights. If the assets and funds of the Corporation legally available for distribution to the
Corporation's stockholders exceed the aggregate preferential amounts payable to the holders of Series E Preferred Stock, Series
D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock and Series A Preferred Stock pursuant to Sections A.4(a),
A.4(b), A.4(c) and A.4(d), then, after such preferential amounts (including the full Series E Preference Amount, Series D Preference
Amount, Series C Preference Amount, Series B Preference Amount and Series A Preference Amount) shall have been paid, the remaining
assets and funds of the Corporation available for distribution to the Corporation's stockholders shall be distributed, subject
to Section A.4(i), ratably among the holders of shares of Series E Preferred Stock, Series D Preferred Stock, Series C Preferred
Stock, Series B Preferred Stock, Series A Preferred Stock and Common Stock, in each case in accordance with their terms (where
each outstanding share of Preferred Stock is treated for this purpose as having been converted into the largest number of shares
of Common Stock into which such share of Preferred Stock could then be converted pursuant to Section A.6) until (i) for the holders
of Series E Preferred Stock, the aggregate amount of the payments made to such holders pursuant to Section A.4(a) and this Section
A.4(e) equals two and one half times the aggregate Series E Preference Amount, (ii) for the holders of Series D Preferred Stock,
the aggregate amount of the payments made to such holders pursuant to Section A.4(b) and this Section A.4(e) equals two times
the aggregate Series D Preference Amount, (iii) for the holders of Series C Preferred Stock, the aggregate amount of the payments
made to such holders pursuant to Section A.4(c) and this Section A.4(e) equals three times the aggregate Series C Preference Amount,
(iv) for the holders of Series B Preferred Stock, the aggregate amount of the payments made to such holders pursuant to Section
A.4(d) and this Section A.4(e) equals three times the aggregate Series B Preference Amount, and (v) for the holders of Series
A Preferred Stock, the aggregate amount of the payments made to such holders pursuant to Section A.4(d) and this Section A.4(e)
equals four times the aggregate Series A Preference Amount. Thereafter, any remaining assets and funds of the Corporation available
for distribution to the Corporation's stockholders shall be distributed ratably among the holders of Common Stock. In the event
that a share of Series E Preferred Stock, Series D Preferred Stock, Series C Preferred Stock, Series B Preferred Stock and/or
Series A Preferred Stock would be entitled to an amount in excess of amounts that such share would be entitled to pursuant to
the foregoing provisions of Sections A.4(a) through (e) in connection with a Liquidation Event, if such share of Preferred Stock
was converted to a share of Common Stock pursuant to Section A.6(a) as of immediately prior to the Liquidation Event and shared
ratably in any distribution in connection with such Liquidation Event on an as converted to Common Stock basis, then such share
shall be deemed to have so converted.
(f) Deemed
Liquidation Events. Each of the following events shall be treated as a Liquidation Event, unless the holders of (i) a majority
of the voting power of the outstanding shares of Preferred Stock voting together as a single class (a "Majority Interest")
and (ii) a majority of the outstanding shares of Series E Preferred Stock (the "Series E Deemed Liquidation Consent")
elect otherwise; provided however, if the amounts available for distribution by the Corporation to holders of Series D Preferred
Stock upon such Liquidation Event would not be sufficient to pay the aggregate Series D Preference Amount if such event was treated
as a Liquidation Event, such waiver shall also require the written election of the holders of not less than sixty percent (60%)
of the Series D Preferred Stock then outstanding (the "Series D Deemed Liquidation Consent"), provided further, that
the Series E Deemed Liquidation Consent and the Series D Deemed Liquidation Consent shall not be required in connection with a
Change of Control Transaction in which (i) the holders of capital stock of the Corporation immediately prior to such Change of
Control Transaction continue to hold at least thirty five percent (35%) of the voting power of the capital stock of the surviving
business entity in equal proportion to their holdings prior to such Change of Control Transaction, (ii) no cash consideration
is paid to any holder of capital stock of the Corporation in such holder's capacity as a holder of capital stock of the Corporation,
(iii) the acquirer in such transaction does not have an effective registration statement under the Securities Act of 1933, as
amended (the "Securities Act") and (iv) there is no readily available public market for the capital stock received by
the holders of capital stock of the Corporation in connection with such transaction: (A) any merger or consolidation of the Corporation
into or with another business entity (except one in which the shares of capital stock of the Corporation immediately prior to
such merger or consolidation continue to represent at least a majority of the voting power of the capital stock of the surviving
business entity) (a "Change of Control Transaction"), (B) any sale, lease, transfer, exclusive license or other disposition,
in a single transaction or series of related transactions, of all or substantially all of the assets of the Corporation and its
subsidiaries taken as a whole (an "Asset Sale"), or (C) a sale, lease, transfer, exclusive license or other disposition,
in a single transaction or series of related transactions, of all or substantially all of the Corporation's and its subsidiaries'
intellectual property (together with any Asset Sale, each a "Disposition"). All consideration payable to the stockholders
of the Corporation in connection with any such Change of Control Transaction, or all consideration payable to the Corporation,
together with all other available assets of the Corporation (net of obligations owed by the Corporation that are senior to the
Preferred Stock), in connection with any Disposition, upon the consummation of such Change of Control Transaction, shall be, as
applicable, paid by the purchaser to the holders of, or distributed by the Corporation in redemption (out of funds legally available
therefor) of, the Preferred Stock and any Junior Stock in accordance with the preferences and priorities set forth in Sections
A.4(a), A.4(b), A.4(c), A.4(d) and A.4(e) above, with such preferences and priorities specifically intended to be applicable in
any such Change of Control Transaction or Disposition, as if any such transaction were a Liquidation Event. In furtherance of
the foregoing, the Corporation shall take such actions as are necessary to give effect to the provisions of this Section A.4(f),
including without limitation, (1) in the case of a Change of Control Transaction, causing the definitive agreement relating to
such Change of Control Transaction to provide for a rate at which the shares of Preferred Stock are converted into or exchanged
for cash, new securities or other property which gives effect to the preferences and priorities set forth in Sections A.4(a),
A.4(b), A.4(c), A.4(d) and A.4(e), or (2) in the case of a Disposition, redeeming the Preferred Stock in a manner that gives effect
to the preferences and priorities set forth in Sections A.4(a), A.4(b), A.4(c), A.4(d) and A.4(e). The Corporation shall promptly
provide to the holders of shares of Preferred Stock such information concerning the terms of such Change of Control Transaction
or Disposition, and the value of the assets of the Corporation as may reasonably be requested by the holders of Preferred Stock.
The amount deemed distributed to the holders of Preferred Stock upon any such transaction shall be the cash or the value of the
property, rights or securities distributed to such holders by the Corporation or the acquiring person, firm or other entity, as
applicable.
(g) Valuation
of Securities or Other Non-Cash Consideration. For purposes of valuing any securities or other noncash consideration to be
delivered to the holders of the Preferred Stock in connection with any transaction to which Section A.4(f) is applicable, the
following shall apply:
(i) If any such securities are traded on a nationally recognized securities exchange or inter dealer quotation system, the
value shall be deemed to be the average of the closing prices of such securities on such exchange or system over the 30 day period
ending three (3) business days prior to the closing;
(ii) If any such securities are traded over the counter, the value shall be deemed to be the average of the closing bid prices
of such securities over the 30 day period ending three (3) business days prior to the closing; and
(iii) If there is no active public market for such securities or other noncash consideration, the value shall be the fair market
value thereof, as determined by the Board of Directors (including at least two of the Preferred Directors) in good faith, provided
that if a Majority Interest objects to such valuation, the valuation shall be determined by a mutually agreed to investment banker,
the fees of which shall be paid by the Corporation.
(h) Allocation.
In the event of a Liquidation Event pursuant to Section A.4(f), if any portion of the consideration payable to the stockholders
of the Corporation is placed into escrow and/or is payable to the stockholders of the Corporation subject to contingencies, the
definitive agreement relating to such Liquidation Event shall provide that (i) the portion of such consideration that is not placed
in escrow and not subject to any contingencies (the "Initial Consideration") shall be allocated among the holders of
capital stock of the Corporation in accordance with Sections A.4(a), A.4(b), A.4(c), A.4(d) and A.4(e) as if the Initial Consideration
were the only consideration payable in connection with such Liquidation Event and (ii) any additional consideration which becomes
payable to the stockholders of the Corporation upon release from escrow or satisfaction of contingencies shall be allocated among
the holders of capital stock of the Corporation in accordance with Sections A.4(a), A.4(b), A.4(c), A.4(d) and A.4(e) after taking
into account the previous payment of the Initial Consideration as part of the same transaction.
(i) Series
E Preferred Stock Proceeds. Notwithstanding anything set forth in this Section A.4 to the contrary, in the event of any liquidation,
dissolution or winding up of the Corporation and its subsidiaries, including any event treated as a Liquidation Event pursuant
to A.4(f), in which net proceeds to the Corporation's equity holders (whether paid directly in a Change of Control Transaction
or by redemption in a Disposition) is above One Hundred Seventy Five Million Dollars ($175,000,000), the Series E Preferred Stock
will be entitled to receive total proceeds per share (treating escrow, holdback, earnouts and other contingent consideration in
a manner consistent with Section A.4(h) herein) in an amount equal to no less than two times the Series E Original Issue Price
prior to any distribution of such proceeds to other shares of capital stock.
5. Redemption.
(a)
Optional Redemption; Redemption Date. At any time on or after April 11th, 2024, the holder(s) of a Majority
Interest may elect to have all (but not less than all) of the outstanding shares of Preferred Stock redeemed. In such event, the
Corporation shall redeem all (but not less than all) of the outstanding shares of Preferred Stock, out of funds legally available
therefor, for an amount equal to the aggregate Redemption Price specified in Section A.5(b). Any election by a Majority Interest
pursuant to this Section A.5(a) shall be made by written notice to the Corporation and the other holders of Preferred Stock at
least fifteen (15) days prior to the elected redemption date (the "Redemption Date"). Upon such election, all holders
of Preferred Stock shall be deemed to have elected to have their shares of Preferred Stock redeemed pursuant to this Section A.5(a)
and such election shall bind all holders of Preferred Stock. Notwithstanding anything to the contrary contained herein, (i) each
holder of shares of Preferred Stock shall have the right to elect to give effect to the conversion rights contained in Section
A.6(a) instead of giving effect to the provisions contained in this Section A.5(a) with respect to the shares of Preferred Stock
held by such holder, and (ii) each holder of Series E Preferred Stock shall have the right to opt out of such election to redeem
shares of Series E Preferred Stock, instead of giving effect to the provisions contained in Section A.5(a) with respect to the
shares of Series E Preferred Stock held by such holder.
(b) Redemption
Price. The price for each share of Preferred Stock redeemed pursuant to this Section A.5 shall be an amount equal to, (i)
in the case of the Series A Preferred Stock, the Series A Original Issue Price plus an amount equal to all declared but
unpaid dividends on such share of Series A Preferred Stock (such amount to be adjusted for any stock splits, stock dividends,
combinations, recapitalizations and the like), (ii) in the case of the Series B Preferred Stock, the Series B Original Issue
Price plus an amount equal to all declared but unpaid dividends on such share of Series B Preferred Stock (such amount to be
adjusted for any stock splits, stock dividends, combinations, recapitalizations and the like), (iii) in the case of the
Series C Preferred Stock, the Series C Original Issue Price plus an amount equal to all declared but unpaid dividends on such
share of Series C Preferred Stock (such amount to be adjusted for any stock splits, stock dividends, combinations,
recapitalizations and the like), (iv) in the case of the Series D Preferred Stock, the Series D Original Issue Price plus an
amount equal to all declared but unpaid dividends on such share of Series D Preferred Stock (such amount to be adjusted for
any stock splits, stock dividends, combinations, recapitalizations and the like), and (v) in the case of the Series E
Preferred Stock, the Series E Original Issue Price plus an amount equal to all declared but unpaid dividends on such share of
Series E Preferred Stock (such amount to be adjusted for any stock splits, stock dividends, combinations, recapitalizations
and the like) (the "Redemption Price"). The aggregate Redemption Price shall be payable in cash in immediately
available funds to the respective holders of the Preferred Stock on the Redemption Date in accordance with the preferences
and priorities set forth in Sections A.4(a), A.4(b), A.4(c), A.4(d) and A.4(e) above.
(c)
Insufficient Funds. If the funds of the Corporation legally available to redeem shares of Preferred Stock
on the Redemption Date are insufficient to redeem the total number of such shares required to be redeemed on such date, the Corporation
shall (i) take any action necessary or appropriate, to the extent reasonably within its control, to remove promptly any impediments
to its ability to redeem the total number of shares of Preferred Stock required to be so redeemed, including, without limitation,
(A) to the extent permissible under applicable law, reducing the stated capital of the Corporation or causing a revaluation of
the assets of the Corporation under Section 154 of the Delaware General Corporation Law to create sufficient surplus to make such
redemption and (B) incurring any indebtedness necessary to make such redemption, and (ii) in any event, use any funds that are
legally available to redeem the maximum possible number of such shares from the holders of such shares to be redeemed in proportion
to the respective number of such shares that otherwise would have been redeemed if all such shares had been redeemed in full.
At any time thereafter when additional funds of the Corporation are legally available to redeem such shares of Preferred Stock,
the Corporation shall immediately use such funds to redeem the balance of the shares that the Corporation became obligated to
redeem on the Redemption Date (but which it has not yet redeemed) at such applicable Redemption Price to the holders of Series
A Preferred Stock, Series B Preferred Stock, Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock in
accordance with the preferences and priorities set forth in Sections A.4(a), A.4(b), A.4(c), A.4(d) and A.4(e) above (with all
shares of Series E Preferred Stock to be redeemed prior to any other shares of Preferred Stock).
(d)
Interest. If any shares of Preferred Stock are not redeemed on the Redemption Date for any reason, all such
unredeemed shares shall remain outstanding and entitled to all the rights and preferences provided herein, and the Corporation
shall pay interest on the Redemption Price applicable to such unredeemed shares at an aggregate per annum rate equal to twelve
percent (12%), with such interest to accrue daily in arrears and to be compounded annually; provided, however,
that in no event shall such interest exceed the maximum permitted rate of interest under applicable law (the "Maximum
Permitted Rate"). In the event that fulfillment of any provision hereof results in such rate of interest being in excess
of the Maximum Permitted Rate, the amount of interest required to be paid hereunder shall automatically be reduced to eliminate
such excess; provided, however, that any subsequent increase in the Maximum Permitted Rate shall be retroactively
effective to the applicable Redemption Date to the extent permitted by law.
6. Conversion.
Shares of Preferred Stock shall be converted into Common Stock in accordance with the following:
(a) Voluntary
Conversion. The holders of shares of Preferred Stock may convert such shares into Common Stock at any time after the date
of issuance of such shares of Preferred Stock as follows:
(i) Upon
the written election of the holder thereof and without payment of any additional consideration, each outstanding share of Preferred
Stock held by such holder shall be converted into such number of fully paid and nonassessable shares of Common Stock
as is determined by dividing (A) the applicable Original Issue Price plus an amount equal to all declared but unpaid
dividends on such share of Preferred Stock (such amount to be adjusted for any stock splits, stock dividends, combinations,
recapitalizations and the like), by (B) the applicable Conversion Price at the time in effect for such series of Preferred
Stock (such quotient, the "Conversion Rate"). The initial "Conversion Price" per share for shares of
Preferred Stock shall be the Original Issue Price for such series of Preferred Stock, subject to adjustment as set forth in
Section A.7. Any election by a holder of Preferred Stock pursuant to this Section A.6(a)(i) shall be made by written notice
to the Corporation, and such notice may be given at any time and from time to time after the Closing Date and through and
including the day which is one (1) day prior to the Redemption Date or the closing of any transaction contemplated by Section
A.4(e).
(ii) Upon
the written election of both (i) a Majority Interest and (ii) holders of a majority of shares of Series E Preferred Stock
then outstanding (a "Series E Majority"), without the payment of any additional consideration, all (but not less
than all) of the outstanding shares of Preferred Stock shall be converted into fully paid and nonassessable shares of Common
Stock at the applicable Conversion Rate. Any election by a Majority Interest pursuant to this Section A.6(a)(ii) shall be
made by written notice to the Corporation and the other holders of Preferred Stock, and such notice may be given at any time
after the Closing Date through and including the date which is one (1) day prior to the closing of any transaction
contemplated by Section A.4(e). Upon such election, all holders of the Preferred Stock shall be deemed to have elected to
voluntarily convert all outstanding shares of Preferred Stock into shares of Common Stock pursuant to this Section A.6(a)(ii)
and such election shall bind all holders of Preferred Stock. Notwithstanding the foregoing, in the event a conversion
pursuant to this Section A.6(a)(ii) is to occur in connection with a Liquidation Event, and the amounts available for
distribution by the Corporation to holders of Series D Preferred Stock upon such Liquidation Event would not be sufficient to
pay the aggregate Series D Preference Amount due to such holders, solely for purposes of this Section A.6(a)(ii) as it
applies to the Series D Preferred Stock, in addition to the written election of a Majority Interest, the written election of
the holders of not less than sixty percent (60%) of the Series D Preferred Stock then outstanding shall be required to
consent to the conversion of all of the outstanding shares of Series D Preferred Stock into shares of Common Stock (the
"Series D Conversion Approval").
(b) Automatic
Conversion. Each share of Preferred Stock shall automatically be converted, without the payment of any additional
consideration, into fully paid and nonassessable shares of Common Stock at the applicable Conversion Rate as of, and in all
cases subject to, the closing of the Corporation's first underwritten public offering on a firm commitment basis pursuant to
an effective registration statement under the Securities Act covering the offer and sale of Common Stock (i) at a price per
share of Common Stock of not less than $7.86 (appropriately adjusted for stock splits, stock dividends, combinations,
recapitalizations and the like), and (ii) with respect to which the Corporation receives aggregate net proceeds attributable
to sales for the account of the Corporation (before deduction of underwriting discounts and commissions) of not less than
$40,000,000 (a "QPO"). If a closing of a QPO occurs, all outstanding shares of Preferred Stock shall be deemed to
have been converted into shares of Common Stock immediately prior to such closing.
(c)
Procedure for Conversion.
(i) Voluntary
Conversion. Upon election to convert pursuant to Section A.6(a)(i), the relevant holder or holders of Preferred Stock
shall surrender the certificate or certificates representing the shares of Preferred Stock being converted to the
Corporation, duly assigned or endorsed for transfer to the Corporation (or accompanied by duly executed stock powers relating
thereto) or shall deliver an affidavit of loss to the Corporation, at its principal executive office or such other place as
the Corporation may from time to time designate by notice to the holders of the Preferred Stock. Upon surrender of such
certificate(s) or delivery of an affidavit of loss, the Corporation shall issue and send by hand delivery, by courier or by
first class mail (postage prepaid) to the holder thereof or to such holder's designee, at the address designated by such
holder, certificates for the number of shares of Common Stock to which such holder shall be entitled upon conversion. The
issuance of certificates for Common Stock upon conversion of Preferred Stock shall be deemed effective as of the date of
surrender of such Preferred Stock certificates or delivery of such affidavit of loss and will be made without charge to the
holders of such shares for any issuance tax in respect thereof or other costs incurred by the Corporation in connection with
such conversion and the related issuance of such stock.
(ii) Automatic
Conversion. As of the closing of a QPO (the "Automatic Conversion Date") or upon election to convert pursuant to
Section A.6(a)(ii), all outstanding shares of Preferred Stock shall be converted into shares of Common Stock without any further
action by the holders of such shares and whether or not the certificates representing such shares of Preferred Stock are surrendered
to the Corporation. On the Automatic Conversion Date, all rights with respect to the shares of Preferred Stock so converted shall
terminate, except any of the rights of the holders thereof upon surrender of their certificate or certificates therefor or delivery
of an affidavit of loss thereof to receive certificates for the number of shares of Common Stock into which such shares of Preferred
Stock have been converted. If so required by the Corporation, certificates surrendered for conversion shall be endorsed for transfer,
in a form satisfactory to the Corporation, accompanied by duly executed stock powers related thereto. The Corporation shall issue
and deliver to such holder, promptly (and in any event in such time as is sufficient to enable such holder to participate in such
QPO) at such office and in its name as shown on such surrendered certificate or certificates, a certificate or certificates for
the number of shares of Common Stock into which the shares of the Preferred Stock surrendered are convertible on the Automatic
Conversion Date.
(d)
Reservation of Stock Issuable Upon Conversion. The Corporation shall at all times reserve and keep available out
of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of the shares of Preferred
Stock, such number of its shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding
shares of Preferred Stock; and if at any time the number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all outstanding shares of Preferred Stock, the Corporation will take such corporate action as may be
necessary to increase the number of its authorized but unissued shares of Common Stock to such number of shares as shall be sufficient
for such purpose, and to reserve the appropriate number of shares of Common Stock for issuance upon such conversion.
(e)
No Closing of Transfer Books. The Corporation shall not close its books against the transfer of shares of Preferred
Stock in any manner that would interfere with the timely conversion of any shares of Preferred Stock.
7. Adjustments.
(a) Adjustments
to the Conversion Price. Except as provided in Section A.7(b) and except in the case of an event described in Section A.7(c),
if and whenever after the date this Fifth Amended and Restated Certificate of Incorporation is first filed with the Secretary of
State of Delaware (the "Filing Date") the Corporation shall issue or sell, or is, in accordance with this Section A.7(a),
deemed to have issued or sold, any shares of Common Stock for a consideration per share less than the applicable Conversion Price
of a series of Preferred Stock in effect immediately prior to such issuance or sale, then, upon such issuance or sale (or deemed
issuance or sale), such Conversion Price shall be reduced to the price determined by dividing (i) the sum of (A) the Common Stock
Deemed Outstanding (as defined below) immediately prior to such issuance or sale (or deemed issuance or sale) multiplied by the
applicable Conversion Price then in effect and (B) the consideration, if any, received by the Corporation upon such issuance or
sale (or deemed issuance or sale) by (ii) the Common Stock Deemed Outstanding immediately after such issuance or sale (or deemed
issuance or sale).
For purposes of this Section A.7(a), the following
shall also be applicable:
(i)
Issuance of Rights or Options. If the Corporation shall, at any time after the Filing Date, in any manner grant (whether
directly or by assumption in a merger or otherwise) any warrants or other rights to subscribe for or to purchase, or any options
for the purchase of, Common Stock or any stock or security convertible into or exchangeable for Common Stock (such warrants, rights
or options being called "Options" and such convertible or exchangeable stock or securities being called "Convertible
Securities"), in each case for consideration per share (determined as provided in this paragraph and in Section A.7(a)(vi))
less than the applicable Conversion Price then in effect, whether or not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, then the total maximum number of shares of Common Stock issuable upon the exercise
of such Options, or upon conversion or exchange of the total maximum amount of such Convertible Securities issuable upon exercise
of such Options, shall be deemed to have been issued as of the date of granting of such Options, at a price per share equal to
the amount determined by dividing (A) the total amount, if any, received or receivable by the Corporation as consideration for
the granting of such Options, plus the minimum aggregate amount of additional consideration payable to the Corporation upon the
exercise of all such Options, plus, in the case of such Options which relate to Convertible Securities, the minimum aggregate amount
of additional consideration, if any, payable upon the issuance or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (B) the total maximum number of shares of Common Stock deemed to have been so issued. Except as otherwise
provided in Section A.7(a)(iii), no adjustment of the Conversion Price of a series of Preferred Stock shall be made upon the actual
issuance of such Common Stock or of such Convertible Securities upon exercise of such Options or upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities.
(ii) Issuance
of Convertible Securities. If the Corporation shall, at any time after the Filing Date, in any manner issue or sell any
Convertible Securities for consideration per share (determined as provided in this paragraph and in Section A.7(a)(vi)) less
than a Conversion Price then in effect, whether or not the rights to exchange or convert any such Convertible Securities are
immediately exercisable, then the total maximum number of shares of Common Stock issuable upon conversion or exchange of all
such Convertible Securities shall be deemed to have been issued as of the date of the issuance or sale of such Convertible
Securities, at a price per share equal to the amount determined by dividing (A) the total amount, if any, received or
receivable by the Corporation as consideration for the issuance or sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable to the Corporation upon the conversion or exchange thereof, by
(B) the total maximum number of shares of Common Stock deemed to have been so issued; provided, that (1) except as
otherwise provided in Section A.7(a)(iii), no adjustment of the Conversion Price of a series of Preferred Stock shall be made
upon the actual issuance of such Common Stock upon conversion or exchange of such Convertible Securities and (2) if any such
issuance or sale of such Convertible Securities is made upon exercise of any Options to purchase any such Convertible
Securities, no further adjustment of a Conversion Price shall be made by reason of such issuance or sale.
(iii)
Change in Option Price or Conversion Rate. If there shall occur a change in (A) the maximum number of shares of Common
Stock issuable in connection with any Option referred to in Section A.7(a)(i) or any Convertible Securities referred to in Section
A.7(a)(i) or (ii), (B) the purchase price provided for in any Option referred to in Section A.7(a)(i), (C) the additional consideration,
if any, payable upon the conversion or exchange of any Convertible Securities referred to in Section A.7(a)(i) or (ii) or (D) the
rate at which Convertible Securities referred to in Section A.7(a)(i) or (ii) are convertible into or exchangeable for Common Stock
(in each case, other than in connection with an event described in Section A.7(b)), then the applicable Conversion Price in effect
at the time of such event shall be adjusted to the Conversion Price for such series of Preferred Stock that would have been in
effect at such time had such Options or Convertible Securities that are still outstanding provided for such changed maximum number
of shares, purchase price, additional consideration or conversion rate, as the case may be, at the time initially granted, issued
or sold, but only if as a result of such adjustment the Conversion Price then in effect for such series of Preferred Stock is thereby
reduced; and on the termination of any such Option or any such right to convert or exchange such Convertible Securities, the Conversion
Price then in effect hereunder shall be increased to the Conversion Price that would have been in effect at the time of such termination
had such Option or Convertible Securities, to the extent outstanding immediately prior to such termination (i.e., to the extent
that fewer than the number of shares of Common Stock deemed to have been issued in connection with such Option or Convertible Securities
were actually issued), never been issued or been issued at such higher price, as the case may be.
(iv)
Stock Dividends. If the Corporation, at any time or from time to time after the Filing Date, shall declare or make,
or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or make any other distribution
upon any stock of the Corporation payable in Common Stock, Options or Convertible Securities, any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or distribution shall be deemed to have been issued or sold
without consideration, and the Conversion Price will be adjusted pursuant to this Section A.7(a); provided, that no adjustment
shall be made to the Conversion Price as a result of such dividend or distribution if the holders of the shares of Preferred Stock
are entitled to, and do, receive such dividend or distribution in accordance with Section A.3; and, provided, further, that
if any adjustment is made to the Conversion Price as a result of the declaration of a dividend and such dividend is not effected,
the Conversion Price shall be appropriately readjusted to the Conversion Price in effect had such dividend not been declared.
(v)
Other Dividends and Distributions. If the Corporation, at any time or from time to time after the Filing Date, shall
declare or make, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other
distribution payable in securities or other property of the Corporation other than shares of Common Stock, then and in each such
event provision shall be made so that the holders of the outstanding shares of Preferred Stock shall receive upon conversion thereof,
in addition to the number of shares of Common Stock receivable thereupon, the amount of such other securities of the Corporation
or the value of such other property that they would have received had the Preferred Stock been converted into Common Stock on
the date of such event and had such holders thereafter, during the period from the date of such event to and including the conversion
date, retained such securities or other property receivable by them during such period giving application to all adjustments called
for during such period under Section A.7 with respect to the rights of the holders of the outstanding shares of Preferred Stock;
and, provided, further, however, that no such adjustment shall be made if the holders of such series of Preferred Stock
simultaneously receive a dividend or other distribution of such securities or other property in an amount equal to the amount
of such securities or other property as they would have received if all outstanding shares of Preferred Stock had been converted
into Common Stock on the date of such event.
(vi) Consideration for Stock. If the Corporation, at any
time or from time to time after the Filing Date, shall issue or sell, or is deemed to have issued or sold, any shares of Common
Stock for cash, the consideration received therefor shall be deemed to be the amount received or to be received by the Corporation
therefor (determined with respect to deemed issuances and sales in connection with Options and Convertible Securities in accordance
with clause (A) of Section A.7(a)(i) or Section A.7(a)(ii), as appropriate) as determined in good faith by the Board of Directors
of the Corporation and the holders of not less than a Majority Interest. In case any shares of Common Stock shall be issued or
sold, or deemed issued or sold, for a consideration other than cash, the amount of the consideration other than cash received
by the Corporation shall be deemed to be the fair value of such consideration received or to be received by the Corporation (determined
with respect to deemed issuances and sales in connection with Options and Convertible Securities in accordance with clause (A)
of Section A.7(a)(i) or Section A.7(a)(ii), as appropriate) as determined in good faith by the Board of Directors of the Corporation
and the holders of not less than a Majority Interest. In case any Options shall be issued in connection with the issuance and
sale of other securities of the Corporation, together comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed to have been issued for such consideration as determined
in good faith by the Board of Directors of the Corporation and the holders of not less than a Majority Interest. Anything herein
to the contrary notwithstanding, if in any case described in this Section A.7(a)(vi) the Corporation and the holders of a Majority
Interest are unable to reach agreement as to the value of such consideration, then the value thereof will be determined by an
independent appraisal by a mutually agreed to investment banker, the fees of which shall be paid by the Corporation.
(vii) Record Date. In case the Corporation shall take a record of the holders of its Common Stock for the purpose of entitling
them (A) to receive a dividend or other distribution payable in Common Stock, Options or Convertible Securities or (B) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such record date shall be deemed to be the date of the issuance
or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of
such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.
(viii) Treasury Shares. The number of shares of Common Stock outstanding at any given time shall not include shares owned
or held by or for the account of the Corporation; provided, that the disposition of any such shares shall be considered
an issuance or sale of Common Stock for the purpose of this Section A.7.
(ix)
Other Issuances or Sales. In calculating any adjustment to a Conversion Price pursuant to this Section A.7(a), any
Options or Convertible Securities that provide, as of the effective date of such adjustment, for the issuance upon exercise or
conversion thereof of an indeterminable number of shares of Common Stock shall (together with the shares of Common Stock issuable
upon exercise or conversion thereof) be disregarded; provided, that at such time as the number of shares of Common Stock issuable
upon exercise or conversion of such Options or Convertible Securities becomes determinable, such Conversion Price shall be adjusted
as provided in Section A.7(a)(iii) above.
(x)
Common Stock Deemed Outstanding. For purposes of this Section A.7, the term "Common Stock Deemed Outstanding"
shall mean, at any time, the sum of (A) the number of shares of Common Stock outstanding immediately prior to the Filing Date
(including for this purpose all shares of Common Stock issuable upon exercise or conversion of any vested Options or Convertible
Securities outstanding and exercisable immediately prior to the Filing Date), plus (B) the number of shares of Common Stock issued
or sold (or deemed issued or sold) after the Filing Date (including for this purpose all shares of Common Stock issuable upon
exercise or conversion of any vested Options or Convertible Securities outstanding and exercisable immediately prior to the Filing
Date).
(b) Certain
Issues of Common Stock Excepted. Anything herein to the contrary notwithstanding, the Corporation shall not be required to
make any adjustment of the Conversion Price of any series of Preferred Stock in the case of the issuance from and after the Filing
Date of (i) shares of Common Stock upon conversion of shares of Preferred Stock, (ii) shares of Common Stock or options therefor
to directors, officers, employees or consultants of the Corporation in connection with their service as directors of the Corporation,
their employment by the Corporation or their retention as consultants by the Corporation, in each case authorized by the Board
of Directors, including at least two of the Preferred Directors, and issued pursuant to any equity incentive plans approved by
the Board of Directors, (iii) as part of the consideration payable in the acquisition of another entity by the Corporation by
merger, purchase of all or substantially all of the assets of such entity, stock purchase or other reorganization of such entity,
in each case as authorized by the Board of Directors, including at least two of the Preferred Directors, (iv) to a bank or other
financial institution (not to exceed two percent (2%) of all outstanding securities) to secure a lending or equipment leasing
transaction, in each case as authorized by the Board of Directors, including at least two of the Preferred Directors, (v) to a
business partner, government laboratory or university to advance strategic business objectives, as authorized by the Board of
Directors, including at least two of the Preferred Directors, and (vi) with respect to an adjustment to the Conversion Price of
a particular series of Preferred Stock, if the Corporation receives a waiver of such adjustment from the holders of a majority
of the shares of such series of Preferred Stock ("Excluded Shares").
(c)
Subdivision or Combination of Common Stock. In case the Corporation shall at any time after the Filing Date subdivide
its outstanding shares of Common Stock into a greater number of shares (by any stock split, stock dividend or otherwise), the
Conversion Price of each series of Preferred Stock in effect immediately prior to such subdivision shall be proportionately reduced,
and, conversely, in case the Corporation shall at any time after the Filing Date combine its outstanding shares of Common Stock
into a smaller number of shares (by any reverse stock split or otherwise), the Conversion Price of each series of Preferred Stock
in effect immediately prior to such combination shall be proportionately increased. In the case of any such subdivision, no further
adjustment shall be made pursuant to Section A.7(a)(iv) by reason thereof.
(d)
Reorganization or Reclassification. If any capital reorganization or reclassification of the capital stock of the
Corporation shall be effected in such a way that holders of Common Stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for Common Stock, then, as a condition of such reorganization or reclassification, lawful and adequate
provisions shall be made whereby each holder of a share or shares of Preferred Stock shall thereupon have the right to receive,
upon the basis and upon the terms and conditions specified herein and in lieu of the shares of Common Stock immediately theretofore
receivable upon the conversion of such share or shares of Preferred Stock, as the case may be, such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore receivable upon such conversion had such reorganization or
reclassification not taken place, and in any such case appropriate provisions shall be made with respect to the rights and interests
of such holder to the end that the provisions hereof (including, without limitation, provisions for adjustments of the Conversion
Price) shall thereafter be applicable, as nearly as may be, in relation to any shares of stock, securities or assets thereafter
deliverable upon the exercise of such conversion rights.
8. Covenants.
(a) For
so long as at least 2,412,110 shares of Preferred Stock remain outstanding (such amount to be adjusted for any stock splits, dividends,
combinations, recapitalizations and the like) as of the applicable date, the Corporation shall not (in any case, by merger, consolidation,
operation of law or otherwise), without first having obtained the affirmative vote or written consent of the holders of not less
than a Majority Interest:
(i)
declare or pay any dividends other than dividends on the Preferred Stock as provided in Section A.3 or make any distributions
of cash, property or securities of the Corporation in respect of its capital stock, or apply any of its assets to the redemption,
retirement, purchase or other acquisition of its capital stock, directly or indirectly, through subsidiaries or otherwise, except
for (A) the redemption of Preferred Stock pursuant to and as provided in this Fifth Amended and Restated Certificate of Incorporation,
or (B) the repurchase of the Excluded Shares described in Section A.7(b)(ii) above upon termination of employment of the holder
of such Excluded Shares, and approved by the Board, including at least two of the Preferred Directors;
(ii)
reclassify any capital stock in a manner that adversely affects the designations, preferences, powers and/or the relative,
participating, optional or other special rights, or the restrictions provided for the benefit of, the Preferred Stock;
(iii)
authorize or issue, or obligate itself to issue, any equity security or debt security convertible into an equity security
of the Corporation or create (by reclassification or otherwise) any new class or series of shares having rights, preferences or
privileges senior to or on a parity with the Preferred Stock), or permit any subsidiary of the Corporation to issue such securities
to any person or entity other than the Corporation or create such new class or series of shares;
(iv) amend, waive, alter or repeal
(whether by merger, consolidation, operation of law, or otherwise) any provision of, or add any provision to, (A) this Fifth Amended
and Restated Certificate of Incorporation (including, without limitation, increasing the total number of shares of Preferred Stock
that the Corporation shall have the authority to issue) or (B) the By-laws of the Corporation as in effect on the Closing Date,
in a manner that alters or changes the right, preferences or privileges of the Preferred Stock or is otherwise adverse to the
Preferred Stock;
(v)
effect any Liquidation Event, or any other event described in Section A.4(f) hereof;
(vi) effect the sale, transfer
or license of all or substantially all of the assets of the Corporation or any subsidiary of the Corporation to any person or
entity other than the Corporation or a wholly-owned subsidiary of the Corporation;
(vii)
increase or decrease to the authorized size of the Board of Directors;
(viii)
take any action that results in the appointment or removal of the Chief Executive Officer;
(ix)
take any action that results in a public offering of any shares of Common Stock;
(x)
incur any indebtedness (including by issuance of any debt security), except for indebtedness that does not exceed $250,000 in
the aggregate;
(xi)
acquire any business with a value in excess of $2,000,000;
(xii)
cause the Corporation to have any non-wholly owned subsidiaries or spin out or sell any subsidiary of the Corporation or any entity
created by the Corporation;
(xiii) change the principal business of the Corporation, enter new lines of business or exit any current line of business, or permits
any subsidiary to take such action;
(xiv)
take any other action not described in Section A.8(a)(i)-(xiii) if such action alters or changes the rights, preferences or privileges
of the Preferred Stock; or
(xv) enter into any agreement to do any of the foregoing that is not expressly made conditional on obtaining the affirmative vote or
written consent of the holders of not less than a Majority Interest.
(b) For
so long as at least 828,078 shares of Series A Preferred Stock remain outstanding (such amount to be adjusted for any stock splits,
dividends, combinations, recapitalizations and the like) as of the applicable date, the Corporation shall not (in any case, by
merger, consolidation, operation of law or otherwise), without first having obtained the affirmative vote or written consent of
the holders of a majority of the Series A Preferred Stock then outstanding:
(i)
alter or change the rights, preferences or privileges of the Series A Preferred Stock in a manner that adversely alters
or changes the rights, preferences or privileges of the Series A Preferred Stock, unless the rights, preferences or privileges
of each series of Preferred Stock are similarly and proportionally altered, changed, amended or terminated, as the case may be;
or
(ii)
amend, waive, alter or repeal (whether by merger, consolidation, operation of law, or otherwise) any provision of, or add
any provision to, this Fifth Amended and Restated Certificate of Incorporation (including, without limitation, increasing or decreasing
the total number of shares of Series A Preferred Stock that the Corporation shall have the authority to issue) or the By-laws
of the Corporation as in effect on the Closing Date in a manner that adversely alters or changes the rights, preferences or privileges
of the Series A Preferred Stock, unless the rights, preferences or privileges of each series of Preferred Stock are similarly
and proportionally altered, changed, amended or terminated, as the case may be.
(c)
For so long as at least 444,198 shares of Series B Preferred Stock remain outstanding (such amount to be adjusted for any
stock splits, dividends, combinations, recapitalizations and the like) as of the applicable date, the Corporation shall not (in
any case, by merger, consolidation, operation of law or otherwise), without first having obtained the affirmative vote or written
consent of the holders of not less than a majority of the Series B Preferred Stock then outstanding:
(i) alter
or change the rights, preferences or privileges of the Series B Preferred Stock in a manner that adversely alters or changes
the rights, preferences or privileges of the Series B Preferred Stock, unless the rights, preferences or privileges of each
series of Preferred Stock are similarly and proportionally altered, changed, amended or terminated, as the case may be;
or
(ii) amend,
waive, alter or repeal (whether by merger, consolidation, operation of law, or otherwise) any provision of, or add any provision
to, this Fifth Amended and Restated Certificate of Incorporation (including, without limitation, increasing or decreasing the
total number of shares of Series B Preferred Stock that the Corporation shall have the authority to issue) or the By-laws of the
Corporation as in effect on the Closing Date in a manner that adversely alters or changes the rights, preferences or privileges
of the Series B Preferred Stock, unless the rights, preferences or privileges of each series of Preferred Stock are similarly
and proportionally altered, changed, amended or terminated, as the case may be.
(d)
For so long as at least 376,806 shares of Series C Preferred Stock remain outstanding (such amount to be adjusted for any
stock splits, dividends, combinations, recapitalizations and the like) as of the applicable date, the Corporation shall not (in
any case, by merger, consolidation, operation of law or otherwise), without first having obtained the affirmative vote or written
consent of the holders of not less than sixty percent (60%) of the Series C Preferred Stock then outstanding:
(i) alter
or change the rights, preferences or privileges of the Series C Preferred Stock in a manner that adversely alters or changes the
rights, preferences or privileges of the Series C Preferred Stock, unless the rights, preferences or privileges of each series
of Preferred Stock are similarly and proportionally altered, changed, amended or terminated, as the case may be; or
(ii) amend,
waive, alter or repeal (whether by merger, consolidation, operation of law, or otherwise) any provision of, or add any provision
to, this Fifth Amended and Restated Certificate of Incorporation (including, without limitation, increasing or decreasing the
total number of shares of Series C Preferred Stock that the Corporation shall have the authority to issue) or the By-laws of the
Corporation as in effect on the Closing Date in a manner that adversely alters or changes the rights, preferences or privileges
of the Series C Preferred Stock, unless the rights, preferences or privileges of each series of Preferred Stock are similarly
and proportionally altered, changed, amended or terminated, as the case may be.
(e) For
so long as at least 425,901 shares of Series D Preferred Stock remain outstanding (such amount to be adjusted for any stock splits,
dividends, combinations, recapitalizations and the like) as of the applicable date, the Corporation shall not (in any case, by
merger, consolidation, operation of law or otherwise), without first having obtained the affirmative vote or written consent of
the holders of not less than sixty percent (60%) of the Series D Preferred Stock then outstanding:
(i)
alter or change the rights, preferences or privileges of the Series D Preferred Stock in a manner that adversely alters
or changes the rights, preferences or privileges of the Series D Preferred Stock, unless the rights, preferences or privileges
of each series of Preferred Stock are similarly and proportionally altered, changed, amended or terminated, as the case may be;
or
(ii)
amend, waive, alter or repeal (whether by merger, consolidation, operation of law, or otherwise) any provision of, or add
any provision to, this Fifth Amended and Restated Certificate of Incorporation (including, without limitation, increasing or decreasing
the total number of shares of Series D Preferred Stock that the Corporation shall have the authority to issue) or the By-laws
of the Corporation as in effect on the Closing Date in a manner that adversely alters or changes the rights, preferences or privileges
of the Series D Preferred Stock, unless the rights, preferences or privileges of each series of Preferred Stock are similarly
and proportionally altered, changed, amended or terminated, as the case may be.
(f) For
so long as at least 278,219 shares of Series E Preferred Stock remain outstanding (such amount to be adjusted for any stock splits,
dividends, combinations, recapitalizations and the like) as of the applicable date, the Corporation shall not (in any case, by
merger, consolidation, operation of law or otherwise), without first having obtained the affirmative vote or written consent of
the holders of not less than a majority of the Series E Preferred Stock then outstanding:
(i)
alter or change the rights, preferences or privileges of the Series E Preferred Stock in a manner that adversely alters
or changes the rights, preferences or privileges of the Series E Preferred Stock, unless the rights, preferences or privileges
of each series of Preferred Stock are similarly and proportionally altered, changed, amended or terminated, as the case may be;
(ii)
amend, waive, alter or repeal (whether by merger, consolidation, operation of law, or otherwise) any provision of, or add
any provision to, this Fifth Amended and Restated Certificate of Incorporation or the By-laws of the Corporation as in effect
on the Closing Date in a manner that adversely alters or changes the rights, preferences or privileges of the Series E Preferred
Stock, unless the rights, preferences or privileges of each series of Preferred Stock are similarly and proportionally altered,
changed, amended or terminated, as the case may be;
(iii)
increase or decrease the total number of shares of Series E Preferred Stock that the Corporation
shall have the authority to issue;
(iv)
purchase or redeem (or permit any subsidiary to redeem) or pay or declare any dividend or
make any distribution on, any shares of capital stock of the Corporation other than (i) dividends or other distributions payable
on the Common Stock solely in the form of additional shares of Common Stock and (ii) repurchases of any Common Stock from former
employees, officers, directors, consultants or other persons who performed services for the Corporation or any subsidiary in connection
with the cessation of employment or service at a price no greater than the applicable price of such shares; or
(v)
amend, waive, alter or repeal (whether by merger, consolidation, operation of law, or otherwise)
the following sections of this Fifth Amended and Restated Certificate of Incorporation in a manner that adversely alters or changes
the rights, preferences of privileges of the Series E Preferred Stock: Section A.2(c), Section A.3(a), Section A.4(a), Section
A.4(e), Section A.4(f), Section A.4(g), Section A.4(h), Section A.4(i), Section A.5(a), Section A.5(b), Section A.5(c), Section
A.6(a), Section A.6(b), Section A.7 or this Section A.8(f). For the avoidance of doubt, the authorization, creation or issuance
of any equity security (including, any security convertible into or exercisable into any equity security) having rights, preferences
or privileges which are senior to or on parity with any of the rights, preferences or privileges of the Series E Preferred Stock
shall not in and of itself, be deemed to adversely affect the holders of Series E Preferred Stock for purposes of this Section
A.8(f).
Any such act or transaction
entered into without such consent or vote shall be null and void ab initio, and of no force or effect. Further, the Corporation
shall not, by amendment, alteration or repeal of this Fifth Amended and Restated Certificate of Incorporation (whether by merger,
consolidation, operation of law, or otherwise) or through any Liquidation Event, any event described in Section A.4(f) hereof,
or any other reorganization, recapitalization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities,
agreement or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed
or performed hereunder by the Corporation and shall at all times in good faith assist in the carrying out of all the provisions
of this Article IV and in the taking of all such action as may be necessary or appropriate in order to protect the rights of the
holders of the Preferred Stock against impairment.
9. Notice;
Adjustments; Waivers.
(a) Liquidation
Events, Etc. In the event (i) the Corporation establishes a record date to determine the holders of any class of
securities who are entitled to receive any dividend or other distribution or who are entitled to vote at a meeting (or by
written consent) in connection with any of the transactions identified in clause (ii) hereof, or (ii) any Liquidation Event,
event deemed a Liquidation Event pursuant to Section A.4(f) hereof, QPO or any other public offering becomes reasonably
likely to occur, the Corporation shall mail or cause to be mailed by first class mail (postage prepaid) to each holder of
Preferred Stock at least thirty (30) days prior to such record date specified therein or the expected effective date of any
such transaction, whichever is earlier, a notice specifying (A) the date of such record date for the purpose of such dividend
or distribution or meeting or consent and a description of such dividend or distribution or the action to be taken at such
meeting or by such consent, (B) the date on which any such Liquidation Event, event deemed a Liquidation Event pursuant to
Section A.4(f) hereof, QPO or other public offering is expected to become effective, and (C) the date on which the books of
the Corporation shall close or a record shall be taken with respect to any such event. Such notice shall be accompanied by a
certificate prepared by the chief financial officer of the Corporation describing in reasonable detail (1) the facts of such
transaction, (2) the amount(s) per share of Preferred Stock or Common Stock each holder of Preferred Stock would receive
pursuant to the applicable provisions of this Fifth Amended and Restated Certificate of Incorporation, and (3) the facts upon
which such amounts were determined.
(b)
Adjustments; Calculations. Upon the occurrence of each adjustment or readjustment of the Conversion Price of a series
of Preferred Stock pursuant to Section A.7, the Corporation at its expense shall promptly compute such adjustment or readjustment
in accordance with the terms hereof and prepare and furnish to each holder of such series of Preferred Stock a certificate setting
forth in reasonable detail (i) such adjustment or readjustment, (ii) the applicable Conversion Price before and after such adjustment
or readjustment, and (iii) the number of shares of Common Stock and the amount, if any, of other property which at the time would
be received upon the conversion of such holder's shares of such series of Preferred Stock. All such calculations shall be made
to the nearest cent or to the nearest one hundredth (1/100) of a share as the case may be.
(c)
Waiver of Notice. The holder or holders of a Majority Interest may, at any time upon written notice to the Corporation,
waive any notice or certificate delivery provisions specified herein for the benefit of such holders, and any such waiver shall
be binding upon all holders of such securities.
(d)
Other Waivers. Subject to the provisions of Section 8(f)(v) and any other provision hereof requiring the consent
of holders of a particular series of Preferred Stock, the holder or holders of a Majority Interest may, at any time upon written
notice to the Corporation, waive compliance by the Corporation with any term or provision herein, provided that any such waiver
shall be binding upon all holders of Preferred Stock and their respective transferees so long as any such waiver does not affect
any holder of outstanding shares of Preferred Stock in a manner materially different than any other holder. Notwithstanding anything
to the contrary contained within this Fifth Amended and Restated Certificate of Incorporation, no waiver of the adjustment provisions
contained in Section A.7 shall be effective with respect to the Series E Preferred Stock without the written election of a Series
E Majority.
10.
No Reissuance of Preferred Stock. No share or shares of Preferred Stock acquired by the Corporation by reason of
redemption, purchase, conversion or otherwise shall be reissued, and all such shares shall be canceled, retired and eliminated
from the shares which the Corporation shall be authorized to issue.
11.
Contractual Rights of Holders. The various provisions set forth herein for the benefit of the holders of the Preferred
Stock shall be deemed contract rights enforceable by them, including, without limitation, one or more actions for specific performance.
B. COMMON
STOCK
1. Voting.
(a) Election
of Directors. The holders of Common Stock voting together as a single class shall be entitled to elect three (3)
Directors of the Corporation. Such Directors shall be elected by a plurality vote, with the elected candidates being the
candidates receiving the greatest number of affirmative votes (with each holder entitled to cast one vote for or against each
candidate with respect to each share held by such holder), with votes cast against such candidates and votes withheld having
no legal effect. The election of such Directors shall occur at the annual meeting of holders of capital stock or at any
special meeting called and held in accordance with the By-laws of the Corporation, or by consent in lieu thereof in
accordance with this Fifth Amended and Restated Certificate of Incorporation and applicable law. The holders of record of the
shares of Common Stock and of any other class or series of voting stock (including the Preferred Stock), exclusively and
voting together as a single class, shall be entitled to elect the balance of the total number of directors of the
Corporation.
(b) Voting
Generally. Except as otherwise expressly provided herein or required by law, each holder of outstanding shares of Common
Stock shall be entitled to one (1) vote in respect of each share of Common Stock held thereby of record on the books of the
Corporation for the election of directors and on all matters submitted to a vote of stockholders of the Corporation.
Notwithstanding the provisions of Section 242(b)(2) of the Delaware General Corporation Law, the number of authorized shares
of Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of a majority of the outstanding shares of Common Stock and Preferred Stock voting together as a single
class. For the avoidance of doubt, each holder of Preferred Stock shall be entitled to one (1) vote per share of Common Stock
into which it is convertible on the applicable date on all matters submitted to a vote of holders of Common Stock as a class
(including, without limitation, pursuant to Section B.1(a) above or this Section B.1(b)).
2. Dividends.
Subject to the payment in full of all preferential dividends to which the holders of the Preferred Stock are entitled hereunder,
the holders of Common Stock shall be entitled to receive dividends out of funds legally available therefor at such times and in
such amounts as the Board of Directors may determine in its sole discretion, with holders of Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock and Common Stock sharing pari passu
in such dividends, as contemplated by Section A.3.
ARTICLE V
In furtherance of and not in limitation
of powers conferred by statute, it is further provided:
1.
Election of Directors need not be by written ballot unless the By-laws of the Corporation so provide.
2.
Except as provided in Article IV, Section A.8, the Board of Directors is expressly authorized to adopt, amend or repeal
the By-laws of the Corporation to the extent specified therein.
ARTICLE VI
Meetings of stockholders
may be held within or without the State of Delaware, as the By-laws may provide.
ARTICLE VII
To the extent permitted
by law, the books of the Corporation may be kept outside the State of Delaware at such place or places as may be designated in
the By-laws of the Corporation or from time to time by its Board of Directors.
ARTICLE VIII
A Director of the Corporation
shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director
of the Corporation, except for liability (a) for any breach of the Director's duty of loyalty to the Corporation or its stockholders,
(b) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (c) under Section
174 of the Delaware General Corporation Law, or (d) for any transaction from which the Director derived an improper personal benefit.
If the Delaware General Corporation Law is amended after the effective date of this Fifth Amended and Restated Certificate of Incorporation
to authorize corporate action further eliminating or limiting the personal liability of Directors, then the liability of a Director
of the Corporation shall be eliminated or limited to the fullest extent permitted by the General Corporation Law of the State of
Delaware.
Any repeal or modification
of this Article VIII, Article IX or Article XI by the stockholders of the Corporation or by an amendment to the Delaware General
Corporation Law shall not adversely affect any right or protection with respect to any acts or omissions occurring before such
repeal or modification of a person serving as a Director prior to or at the time of such repeal or modification.
ARTICLE IX
The Corporation renounces
any interest or expectancy of the Corporation in, or in being offered an opportunity to participate in, any Excluded Opportunity.
An "Excluded Opportunity" is any matter, transaction or interest that is presented to, or acquired, created or developed
by, or which otherwise comes into the possession of, (i) any Director of the Corporation who is not an employee of the Corporation
or any of its subsidiaries, or (ii) any holder of Preferred Stock or any partner, member, director, stockholder, employee or agent
of any such holder, other than someone who is an employee of the Corporation or any of its subsidiaries (collectively, "Covered
Persons"), unless such matter, transaction or interest is presented to, or acquired, created or developed by, or otherwise
comes into the possession of, a Covered Person expressly and solely in such Covered Person's capacity as a Director of the Corporation.
ARTICLE X
Except as otherwise
provided herein, the Corporation reserves the right to amend, alter, change or repeal any provision contained in this Fifth Amended
and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
ARTICLE XI
To the fullest extent
permitted by applicable law, this Company is authorized to provide indemnification of (and advancement of expenses to) directors,
officers, employees and other agents of this Company (and any other persons to which Delaware law permits this Company to provide
indemnification), through Bylaw provisions, agreements with any such director, officer, employee or other agent or other person,
vote of stockholders or disinterested directors, or otherwise, in excess of the indemnification and advancement otherwise permitted
by the Delaware General Corporation Law, subject only to limits created by applicable Delaware law (statutory or nonstatutory),
with respect to actions for breach of duty to a corporation, its stockholders and others.
ARTICLE XII
Unless the Corporation
consents in writing to the selection of an alternative forum, the Court of Chancery in the State of Delaware shall be the sole
and exclusive forum for any stockholder (including a beneficial owner) to bring (i) any derivative action or proceeding brought
on behalf of the Corporation, (ii) any action asserting a claim of breach of fiduciary duty owed by any director, officer or other
employee of the Corporation to the Corporation or the Corporation's stockholders, (iii) any action asserting a claim against the
Corporation, its directors, officers or employees arising pursuant to any provision of the Delaware General Corporation Law or
the Corporation's certificate of incorporation or By-laws or (iv) any action asserting a claim against the Corporation, its directors,
officers or employees governed by the internal affairs doctrine. If any provision or provisions of this Article Twelfth shall be
held to be invalid, illegal or unenforceable as applied to any person or entity or circumstance for any reason whatsoever, then,
to the fullest extent permitted by law, the validity, legality and enforceability of such provisions in any other circumstance
and of the remaining provisions of this Article Twelfth (including, without limitation, each portion of any sentence of this Article
Twelfth containing any such provision held to be invalid, illegal or unenforceable that is not itself held to be invalid, illegal
or unenforceable) and the application of such provision to other persons or entities and circumstances shall not in any way be
affected or impaired thereby.
ATTACHMENT B
BYLAWS OF THE CORPORATION
Attachment B
BY-LAWS
of
908 DEVICES INC.
(the "Corporation")
1. Stockholders
(a)
Annual Meeting. The annual meeting of stockholders shall be held for the election of directors each year at such
place, date and time as shall be designated by the Board of Directors. Any other proper business may be transacted at the annual
meeting. If no date for the annual meeting is established or said meeting is not held on the date established as provided above,
a special meeting in lieu thereof may be held or there may be action by written consent of the stockholders on matters to be voted
on at the annual meeting, and such special meeting or written consent shall have for the purposes of these By-laws or otherwise
all the force and effect of an annual meeting.
(b)
Special Meetings. Special meetings of stockholders may be called by the Chief Executive Officer, if one is elected,
or, if there is no Chief Executive Officer, a President, or by the Board of Directors, but such special meetings may not be called
by any other person or persons. The call for the meeting shall state the place, date, hour and purposes of the meeting. Only the
purposes specified in the notice of special meeting shall be considered or dealt with at such special meeting.
(c)
Notice of Meetings. Whenever stockholders are required or permitted to take any action at a meeting, a notice stating
the place, if any, date and hour of the meeting, the means of remote communications, if any, by which stockholders and proxyholders
may be deemed to be present and vote at such meeting, and, in the case of a special meeting, the purpose or purposes of the meeting,
shall be given by the Secretary (or other person authorized by these By-laws or by law) not less than ten (10) nor more than sixty
(60) days before the meeting to each stockholder entitled to vote thereat and to each stockholder who, under the Certificate of
Incorporation or under these By-laws is entitled to such notice. If mailed, notice is given when deposited in the mail, postage
prepaid, directed to such stockholder at such stockholder's address as it appears in the records of the Corporation. Without limiting
the manner by which notice otherwise may be effectively given to stockholders, any notice to stockholders may be given by electronic
transmission in the manner provided in Section 232 of the Delaware General Corporation Law (the "DGCL").
If a meeting is adjourned to another
time or place, notice need not be given of the adjourned meeting if the time and place, if any, and the means of remote
communications, if any, by which stockholders and proxyholders may be deemed to be present in person and vote at such
adjourned meeting are announced at the meeting at which the adjournment is taken, except that if the adjournment is for more
than thirty (30) days, or if after the adjournment a new record date is fixed for the adjourned meeting, notice of the
adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.
(d)
Quorum. The holders of a majority in interest of all stock issued, outstanding and entitled to vote at a meeting,
present in person or represented by proxy, shall constitute a quorum. Any meeting may be adjourned from time to time by a majority
of the votes properly cast upon the question, whether or not a quorum is present. The stockholders present at a duly constituted
meeting may continue to transact business until adjournment notwithstanding the withdrawal of enough stockholders to reduce the
voting shares below a quorum.
(e)
Voting and Proxies. Except as otherwise provided by the Certificate of Incorporation or by law, each stockholder
entitled to vote at any meeting of stockholders shall be entitled to one vote for each share of stock held by such stockholder
which has voting power upon the matter in question. Each stockholder entitled to vote at a meeting of stockholders or to express
consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for such stockholder
by either written proxy or by a transmission permitted by Section 212(c) of the DGCL, but no proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period or is irrevocable and coupled with an interest.
Proxies shall be filed with the Secretary of the meeting, or of any adjournment thereof. Except as otherwise limited therein, proxies
shall entitle the persons authorized thereby to vote at any adjournment of such meeting.
(f)
Action at Meeting. When a quorum is present, any matter before the meeting shall be decided by vote of the holders
of a majority of the shares of stock vo ting on such matter except where a larger vote is required by law, by the Certificate of
Incorporation or by these By-laws. Any election of directors by stockholders shall be determined by a plurality of the votes cast,
except where a larger vote is required by law, by the Certificate of Incorporation or by these By-laws. The Corporation shall not
directly or indirectly vote any share of its own stock; provided, however, that the Corporation may vote shares which it holds
in a fiduciary capacity to the extent permitted by law.
(g)
Presiding Officer. Meetings of stockholders shall be presided over by the Chairman of the Board, if one is elected,
or in his or her absence, the Vice Chairman of the Board, if one is elected, or if neither is elected or in their absence, a President.
The Board of Directors shall have the authority to appoint a temporary presiding officer to serve at any meeting of the stockholders
if the Chairman of the Board, the Vice Chairman of the Board or a President is unable to do so for any reason.
(h) Conduct
of Meetings. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of
stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by
the Board of Directors, the presiding officer of any meeting of stockholders shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such acts as, in the judgment of such chairman, are appropriate for the
proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed
by the presiding officer of the meeting, may include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those
present; (iii) limitations on attendance at or participation in the meeting to stockholders of record of the Corporation,
their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv)
restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time
allotted to questions or comments by participants. Unless and to the extent determined by the Board of Directors or the
presiding officer of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of
parliamentary procedure.
(i)
Action without a Meeting. Unless otherwise provided in the Certificate of Incorporation, any action required or permitted
by law to be taken at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without
a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock
having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered
office, by hand or by certified mail, return receipt requested, or to the Corporation's principal place of business or to the officer
of the Corporation having custody of the minute book. Every written consent shall bear the date of signature and no written consent
shall be effective unless, within sixty (60) days of the earliest dated consent delivered pursuant to these By-laws, written consents
signed by a sufficient number of stockholders entitled to take action are delivered to the Corporation in the manner set forth
in these By-laws. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent
shall be given to those stockholders who have not consented in writing.
(j)
Stockholder Lists. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least
ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged
in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.
Nothing contained in this Section 1(j) shall require the Corporation to include electronic mail addresses or other electronic contact
information on such list. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting,
for a period of at least ten (10) days prior to the meeting in the manner provided by law. The list shall also be open to the examination
of any stockholder during the whole time of the meeting as provided by law.
2. Directors
(a)
Powers. The business of the Corporation shall be managed by or under the direction of a Board of Directors who may
exercise all the powers of the Corporation except as otherwise provided by law, by the Certificate of Incorporation or by these
By-laws. In the event of a vacancy in the Board of Directors, the remaining directors, except as otherwise provided by law, may
exercise the powers of the full Board until the vacancy is filled.
(b) Number
and Qualification. Unless otherwise provided in the Certificate of Incorporation or in these By-laws, the number of
directors which shall constitute the whole board shall be determined from time to time by resolution of the Board of
Directors. Directors need not be stockholders.
(c)
Vacancies; Reduction of Board. A majority of the directors then in office, although less than a quorum, or a sole
remaining Director, may fill vacancies in the Board of Directors occurring for any reason and newly created directorships resulting
from any increase in the authorized number of directors. In lieu of filling any vacancy, the Board of Directors may reduce the
number of directors.
(d)
Tenure. Except as otherwise provided by law, by the Certificate of Incorporation or by these By-laws, directors shall
hold office until their successors are elected and qualified or until their earlier resignation or removal. Any director may resign
at any time upon notice given in writing or by electronic transmission to the Corporation. Such resignation shall be effective
upon receipt unless it is specified to be effective at some other time or upon the happening of some other event.
(e)
Removal. To the extent permitted by law, a director may be removed from office with or without cause by vote of the
holders of a majority of the shares of stock entitled to vote in the election of directors.
(f)
Meetings. Regular meetings of the Board of Directors may be held without notice at such time, date and place as the
Board of Directors may from time to time determine. Special meetings of the Board of Directors may be called, orally or in writing,
by the Chief Executive Officer, if one is elected, or, if there is no Chief Executive Officer, the President, or by two or more
Directors, designating the time, date and place thereof. Directors may participate in meetings of the Board of Directors by means
of conference telephone or other communications equipment by means of which all directors participating in the meeting can hear
each other, and participation in a meeting in accordance herewith shall constitute presence in person at such meeting.
(g)
Notice of Meetings. Notice of the time, date and place of all special meetings of the Board of Directors shall be
given to each director by the Secretary, or Assistant Secretary, or in case of the death, absence, incapacity or refusal of such
persons, by the officer or one of the directors calling the meeting. Notice shall be given to each director in person, by telephone,
or by facsimile, electronic mail or other form of electronic communications, sent to such director's business or home address at
least twenty-four (24) hours in advance of the meeting, or by written notice mailed to such director's business or home address
at least forty-eight (48) hours in advance of the meeting.
(h)
Quorum. At any meeting of the Board of Directors, a majority of the total number of directors shall constitute a
quorum for the transaction of business. Less than a quorum may adjourn any meeting from time to time and the meeting may be held
as adjourned without further notice.
(i) Action
at Meeting. At any meeting of the Board of Directors at which a quorum is present, unless otherwise provided in the
following sentence, a majority of the directors present may take any action on behalf of the Board of Directors, unless a
larger number is required by law, by the Certificate of Incorporation or by these By-laws. So long as there are two (2) or
fewer Directors, any action to be taken by the Board of Directors shall require the approval of all Directors.
(j) Action
by Consent. Any action required or permitted to be taken at any meeting of the Board of Directors may be taken without a meeting
if all members of the Board of Directors consent thereto in writing or by electronic transmission, and the writing or writings
or electronic transmission or transmissions are filed with the records of the meetings of the Board of Directors. Such filing shall
be in paper form if the minutes are maintained in paper form and shall be in electronic form if the minutes are maintained in electronic
form.
(k) Committees.
The Board of Directors may, by resolution passed by a majority of the whole Board of Directors, establish one or more committees,
each committee to consist of one or more directors. The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any meeting of the committee. In the absence or disqualification
of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not
such member or members constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting
in the place of any such absent or disqualified member.
Any such committee, to the extent
permitted by law and to the extent provided in the resolution of the Board of Directors, shall have and may exercise all the powers
and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority
in reference to the following: (i) approving or adopting, or recommending to the stockholders, any action or matter expressly required
by the DGCL to be submitted to stockholders for approval or (ii) adopting, amending or repealing any provision of these By-laws.
Except as the Board of Directors
may otherwise determine, any such committee may make rules for the conduct of its business, but in the absence of such rules its
business shall be conducted so far as possible in the same manner as is provided in these By-laws for the Board of Directors. All
members of such committees shall hold their committee offices at the pleasure of the Board of Directors, and the Board may abolish
any committee at any time.
3. Officers
(a) Enumeration.
The officers of the Corporation shall consist of one or more Presidents (who, if there is more than one, shall be referred to as
Co-Presidents), a Treasurer, a Secretary, and such other officers, including, without limitation, a Chief Executive Officer and
one or more Vice Presidents (including Executive Vice Presidents or Senior Vice Presidents), Assistant Vice Presidents, Assistant
Treasurers and Assistant Secretaries, as the Board of Directors may determine. The Board of Directors may elect from among its
members a Chairman of the Board and a Vice Chairman of the Board.
(b)
Election. The Presidents, Treasurer and Secretary shall be elected annually by the Board of Directors at their first
meeting following the annual meeting of stockholders. Other officers may be chosen by the Board of Directors at such meeting or
at any other meeting.
(c)
Qualification. No officer need be a stockholder or Director. Any two or more offices may be held by the same person.
Any officer may be required by the Board of Directors to give bond for the faithful performance of such officer's duties in such
amount and with such sureties as the Board of Directors may determine.
(d)
Tenure. Except as otherwise provided by the Certificate of Incorporation or by these By-laws, each of the officers
of the Corporation shall hold office until the first meeting of the Board of Directors following the next annual meeting of stockholders
and until such officer's successor is elected and qualified or until such officer's earlier resignation or removal. Any officer
may resign by delivering his or her written resignation to the Corporation, and such resignation shall be effective upon receipt
unless it is specified to be effective at some other time or upon the happening of some other event.
(e)
Removal. The Board of Directors may remove any officer with or without cause by a vote of a majority of the directors
then in office.
(f)
Vacancies. Any vacancy in any office may be filled for the unexpired portion of the term by the Board of Directors.
(g)
Chairman of the Board and Vice Chairman. Unless otherwise provided by the Board of Directors, the Chairman of the
Board of Directors, if one is elected, shall preside, when present, at all meetings of the stockholders and the Board of Directors.
The Chairman of the Board shall have such other powers and shall perform such duties as the Board of Directors may from time to
time designate.
Unless otherwise provided by
the Board of Directors, in the absence of the Chairman of the Board, the Vice Chairman of the Board, if one is elected, shall preside,
when present, at all meetings of the stockholders and the Board of Directors. The Vice Chairman of the Board shall have such other
powers and shall perform such duties as the Board of Directors may from time to time designate.
(h)
Chief Executive Officer. The Chief Executive Officer, if one is elected, shall have such powers and shall perform
such duties as the Board of Directors may from time to time designate.
(i)
Presidents. The Presidents shall, subject to the direction of the Board of Directors, each have general supervision
and control of the Corporation's business and any action that would typically be taken by a President may be taken by any Co-President.
If there is no Chairman of the Board or Vice Chairman of the Board, a President shall preside, when present, at all meetings of
stockholders and the Board of Directors. The Presidents shall have such other powers and shall perform such duties as the Board
of Directors may from time to time designate.
(j)
Vice Presidents and Assistant Vice Presidents. Any Vice President (including any Executive Vice President or Senior
Vice President) and any Assistant Vice President shall have such powers and shall perform such duties as the Board of Directors
may from time to time designate.
(k)
Treasurer and Assistant Treasurers. The Treasurer shall, subject to the direction of the Board of Directors, have
general charge of the financial affairs of the Corporation and shall cause to be kept accurate books of account. The Treasurer
shall have custody of all funds, securities, and valuable documents of the Corporation, except as the Board of Directors may otherwise
provide. The Treasurer shall have such other powers and shall perform such duties as the Board of Directors may from time to time
designate.
Any Assistant Treasurer shall
have such powers and perform such duties as the Board of Directors may from time to time designate.
(1) Secretary
and Assistant Secretaries. The Secretary shall record the proceedings of all meetings of the stockholders and the Board of
Directors (including committees of the Board) in books kept for that purpose. In the absence of the Secretary from any such meeting
an Assistant Secretary, or if such person is absent, a temporary secretary chosen at the meeting, shall record the proceedings
thereof. The Secretary shall have charge of the stock ledger (which may, however, be kept by any transfer or other agent of the
Corporation) and shall have such other duties and powers as may be designated from time to time by the Board of Directors.
Any Assistant Secretary shall
have such powers and perform such duties as the Board of Directors may from time to time designate.
(m) Other
Powers and Duties. Subject to these By-laws, each officer of the Corporation shall have in addition to the duties and powers
specifically set forth in these By-laws, such duties and powers as are customarily incident to such officer's office, and such
duties and powers as may be designated from time to time by the Board of Directors.
4. Capital
Stock
(a) Certificates
of Stock. Each stockholder shall be entitled to a certificate of the capital stock of the Corporation in such form as may from
time to time be prescribed by the Board of Directors. Such certificate shall be signed by a President or a Vice President, and
by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary. Such signatures may be a facsimile. In
case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed on such certificate shall
have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation
with the same effect as if such person were such officer, transfer agent or registrar at the time of its issue. Every certificate
for shares of stock which are subject to any restriction on transfer and every certificate issued when the Corporation is authorized
to issue more than one class or series of stock shall contain such legend with respect thereto as is required by law. The Corporation
shall be permitted to issue fractional shares.
(b)
Transfers. Subject to any restrictions on transfer, shares of stock may be transferred on the books of the Corporation
by the surrender to the Corporation or its transfer agent of the certificate therefor properly endorsed or accompanied by a written
assignment or power of attorney properly executed, with transfer stamps (if necessary) affixed, and with such proof of the authenticity
of signature as the Corporation or its transfer agent may reasonably require.
(c)
Record Holders. Except as may otherwise be required by law, by the Certificate of Incorporation or by these By-laws,
the Corporation shall be entitled to treat the record holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect thereto, regardless of any transfer, pledge or
other disposition of such stock, until the shares have been transferred on the books of the Corporation in accordance with the
requirements of these By-laws.
It
shall be the duty of each stockholder to notify the Corporation of such stockholder's post office address.
(d)
Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any
meeting of stockholders or any adjournment thereof, or to consent to corporate action in writing without a meeting, or entitled
to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect
of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not precede the date on which it is established, and which shall not be more than sixty (60)
nor less than ten (10) days before the date of such meeting, more than ten (10) days after the date on which the record date for
stockholder consent without a meeting is established, nor more than sixty (60) days prior to any other action. In such case only
stockholders of record on such record date shall be so entitled notwithstanding any transfer of stock on the books of the Corporation
after the record date.
If no record date is fixed, (i) the
record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day
next preceding the day on which the meeting is held, (ii) the record date for determining stockholders entitled to consent to corporate
action in writing without a meeting, when no prior action by the Board of Directors is necessary, shall be the first date on which
a signed written consent setting forth the action taken or proposed to be taken is delivered to the Corporation by delivery to
its registered office in this state, to its principal place of business, or to an officer or agent of the Corporation having custody
of the book in which proceedings of meetings of stockholders are recorded, and (iii) the record date for determining stockholders
for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating
thereto.
(e) Lost
Certificates. The Corporation may issue a new certificate of stock in the place of any certificate theretofore issued by
it, alleged to have been lost, stolen or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a bond sufficient to indemnify it against any
claim that may be made against it on account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
5. Indemnification
(a) Definitions.
For purposes of this Section 5:
(i)
"Corporate Status" describes the status of a person who is serving or has served (A) as a Director of the Corporation,
(B) as an Officer of the Corporation, (C) as a Non-Officer Employee of the Corporation, or (D) as a director, partner, trustee,
officer, employee or agent of any other corporation, partnership, limited liability company, joint venture, trust, employee benefit
plan, foundation, association, organization or other legal entity for which such person is or was serving at the request of the
Corporation. For purposes of this Section 5(a)(i), a Director, Officer or Non-Officer Employee of the Corporation who is serving
or has served as a director, partner, trustee, officer, employee or agent of a Subsidiary shall be deemed to be serving at the
request of the Corporation. Notwithstanding the foregoing, "Corporate Status" shall not include the status of a person
who is serving or has served as a director, officer, employee or agent of a constituent corporation absorbed in a merger or consolidation
transaction with the Corporation with respect to such person's activities prior to said transaction, unless specifically authorized
by the Board of Directors or the stockholders of the Corporation;
(ii)
"Director" means any person who serves or has served the Corporation as a director on the Board of Directors of
the Corporation;
(iii)
"Disinterested Director" means, with respect to each Proceeding in respect of which indemnification is sought
hereunder, a Director of the Corporation who is not and was not a party to such Proceeding;
(iv)
"Expenses" means all reasonable attorneys fees, retainers, court costs, transcript costs, fees of expert witnesses,
private investigators and professional advisors (including, without limitation, accountants and investment bankers), travel expenses,
duplicating costs, printing and binding costs, costs of preparation of demonstrative evidence and other courtroom presentation
aids and devices, costs incurred in connection with document review, organization, imaging and computerization, telephone charges,
postage, delivery service fees, and all other disbursements, costs or expenses of the type customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating, being or preparing to be a witness in, settling or otherwise
participating in, a Proceeding;
(v)
"Liabilities" means judgments, damages, liabilities, losses, penalties, excise taxes, fines and amounts paid in
settlement;
(vi)
"Non-Officer Employee" means any person who serves or has served as an employee or agent of the Corporation, but
who is not or was not a Director or Officer;
(vii )
"Officer" means any person who serves or has served the Corporation as an officer of the Corporation appointed
by the Board of Directors of the Corporation;
(viii)
"Proceeding" means any threatened, pending or completed action, suit, arbitration, alternate dispute resolution
mechanism, inquiry, investigation, administrative hearing or other proceeding, whether civil, criminal, administrative, arbitrative
or investigative; and
(xi)
"Subsidiary" shall mean any corporation, partnership, limited liability company, joint venture, trust or other
entity of which the Corporation owns (either directly or through or together with another Subsidiary of the Corporation) either
(i) a general partner, managing member or other similar interest or (ii) (A) 50% or more of the voting power of the voting capital
equity interests of such corporation, partnership, limited liability company, joint venture or other entity, or (B) 50% or more
of the outstanding voting capital stock or other voting equity interests of such corporation, partnership, limited liability company,
joint venture or other entity.
(b) Indemnification
of Directors and Officers. Subject to the operation of Section 5(d) of these By-laws, each Director and Officer shall be indemnified
and held harmless by the Corporation to the fullest extent authorized by the DGCL, as the same exists or may hereafter be amended
(but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide prior to such amendment), and to the extent authorized in subsections
(i) through (iv) of this Section 5(b).
(i)
Actions, Suits and Proceedings Other than By or In the Right of the Corporation. Each Director and Officer shall
be indemnified and held harmless by the Corporation against any and all Expenses and Liabilities that are incurred or paid by such
Director or Officer or on such Director's or Officer's behalf in connection with any Proceeding or any claim, issue or matter therein
(other than an action by or in the right of the Corporation), which such Director or Officer is, or is threatened to be made, a
party to or participant in by reason of such Director's or Officer's Corporate Status, if such Director or Officer acted in good
faith and in a manner such Director or Officer reasonably believed to be in or not opposed to the best interests of the Corporation
and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful.
(ii) Actions,
Suits and Proceedings By or In the Right of the Corporation. Each Director and Officer shall be indemnified and held
harmless by the Corporation against any and all Expenses that are incurred by such Director or Officer or on such Director's
or Officer's behalf in connection with any Proceeding or any claim, issue or matter therein by or in the right of the
Corporation, which such Director or Officer is, or is threatened to be made, a party to or participant in by reason of such
Director's or Officer's Corporate Status, if such Director or Officer acted in good faith and in a manner such Director or
Officer reasonably believed to be in or not opposed to the best interests of the Corporation; provided, however, that no
indemnification shall be made under this Section 5(b)(ii) in respect of any claim, issue or matter as to which such Director
or Officer shall have been finally adjudged by a court of competent jurisdiction to be liable to the Corporation, unless, and
only to the extent that, the Court of Chancery or another court in which such Proceeding was brought shall determine upon
application that, despite adjudication of liability, but in view of all the circumstances of the case, such Director or
Officer is fairly and reasonably entitled to indemnification for such Expenses that such court deems proper.
(iii)
Survival of Rights. The rights of indemnification provided by this Section 5(b) shall continue as to a Director or
Officer after he or she has ceased to be a Director or Officer and shall inure to the benefit of his or her heirs, executors, administrators
and personal representatives.
(iv)
Actions by Directors or Officers. Notwithstanding the foregoing, the Corporation shall indemnify any Director or
Officer seeking indemnification in connection with a Proceeding initiated by such Director or Officer only if such Proceeding (including
any parts of such Proceeding not initiated by such Director or Officer) was authorized in advance by the Board of Directors of
the Corporation, unless such Proceeding was brought to enforce such Officer's or Director's rights to indemnification or, in the
case of Directors, advancement of Expenses under these Bylaws in accordance with the provisions set forth herein.
(c)
Indemnification of Non-Officer Employees. Subject to the operation of Section 5(d) of these By-laws, each Non-Officer
Employee may, in the discretion of the Board of Directors of the Corporation, be indemnified by the Corporation to the fullest
extent authorized by the DGCL, as the same exists or may hereafter be amended, against any or all Expenses and Liabilities that
are incurred by such Non-Officer Employee or on such Non-Officer Employee's behalf in connection with any threatened, pending or
completed Proceeding, or any claim, issue or matter therein, which such Non-Officer Employee is, or is threatened to be made, a
party to or participant in by reason of such Non-Officer Employee's Corporate Status, if such Non-Officer Employee acted in good
faith and in a manner such Non-Officer Employee reasonably believed to be in or not opposed to the best interests of the Corporation
and, with respect to any criminal proceeding, had no reasonable cause to believe his or her conduct was unlawful. The rights of
indemnification provided by this Section 5(c) shall exist as to a Non-Officer Employee after he or she has ceased to be a Non-Officer
Employee and shall inure to the benefit of his or her heirs, personal representatives, executors and administrators. Notwithstanding
the foregoing, the Corporation may indemnify any Non-Officer Employee seeking indemnification in connection with a Proceeding initiated
by such Non-Officer Employee only if such Proceeding was authorized in advance by the Board of Directors of the Corporation.
(d) Determination.
Unless ordered by a court, no indemnification shall be provided pursuant to this Section 5 to a Director, to an Officer or to
a Non-Officer Employee unless a determination shall have been made that such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the Corporation and, with respect to any criminal
Proceeding, such person had no reasonable cause to believe his or her conduct was unlawful. Such determination shall be made
by (i) a majority vote of the Disinterested Directors, even though less than a quorum of the Board of Directors, (ii) a
committee comprised of Disinterested Directors, such committee having been designated by a majority vote of the Disinterested
Directors (even though less than a quorum), (iii) if there are no such Disinterested Directors, or if a majority of
Disinterested Directors so directs, by independent legal counsel in a written opinion, or (iv) by the stockholders of the
Corporation.
(e) Advancement
of Expenses to Directors Prior to Final Disposition.
(i)
The Corporation shall advance all Expenses incurred by or on behalf of any Director in connection with any Proceeding in
which such Director is involved by reason of such Director's Corporate Status within thirty (30) days after the receipt by the
Corporation of a written statement from such Director requesting such advance or advances from time to time, whether prior to or
after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by such
Director and shall be preceded or accompanied by an undertaking by or on behalf of such Director to repay any Expenses so advanced
if it shall ultimately be determined that such Director is not entitled to be indemnified against such Expenses. Notwithstanding
the foregoing, the Corporation shall advance all Expenses incurred by or on behalf of any Director seeking advancement of expenses
hereunder in connection with a Proceeding initiated by such Director only if such Proceeding (including any parts of such Proceeding
not initiated by such Director) was (A) authorized by the Board of Directors of the Corporation, or (B) brought to enforce such
Director's rights to indemnification or advancement of Expenses under these By-laws.
(ii)
If a claim for advancement of Expenses hereunder by a Director is not paid in full by the Corporation within thirty (30)
days after receipt by the Corporation of documentation of Expenses and the required undertaking, such Director may at any time
thereafter bring suit against the Corporation to recover the unpaid amount of the claim and if successful in whole or in part,
such Director shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including
its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning
the permissibility of such advancement of Expenses under this Section 5 shall not be a defense to an action brought by a Director
for recovery of the unpaid amount of an advancement claim and shall not create a presumption that such advancement is not permissible.
The burden of proving that a Director is not entitled to an advancement of expenses shall be on the Corporation.
(iii)
In any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the
Corporation shall be entitled to recover such expenses upon a final adjudication that the Director has not met any applicable standard
for indemnification set forth in the DGCL.
(f) Advancement
of Expenses to Officers and Non-Officer Employees Prior to Final Disposition.
(i) The
Corporation may, at the discretion of the Board of Directors of the Corporation, advance any or all Expenses incurred by or
on behalf of any Officer or any Non-Officer Employee in connection with any Proceeding in which such person is involved by
reason of his or her Corporate Status as an Officer or Non-Officer Employee upon the receipt by the Corporation of a
statement or statements from such Officer or Non-Officer Employee requesting such advance or advances from time to time,
whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the
Expenses incurred by such Officer or Non-Officer Employee and shall be preceded or accompanied by an undertaking by or on
behalf of such person to repay any Expenses so advanced if it shall ultimately be determined that such Officer or Non-Officer
Employee is not entitled to be indemnified against such Expenses.
(ii) In
any suit brought by the Corporation to recover an advancement of expenses pursuant to the terms of an undertaking, the Corporation
shall be entitled to recover such expenses upon a final adjudication that the Officer or Non-Officer Employee has not met any applicable
standard for indemnification set forth in the DGCL.
(g) Contractual
Nature of Rights.
(i)
The provisions of this Section 5 shall be deemed to be a contract between the Corporation and each Director and Officer
entitled to the benefits hereof at any time while this Section 5 is in effect, in consideration of such person's past or current
and any future performance of services for the Corporation. Neither amendment, repeal or modification of any provision of this
Section 5 nor the adoption of any provision of the Certificate of Incorporation inconsistent with this Section 5 shall eliminate
or reduce any right conferred by this Section 5 in respect of any act or omission occurring, or any cause of action or claim that
accrues or arises or any state of facts existing, at the time of or before such amendment, repeal, modification or adoption of
an inconsistent provision (even in the case of a proceeding based on such a state of facts that is commenced after such time),
and all rights to indemnification and advancement of Expenses granted herein or arising out of any act or omission shall vest at
the time of the act or omission in question, regardless of when or if any proceeding with respect to such act or omission is commenced.
The rights to indemnification and to advancement of expenses provided by, or granted pursuant to, this Section 5 shall continue
notwithstanding that the person has ceased to be a director or officer of the Corporation and shall inure to the benefit of the
estate, heirs, executors, administrators, legatees and distributees of such person.
(ii)
If a claim for indemnification hereunder by a Director or Officer is not paid in full by the Corporation within sixty (60)
days after receipt by the Corporation of a written claim for indemnification, such Director or Officer may at any time thereafter
bring suit against the Corporation to recover the unpaid amount of the claim, and if successful in whole or in part, such Director
or Officer shall also be entitled to be paid the expenses of prosecuting such claim. The failure of the Corporation (including
its Board of Directors or any committee thereof, independent legal counsel, or stockholders) to make a determination concerning
the permissibility of such indemnification under this Section 5 shall not be a defense to an action brought by a Director or Officer
for recovery of the unpaid amount of an indemnification claim and shall not create a presumption that such indemnification is not
permissible. The burden of proving that a Director or Officer is not entitled to indemnification shall be on the Corporation.
(iii) In any suit brought by
a Director or Officer to enforce a right to indemnification hereunder, it shall be a defense that such Director or Officer has
not met any applicable standard for indemnification set forth in the DGCL.
(h)
Non-Exclusivity of Rights. The rights to indemnification and advancement of Expenses set forth in this Section 5
shall not be exclusive of any other right which any Director, Officer, or Non-Officer Employee may have or hereafter acquire under
any statute, provision of the Certificate or these By-laws, agreement, vote of stockholders or Disinterested Directors or otherwise.
(i)
Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any Director, Officer or
Non-Officer Employee against any liability of any character asserted against or incurred by the Corporation or any such Director,
Officer or Non-Officer Employee, or arising out of any such person's Corporate Status, whether or not the Corporation would have
the power to indemnify such person against such liability under the DGCL or the provisions of this Section 5.
(j) Other
Indemnification. The Corporation's obligation, if any, to indemnify or provide advancement of Expenses to any person under
this Section 5 as a result of such person serving, at the request of the Corporation, as a director, partner, trustee, officer,
employee or agent of another corporation, partnership, joint venture, trust, employee benefit plan or other enterprise shall be
reduced by any amount such person may collect as indemnification or advancement of Expenses from such other corporation, partnership,
joint venture, trust, employee benefit plan or enterprise (the "Primary Indemnitor"). Any indemnification or advancement
of Expenses under this Section 5 owed by the Corporation as a result of a person serving, at the request of the Corporation, as
a director, partner, trustee, officer, employee or agent of another corporation, partnership, joint venture, trust, employee benefit
plan or other enterprise shall only be in excess of, and shall be secondary to, the indemnification or advancement of Expenses
available from the applicable Primary Indemnitor(s) and any applicable insurance policies.
6. Miscellaneous
Provisions
(a)
Fiscal Year. Except as otherwise determined by the Board of Directors, the fiscal year of the Corporation shall end
on December 31 of each year.
(b)
Seal. The Board of Directors shall have power to adopt and alter the seal of the Corporation.
(c)
Execution of Instruments. Subject to any limitations which may be set forth in a resolution of the Board of Directors,
all deeds, leases, transfers, contracts, bonds, notes and other obligations to be entered into by the Corporation in the ordinary
course of its business without director action may be executed on behalf of the Corporation by, a President, or by any other officer,
employee or agent of the Corporation as the Board of Directors may authorize.
(d) Voting
of Securities. Unless the Board of Directors otherwise provides, a President, any Vice President or the Treasurer may
waive notice of and act on behalf of this Corporation, or appoint another person or persons to act as proxy or attorney in
fact for this Corporation with or without discretionary power and/or power of substitution, at any meeting of stockholders or
shareholders of any other corporation or organization, any of whose securities are held by this Corporation.
(e)
Resident Agent. The Board of Directors may appoint a resident agent upon whom legal process may be served in any
action or proceeding against the Corporation.
(f)
Corporate Records. The original or attested copies of the Certificate of Incorporation, By-laws and records of all
meetings of the incorporators, stockholders and the Board of Directors and the stock and transfer records, which shall contain
the names of all stockholders, their record addresses and the amount of stock held by each, shall be kept at the principal office
of the Corporation, at the office of its counsel, or at an office of its transfer agent.
(g)
Certificate of Incorporation. All references in these By-laws to the Certificate of Incorporation shall be deemed
to refer to the Certificate of Incorporation of the Corporation, as amended and in effect from time to time.
(h)
Amendments. These By-laws may be altered, amended or repealed, and new By-laws may be adopted, by the stockholders
or by the Board of Directors; provided, that (a) the Board of Directors may not alter, amend or repeal any provision of these By-laws
which by law, by the Certificate of Incorporation or by these By-laws requires action by the stockholders and (b) any alteration,
amendment or repeal of these By-laws by the Board of Directors and any new By-law adopted by the Board of Directors may be altered,
amended or repealed by the stockholders.
(i)
Waiver of Notice. Whenever notice is required to be given under any provision of these By-laws, a written waiver,
signed by the person entitled to notice, or a waiver by electronic transmission by the person entitled to notice, whether before
or after the time of the event for which notice is to be given, shall be deemed equivalent to notice. Attendance of a person at
a meeting shall constitute a waiver of notice of such meeting, except when the person attends a meeting for the express purpose
of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any meeting needs to be specified in any written waiver or any waiver
by electronic transmission.
Adopted February 10, 2012
AMENDMENT NO. 1 TO BY-LAWS
of
908 DEVICES INC.
(the "Corporation")
The By-laws of the
Corporation, dated February 10, 2012 (the "By-laws"), are hereby amended as follows:
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1.
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Section 2(h) of the By-laws is hereby deleted in its
entirety and replaced with the following:
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"(h) Quorum.
At any meeting of the Board of Directors, a majority of the total number of directors shall constitute a quorum for the transaction
of business. Less than a quorum may adjourn any meeting from time to time and the meeting may be held as adjourned without further
notice. Notwithstanding the foregoing, for so long as the Security Control Agreement dated as of March 1, 2016, by and among the
Corporation, SAEV Guernsey Holding Limited ("SAEV") and the U.S. Department of Defense (the "Security Control Agreement")
remains in effect, unless the Inside Director recuses himself from a meeting, a quorum must include at least one Outside Director.
For purposes hereof, the terms "Inside Director" and "Outside Director" shall have the following meanings:
"Inside
Director" shall mean a member of the Board of Directors who is not an Officer Director, an Outside Director, or otherwise
appointed to the Board of Directors by any U.S. controlled companies and individuals, excluding SAEV, that, directly or through
subsidiaries, own the majority of the Corporation's issued and outstanding Common Stock and Preferred Stock (as those terms are
defined in the Certificate of Incorporation); provided, that any member of the Board of Directors who is also a significant shareholder,
director, officer, employee, agent or representative of SAEV, or any entity that directly or indirectly controls the SAEV, is directly
or indirectly controlled by SAEV, or is directly or indirectly under common control with SAEV, is deemed to be an Inside Director;
"Officer
Director" shall mean a member of the Board of Directors who is a cleared officer of the Corporation; and
"Outside
Director" shall mean an existing non-employee member of the Board of Directors who meets the qualifications set forth in the
National Industrial Security Program Operating Manual 2-300 (the "NISPOM") § 2-305 and whose qualifications and
eligibility are otherwise approved by the Defense Security Service ("DSS") in advance and in writing."
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2.
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Section 2(k) of the By-laws is hereby amended by inserting
the following as a new paragraph immediately after the first paragraph in Section 2(k):
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"The
Board of Directors shall, by resolution passed by a majority of the whole Board of Directors, establish a Government Security Committee
(the "GSC") for so long as the Security Control Agreement remains in effect, consisting of each Outside Director and
Officer Director, if any, which will, among other things, ensure that the Corporation's directors, officers, employees, representatives
and agents comply with the provisions of the Security Control Agreement and take any such actions as required by the Security Control
Agreement or pursuant to any charter governing the GSC to be adopted by the Board of Directors. The GSC must designate an Outside
Director to serve as Chairman of the GSC. The Chairman of the GSC must designate a member of the GSC to be the Secretary of the
GSC.
The Board
of Directors shall, by resolution passed by a majority of the whole Board of Directors, establish a Compensation Committee (the
"Compensation Committee") for so long as the Security Control Agreement remains in effect, consisting of at least one
Outside Director, which will, among other things, be responsible for reviewing the annual compensation of the Company Principals
and making recommendations to the Board of Directors for approval. For purposes hereof, the term "Company Principals"
shall have the following meaning:
"Company
Principals" shall mean those persons who, pursuant to Section 2-104 of the NISPOM, must be granted personnel security clearances
or be excluded from classified access pursuant to Section 2-106 of the NISPOM, and at a minimum, will include each director and
each incumbent officer occupying an office expressly authorized in the Corporation's charter documents and any other person identified
by the GSC, whose determination shall be subject to review and approval of DSS as a person occupying a position that would enable
him or her to adversely affect the Corporation's policies or practices in the performance of classified contracts."
Capitalized terms used
herein and not otherwise defined shall have the meaning ascribed to such terms in the By-laws.
Except as expressly
modified hereby, the By-laws and all of the provisions contained therein shall remain in full force and effect.
Adopted March 1, 2016
Exhibit 10.10
[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is
not material and would likely cause competitive harm to the registrant if publicly disclosed.
FIRST AMENDMENT TO LOAN AND SECURITY
AGREEMENT
This First
Amendment to Loan and Security Agreement (this "Amendment") is entered into as of March 15, 2020, by and between SIGNATURE
BANK ("Bank") and 908 DEVICES INC. ("Borrower").
RECITALS
Borrower
and Bank are parties to that certain Loan and Security Agreement dated as of August 29, 2019 (as may be amended from time to time,
the "Agreement"). The parties desire to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1.
The following defined terms in Section 1.1 of the Agreement hereby are added or amended and restated, as appropriate, as
follows:
"Covenant
Reset" is defined in Section 6.8(b).
"First
Amendment Closing Date" is March 15, 2020.
"New
Proceeds Milestone" means the receipt by Borrower of at least [***] of net proceeds
from the incurrence of Subordinated Debt or the sale of its equity securities from investors and on terms and conditions acceptable
to Bank in its reasonable business discretion.
"Revenue
Milestone" means Borrower's delivery to Bank of evidence, in form and substance satisfactory to Bank in its sole
discretion, that Borrower has achieved revenue (determined in accordance with GAAP) of [***].
"[***]
Milestone" means Borrower's delivery to Bank of evidence, in form
and substance satisfactory to Bank in its sole discretion, confirming that Borrower has executed a contract with an [***] program
distribution partner, pursuant to which Borrower will receive at least [***] in 2020 revenue (determined in accordance with GAAP).
"Shippable
Backlog Revenue" means revenue (determined in accordance with GAAP) which has not yet been recognized but the Borrower
has received signed purchase orders for Borrower's products and products are scheduled for shipment to Borrower's customers not
later than December 31, 2020.
"Term
Sheet Milestone" means Borrower's delivery to Bank of an executed term sheet pursuant to which investors
satisfactory to Bank in its reasonable business discretion commit to consummate the New Proceeds Milestone no later than
August 14, 2020.
2.
The following defined term in Section 1.1 of the Agreement hereby is deleted in its entirety:
"Liquidity Ratio"
***] Certain information
in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and
would likely cause competitive harm to the registrant if publicly disclosed.
3.
Section 6.8 of the Agreement hereby is amended and restated in its entirety to read as follows:
"6.8. Financial Covenants.
(a)
Minimum Cash. Borrower shall maintain at all times (i) beginning on the First Amendment Closing Date and continuing
through the date on which the Covenant Reset has been completed, a balance of unrestricted cash at Bank in an amount not less than
Four Million Dollars ($4,000,000), and (ii) beginning on the date on which the Covenant Reset has been completed and continuing
at all times thereafter, a balance of unrestricted cash at Bank in an amount not less than Three Million Dollars ($3,000,000).
(b)
Milestone Covenants. On or prior to June 30, 2020, Borrower shall achieve (i) the [***] Milestone; (ii) the Term
Sheet Milestone; or (iii) the Revenue Milestone.
If
one of the foregoing milestone covenants set forth in Section 6.8(b) above is achieved by June 30, 2020, Borrower and Bank agree
to, no later than August 14, 2020, enter into an amendment to this Agreement to set a cumulative quarterly revenue covenant (determined
in accordance with GAAP). If none of the foregoing milestone covenants set forth in Section 6.8(b) above is achieved by June 30,
2020 then (i) Borrower shall have consummated the New Proceeds Milestone no later than August 14, 2020, and (ii)
Borrower and Bank agree to, no later than August 14, 2020, enter into an amendment to this Agreement to set a new performance financial
covenant (the "Covenant Reset")."
4.
No course of dealing on the
part of Bank or its officers, nor any failure or delay in the exercise of any right by Bank, shall operate as a waiver
thereof, and any single or partial exercise of any such right shall not preclude any later exercise of any such right. Bank's
failure at any time to require strict performance by Borrower of any provision shall not affect any right of Bank thereafter
to demand strict compliance and performance. Any suspension or waiver of a right must be in writing signed by an officer of
Bank.
5. Unless otherwise defined, all
initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement, as amended hereby, shall
be and remain in full force and effect in accordance with its respective terms and hereby is ratified and confirmed in all
respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not operate
as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect prior to the
date hereof.
6. Borrower represents and warrants that
the Representations and Warranties contained in the Agreement are true and correct in all material respects as of the date of
this Amendment, and that no Event of Default has occurred and is continuing.
7. As
a condition to the effectiveness of this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the
following:
(a)
this Amendment, duly executed by Borrower;
(b)
all reasonable Bank Expenses incurred through the date of this Amendment, which may be debited from any of Borrower's accounts
at Bank; and
(c)
such other documents, and completion of such other matters, as Bank may have reasonably requested.
8. This Amendment may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument.
[Balance of Page Intentionally Left
Blank]
IN
WITNESS WHEREOF, the undersigned have excuted this Amendment as of the first date above written.
|
|
908
DEVICES INC.
|
|
|
|
|
|
By:
|
/s/
Joseph H. Griffith IV
|
|
|
Name:
|
Joseph
H. Griffith IV
|
|
|
Title:
|
Treasurer
and Chief Financial Officer
|
|
|
|
|
|
SIGNATURE
BANK
|
|
|
|
|
|
By:
|
/s/
Lisa Foussianes
|
|
|
Name:
|
Lisa
Foussianes
|
|
|
Title:
|
SVP
|
[Signature Page to First Amendment to Loan and Security
Agreement]
Exhibit 10.11
[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is
not material and would likely cause competitive harm to the registrant if publicly disclosed.
SECOND AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Second Amendment
to Loan and Security Agreement (this “Amendment”) is entered into as of August 7, 2020, by and between SIGNATURE BANK
(“Bank”) and 908 DEVICES INC., a Delaware corporation (“Borrower”).
RECITALS
Borrower and Bank are
parties to that certain Loan and Security Agreement dated as of August 29, 2019 (as may be amended from time to time, including,
without limitation, by that certain First Amendment to Loan and Security Agreement dated as of March 15, 2020, collectively, the
“Agreement”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
1. The following defined
terms in Section 1.1 of the Agreement hereby are added or amended and restated in their entirety, as appropriate, to read as follows:
“Liquidity
Ratio” is a ratio of (a) the sum of (i) unrestricted cash held by Borrower in accounts at Bank, plus (ii) an amount equal
to fifty percent (50%) of Borrower’s net trade accounts receivable, to (b) all Obligations owing from Borrower to Bank.
“Second Amendment Closing Date” is
August 7, 2020.
“Shippable
Backlog Revenue” means revenue (determined in accordance with GAAP) which has not yet been recognized but with respect
to which Borrower has received signed purchase orders for Borrower’s products scheduled for shipment to Borrower’s
customers not later than six (6) months from any such date of measurement.
2. The following terms and their respective
definitions hereby are deleted in their entirety from Section 1.1 of the Agreement:
“New Proceeds Milestone”,
“Revenue Milestone”, “[***] Milestone”, and “Term Sheet Milestone”
3. Section
6.8 of the Agreement hereby is amended and restated in its entirety to read as follows:
“6.8.
Financial Covenants. Borrower shall maintain at all times, subject to periodic reporting as of the last day of each month,
unless otherwise noted below:
(a) Minimum Cash.
Maintain a balance of unrestricted cash at Bank in an aggregate amount not less than Three Million Dollars ($3,000,000).
(b) Minimum Revenue
or Liquidity Ratio. Comply with one (1) of the following two (2) covenants:
(i) Minimum
Revenue. The sum of (y) recognized revenue (determined in accordance with GAAP) plus, without duplication (z) Shippable Backlog
Revenue (but capped in an aggregate amount not to exceed twenty-five percent (25%) of all revenue for any such measuring period),
in each case, measured on a cumulative basis (starting on July 1, 2020) of not less than the following amounts for the corresponding
measuring period:
|
Measuring Period Ending
|
|
Trailing Months
|
|
Minimum Revenue
|
|
|
September 30, 2020
|
|
Three (3)
|
|
|
[***]
|
|
|
December 31, 2020
|
|
Six (6)
|
|
|
[***]
|
|
[***] Certain information in this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is
not material and would likely cause competitive harm to the registrant if publicly disclosed.
Borrower and Bank
agree to, no later than March 15, 2021, enter into an amendment to this Agreement to set a cumulative quarterly revenue covenant
(determined in accordance with GAAP) which shall be targeted at [***]
(ii) Minimum
Liquidity Ratio. A Liquidity Ratio of at least 1.0 to 1.0.”
4.
No course of dealing on the part of Bank or its officers, nor any failure or delay in the exercise of any right by Bank, shall
operate as a waiver thereof, and any single or partial exercise of any such right shall not preclude any later exercise of any
such right. Bank’s failure at any time to require strict performance by Borrower of any provision shall not affect any right
of Bank thereafter to demand strict compliance and performance. Any suspension or waiver of a right must be in writing signed by
an officer of Bank.
5.
Unless otherwise defined, all initially capitalized terms in this Amendment shall be as defined in the Agreement. The Agreement,
as amended hereby, shall be and remain in full force and effect in accordance with its respective terms and hereby is ratified
and confirmed in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment
shall not operate as a waiver of, or as an amendment of, any right, power, or remedy of Bank under the Agreement, as in effect
prior to the date hereof.
6. Borrower
represents and warrants that the Representations and Warranties contained in the Agreement are true and correct in all material
respects as of the date of this Amendment, and that no Event of Default has occurred and is continuing.
7. As a condition to the effectiveness of
this Amendment, Bank shall have received, in form and substance satisfactory to Bank, the following:
(a)
this Amendment, duly executed by Borrower;
(b)
all reasonable Bank Expenses incurred through the date of this Amendment, which may be debited from any of Borrower’s
accounts at Bank; and
(c) such
other documents, and completion of such other matters, as Bank may have reasonably requested.
8. This
Amendment may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one instrument.
[Balance of Page Intentionally Left Blank]
IN WITNESS WHEREOF, the undersigned have executed
this Amendment as of the first date above written.
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|
908 DEVICES INC.
|
|
|
|
|
|
By:
|
/s/ Joseph H. Griffith
IV
|
|
|
Name:
|
Joseph H. Griffith IV
|
|
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Title:
|
Treasurer and Chief Financial Officer
|
|
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SIGNATURE BANK
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|
|
|
|
|
By:
|
/s/ Michael Fulton
|
[Signature Page to Second Amendment to Loan and
Security Agreement]
Exhibit 10.12
LEASE
BETWEEN
BOSTON
HARBOR INDUSTRIAL DEVELOPMENT LLC
AND
908
DEVICES INC.
ARTICLE
1
Reference Data
|
|
1.1
|
Introduction:
Each reference in this Lease to any of the following subjects shall be construed
to incorporate the data stated for that subject in this Section 1.1.
|
|
Lease
Date:
|
As of January
2, 2018
|
|
|
|
|
Building:
|
The building located
at 645 Summer Street, Boston, MA, containing approximately 150,000 rentable square feet (the Building and such parcel of land
hereinafter being collectively referred to as the "Property").
|
|
|
|
|
Pappas Commerce Center:
|
That certain commercial
office and industrial park located in the City of Boston, MA, in which the Property is located, containing approximately 760,784
rentable square feet.
|
|
|
|
|
Premises:
|
That portion of the
second floor of the Building containing approximately 37,500 rentable square feet as shown on the floor plan on Exhibit
A attached hereto and made a part hereof hereinafter referred to as the "Premises".
|
|
|
|
|
Landlord:
|
Boston Harbor Industrial
Development LLC, a Delaware limited liability company
|
|
|
|
|
Original Notice Address
of Landlord:
|
655 Summer Street
Boston,
MA 02210
Attention: Timothy A. Pappas
|
|
|
|
|
Tenant:
|
908 Devices Inc., a
Delaware corporation
|
|
|
|
|
Original Notice Address of Tenant:
|
645
Summer Street
Boston, MA 02210
|
|
|
|
|
|
with a copy
to:
|
|
Term:
|
Seven (7) years, commencing
on the Commencement Date and expiring on the seventh (7th) anniversary of the Rent Commencement Date unless extended
or sooner terminated as stated in this Lease (the “Expiration Date”).
|
|
|
|
|
Estimated Tenant
Access Date:
|
May 1, 2018
|
|
|
|
|
Commencement Date
|
The date of full execution
of this Lease by all parties.
|
|
|
|
|
Rent Commencement
Date:
|
The later of (i) substantial
completion of the Tenant Improvements (as defined in Article 4) and receipt by Landlord of a certificate of occupancy for
the Premises, (ii) June 1, 2018 or (iii) the date that is thirty (30) days after the date upon which Tenant gains access to
the Premises.
|
Annual
Fixed Rent Rate:
Months
1-9:
|
Lease
Term Period
|
|
Rentable
square feet
|
|
|
Fixed
Rent per
square foot
(NNN)
|
|
|
Annual
Fixed Rent
Rate
|
|
|
Rent Commencement
Date – Month 9
|
|
|
12,500
|
|
|
$
|
44.00
|
|
|
|
*550,000.00
|
|
Months
10-12:
|
Lease
Term Period
|
|
Rentable
square feet
|
|
|
Fixed
Rent per
square foot
(NNN)
|
|
|
Annual
Fixed Rent
Rate
|
|
|
Months 10-12
|
|
|
27,500
|
|
|
$
|
44,00
|
|
|
|
*1,210,000.00
|
|
*Annualized
number
Months
13-24:
|
Lease
Term Period
|
|
Rentable
square feet
|
|
|
Fixed
Rent per
square foot
(NNN)
|
|
|
Annual
Fixed Rent
Rate
|
|
|
Months
13-24
|
|
|
37,500
|
|
|
$
|
45.10
|
|
|
$
|
1,691,250.00
|
|
Remainder of Lease
Term:
|
Lease
Year
|
|
Rentable
square
feet
|
|
|
Fixed
Rent per
square foot (NNN)
|
|
|
Rent
Escalation
|
|
|
Annual
Fixed Rent
Rate
|
|
|
Months 25-36
|
|
|
37,500
|
|
|
$
|
46.23
|
|
|
|
2.5
|
%
|
|
$
|
1,733,531.25
|
|
|
Months 37-48
|
|
|
37,500
|
|
|
$
|
47.38
|
|
|
|
2.5
|
%
|
|
$
|
1,776,869.53
|
|
|
Months 49-60
|
|
|
37,500
|
|
|
$
|
48.57
|
|
|
|
2.5
|
%
|
|
$
|
1,821,291.27
|
|
|
Months 61-72
|
|
|
37,500
|
|
|
$
|
49.78
|
|
|
|
2.5
|
%
|
|
$
|
1,866,823.55
|
|
|
Months 73-84
|
|
|
37,500
|
|
|
$
|
51.03
|
|
|
|
2.5
|
%
|
|
$
|
1,913,494.14
|
|
Monthly
Fixed Rent Rate:
Months 1-9:
|
Lease
Term Period
|
|
Rentable
square feet
|
|
|
Fixed
Rent per
square foot
(NNN)
|
|
|
Monthly
Fixed Rent
Rate
|
|
|
Rent Commencement Date - Month
9
|
|
|
12,500
|
|
|
$
|
44.00
|
|
|
$
|
45,833.33
|
|
Months 10-12:
|
Lease
Term Period
|
|
Rentable
square feet
|
|
|
Fixed
Rent per
square foot
(NNN)
|
|
|
Monthly
Fixed Rent
Rate
|
|
|
Months 10-12
|
|
|
27,500
|
|
|
$
|
44.00
|
|
|
$
|
100,833.33
|
|
Months 13-24:
|
Lease
Term Period
|
|
Rentable
square feet
|
|
|
Fixed
Rent per
square foot
(NNN)
|
|
|
Monthly
Fixed Rent
Rate
|
|
|
Months 13-24
|
|
|
37,500
|
|
|
$
|
45.10
|
|
|
$
|
140,937.50
|
|
Remainder of Lease
Term:
|
Lease
Year
|
|
Rentable
square
feet
|
|
|
Fixed
Rent per
square foot (NNN)
|
|
|
Rent
Escalation
|
|
|
Monthly
Fixed Rent
Rate
|
|
|
Months 25-36
|
|
|
37,500
|
|
|
$
|
46.23
|
|
|
|
2.5
|
%
|
|
$
|
144,460.94
|
|
|
Months 37-48
|
|
|
37,500
|
|
|
$
|
47.38
|
|
|
|
2.5
|
%
|
|
$
|
148,072.46
|
|
|
Months 49-60
|
|
|
37,500
|
|
|
$
|
48.57
|
|
|
|
2.5
|
%
|
|
$
|
151,774.27
|
|
|
Months 61-72
|
|
|
37,500
|
|
|
$
|
49.78
|
|
|
|
2.5
|
%
|
|
$
|
155,568.63
|
|
|
Months 73-84
|
|
|
37,500
|
|
|
$
|
51.03
|
|
|
|
2.5
|
%
|
|
$
|
159,457.85
|
|
|
Security Deposit:
|
$500,000
|
|
Tenant's Percentage
of Operating Costs for
Pappas Commerce Center:
|
|
4.93 % of the annual Operating Costs for Pappas
Commerce Center (as defined below) based on a ratio of the rentable square foot (“RSF”) of the Premises (37,500
RSF) to the total RSF of the Pappas Commerce Center (760,784 RSF), as may be adjusted from time to time to reflect changes
to the Premises or the Pappas Commerce Center. Based on current annual Operating Costs of the Pappas Commerce Center, Tenant’s
annual share is estimated to be $40,875, or $1.09/RSF, for all Operating Costs except for utilities to the Premises to the
extent separately metered; provided, however, such estimate does not supersede the specific provisions set forth in this Lease,
and Tenant shall remain liable for the actual Operating Costs for Pappas Commerce Center incurred by Landlord.
|
|
|
|
|
|
Tenant's Percentage of Real
Estate Taxes for Building:
|
|
25% of the annual real estate taxes of the Building
based on a ratio of the RSF of the Premises (37,500 RSF) to the total RSF of the Building (150,000 RSF), as may be adjusted
from time to time to reflect changes to the Premises or the Pappas Commerce Center. Based on the current annual real estate
taxes for the Building, Tenant’s annual real estate tax share is estimated to be $122,250, or $3.26/RSF; provided, however,
such estimate does not supersede the specific provisions set forth in this Lease, and Tenant shall remain liable for the actual
Real Estate Taxes incurred by Landlord.
|
|
|
|
|
|
Tenant’s Percentage of Insurance
for Building:
|
|
25% of the annual insurance cost of the Building
based on a ratio of the RSF of the Premises (37,500 RSF) to the total RSF of the Building (150,000 RSF), as may be adjusted
from time to time to reflect changes to the Premises or the Pappas Commerce Center. Based on the current annual insurance
cost for the Building, Tenant’s annual insurance share is estimated to be $50,250, or $1.34/RSF; provided, however,
such estimate does not supersede the specific provisions set forth in this Lease, and Tenant shall remain liable for the actual
insurance costs incurred by Landlord.
|
|
|
|
|
|
Tenant’s Percentage of Building
Operating Expenses:
|
|
25% of the annual Building Operating Expenses
(as defined below) based on a ratio of the RSF of the Premises (37,500 RSF) to the total RSF of the Building (150,000 RSF),
as may be adjusted from time to time to reflect changes to the Premises or the Pappas Commerce Center. Based on the current
annual insurance cost for the Building, Tenant’s annual Building Operating Expenses share is estimated to be $244,875,
or $6.53/RSF; provided, however, such estimate does not supersede the specific provisions set forth in this Lease, and Tenant
shall remain liable for the actual Building Operating Expenses incurred by Landlord.
|
|
|
|
|
|
Permitted Uses:
|
|
Office, research and development laboratories,
assembly, high tech manufacturing and light manufacturing including, without limitation the use of a machine shop and for
no other purpose.
|
|
Insurance
Limits:
|
Comprehensive
General Liability Insurance: $2,000,000
|
|
|
Property Damage
Insurance:
|
For Tenant:
|
100% of the full replacement value of the Tenant's insured
personal property.
|
|
|
|
|
|
|
|
|
For Landlord:
|
100% of the full replacement value of the Building and
Property.
|
|
1.2
|
Exhibits.
The Exhibits listed below in this section are incorporated in this Lease by reference
and are to be construed as a part of this Lease.
|
|
EXHIBIT
A
|
Plan showing
the Premises
|
|
EXHIBIT B
|
Landlord's Work Letter
|
ARTICLE 2
Premises
|
|
2.1
|
Premises. Subject to Landlord's completion of the Tenant Improvements (as defined
in Section 4.1) in a good and workmanlike manner an in compliance with all laws applicable to the Tenant Improvements and the use
or occupancy of the Premises including, without limitation, the so-called Americans with Disabilities Act and the rules and regulations
promulgated thereunder, Landlord hereby leases to Tenant and Tenant hereby leases from Landlord, subject to and with the benefit
of the terms, covenants, conditions and provisions of this Lease, the Premises in its "as is" condition in the Building,
excluding exterior faces of exterior walls, the common pipes, ducts, conduits, wires, and appurtenant fixtures serving exclusively
or in common other parts of the Building.
|
|
|
2.2
|
Appurtenant Rights. Tenant shall have, as appurtenant to the Premises, rights to
use, and permit its invitees to use, in common with Landlord and other tenants and occupants of the Property, subject to reasonable
rules and regulations from time to time made by Landlord of which Tenant is given notice: (a) the common lobbies, toilets and corridors
of the Building and the pipes, ducts, conduits, wires and appurtenant fixtures serving the Premises, (b) common walkways and driveways
necessary for access to the Building, and (c) the common parking areas serving the Building (i.e., parking areas not designated
by suitable markings or otherwise as exclusive parking spaces for other tenants in the Building) all of which are hereinafter known
as the "Common Areas". Tenant shall lease from Landlord up to thirty-seven (37) parking spaces for Tenant's exclusive
use that are located at the on-site parking facility (the "Tenant Parking") at the monthly rent of $190.00/month per
parking space, for the spaces in use, as such rate may be changed from time to time (the "Parking Fee"). Tenant shall
pay the Parking Fee to Landlord on the first day of each month in advance and such Parking Fee shall be deemed Additional Rent
hereunder. Landlord reserves the right to relocate the Tenant Parking to a potential future parking structure owned by Landlord
and within a five minute walk from the Building upon reasonable notice to Tenant. Tenant shall also have access to a shared loading
dock, and shall have the exclusive right to use of a tailboard loading dock freight elevator serving the Premises.
|
To assist Landlord in preserving
the common parking area, Landlord reserves the right to require Tenant to cause its employees to affix to their vehicles an identification
sticker as furnished by Landlord as evidence that they are entitled to use said parking area. Further, Tenant shall furnish to
Landlord, upon Landlord's request at reasonable intervals, the license plate numbers of vehicles of employees of Tenant who are
principally employed at the Premises.
Landlord reserves the right from
time to time, upon not less than two (2) days prior notice which may be oral (except for emergency situations, where no prior notice
shall be required, provided Landlord shall notify Tenant after such entry has occurred), without unreasonable interference with
Tenant's use of or access to the Premises: (a) to install above a dropped ceiling (when applicable), use, maintain, repair, replace
and relocate for service to the Premises and/or other parts of the Building, pipes, ducts, conduits, wires and appurtenant fixtures,
wherever located in the Premises or Building, (b) to alter or relocate any other common facility, (c) to make any repairs and replacements
to the Premises which Landlord may deem necessary, and (d) in connection with any excavation made upon adjacent land of Landlord
or others, to enter, and to license others to enter, upon the Premises to do such work as the person causing such excavation deems
necessary to preserve the wall of the Building from injury or damage and to support the same. Tenant shall install and maintain,
as Landlord may reasonably require, proper access panels in any hung ceilings or walls as may be installed by Tenant in the Premises
to afford access to any facilities above the ceiling or within or behind the walls.
ARTICLE 3
Lease Term
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3.1
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Term. TO HAVE AND TO HOLD for a term specified in Section 1.1 hereof as the
"Term," beginning on the Commencement Date. When the Rent Commencement Date is determined the parties shall execute
a commencement date agreement confirming the Commencement
Date, the Rent Commencement Date and the Fixed Rent schedules. During the Term, Tenant shall have access and use of the Premises
24 hours per day, 7 days per week.
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ARTICLE 4
Improvements
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4.1
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Landlord and Tenant Scope of Work. Landlord shall perform improvements in the Premises
in accordance with Exhibit B ("Tenant Improvements"). Notwithstanding anything herein to the contrary, Landlord
shall not be required to spend more than the TI Allowance (defined below) and any cost of Tenant Improvement in excess of the TI
Allowance shall be paid by Tenant. For purposes of this Lease, "substantial completion" of Tenant Improvements shall
be deemed to occur when the Premises are ready for Tenant's occupancy except for minor items which do not cause material interference
with Tenant's use and occupancy of the Premises with Landlord having obtained a certificate of occupancy for the Premises. If substantial
completion of Tenant Improvements is delayed by a Tenant Delay, then substantial completion shall be deemed to occur on the date
on which the Tenant Improvements in the Premises would have been substantially completed but for the occurrence of any Tenant Delay.
As used herein, a "Tenant Delay" shall mean each day of delay in the performance of the Tenant Improvements that occurs
(a) because of Tenant's failure to timely deliver or approve any required documentation such as any design or space plans, (b)
because of any change by Tenant to any design or space plans after the same have been approved as final by Tenant in writing, or
(c) because Tenant or its employees, agents, or contractors otherwise delay completion of the Tenant Improvements. In the event
Tenant does not spend the entire TI Allowance, all remaining TI Allowance funds shall remain property of Landlord.
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4.2
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Tenant Improvement Allowance. Landlord shall provide to Tenant a tenant improvement
allowance in an amount not to exceed $100/RSF, or $3,750,000, to be applied towards the hard costs associated with the Tenant Improvements
(the "TI Allowance"). Notwithstanding the foregoing, Tenant may apply up to 20% of the TI Allowance towards soft costs
associated with the Tenant Improvements (the "Soft Cost Allowance"), said soft costs to be limited to architectural fees,
engineering fees, construction and project management fees and the Landlord Supervisory Fee (as defined below). Tenant shall not
apply any portion of the Soft Cost Allowance towards cabling, wiring, furniture or equipment for the office and lab portions of
the Premises.
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4.3
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TI Allowance Requisition Procedure. Following the commencement of the Tenant Improvements,
on a monthly basis Landlord and Tenant's construction representative ("Tenant's Representative") shall prepare a requisition
for payment of costs associated with the performance of the Tenant Improvements (the "Requisition"). Upon the completion
of each Requisition, Landlord and Tenant's Representative shall mutually agree upon the allocation and application of TI Allowance
funds in accordance with paragraph 4.2, above. In the event Landlord disburses the entire TI Allowance to Tenant pursuant to the
requisition procedure set forth in this Section 4.3, Tenant shall thereafter be responsible for all additional costs associated
with the performance of the Tenant Improvements. Upon substantial completion of the Tenant Improvements and before Tenant occupies
the Premises to conduct business therein, Tenant shall pay to Landlord an amount equal to the total construction costs of Tenant
Improvements (as adjusted for any approved changes to the Tenant Improvements), less the amount of the TI Allowance. In the event
of default of payment of such excess costs, Landlord (in addition to all other remedies) shall have the same rights as for a Tenant's
default under the Lease.
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4.4
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Early Access to Premises. Tenant shall have a license to access the Premises 30 days
prior to the substantial completion date for the purpose of moving Tenant's personal property into the Premises, so long as such
access does not interfere with Tenant Improvements. Tenant shall not be obligated to pay any Rent or charges for the use of the
Building facilities (including, but not limited to, the loading docks, freight elevators, parking and electricity) during such
early access. Tenant shall be permitted to move property into the Premises at reasonably hours as determined by Landlord, Monday
through Friday at Tenant's sole risk. Tenant shall be permitted to perform work in the Premises, upon Landlord's prior written
consent (which consent shall not be unreasonably withheld), during such access period.
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4.5
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Landlord Supervisory Fee. Tenant shall pay to Landlord a fee equal to three
percent (3%) of the total Tenant Improvements construction contract value, which shall be paid from the TI Allowance.
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ARTICLE 5
Rent
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5.1
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The Fixed Rent. Tenant
covenants and agrees to pay rent to Landlord at the Original Notice Address of Landlord
or at such other place or to such other person or entity as Landlord may by notice in
writing to Tenant from time to time direct, at the Monthly Fixed Rent Rate in advance,
on the first day of each calendar month included in the Term; and for any portion of
a calendar month at the beginning or end of the Term, at that rate payable in advance
for such portion. It is the intention of the parties hereto that the obligations of Tenant
hereunder shall be separate and independent covenants and agreements, that the Monthly
Fixed Rent Rate, the Additional Rent and all other sums payable by Tenant to Landlord
shall continue to be payable in all events and that the obligations of Tenant hereunder
shall continue unaffected, unless the requirement to pay or perform the same shall have
been terminated or subject to abatement, deduction or setoff pursuant to an express provision
of this Lease.
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5.2
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Additional Rent. Tenant covenants and agrees to pay, as Additional Rent, (i) Personal
Property Taxes, (ii) Tenant's Percentage of Real Estate Taxes, Insurance and Operating Costs, and (iii) Utilities with respect
to the Premises, as provided in this Section 5.2 as follows; provided that, Tenant's obligations to pay Real Property Taxes, Insurance
costs and Building Operating Expenses shall be phased in so that Tenant's share of such costs shall be calculated as if the Premises
contained only 12,500 rentable square feet for Months 1-9 and 27,500 rentable square feet for Months 10-12:
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5.2.1
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Taxes. (a) Personal Property Taxes. Tenant shall pay all taxes charged, assessed
or imposed upon the personal property of Tenant in or upon the Premises.
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(b) Real Property Taxes. Tenant
shall pay during the Term hereof Tenant's Percentage, as indicated above in Section 1.1, of all Real Estate Taxes paid by Landlord
in any tax year. The term "Real Estate Taxes" means the aggregate of all real estate taxes and any other governmental
impositions which Landlord is required to pay based upon the value of or gross rents from the Property, general or special assessments,
charges for sewer use or other governmental services, special district fees or taxes, and any other governmental fees and assessments
imposed upon the Property, exclusive only of income and franchise taxes, whether or not such Real Estate Taxes exist or apply on
the Commencement Date. Any assessments which can be paid in installments by Landlord shall be paid by Landlord in the maximum number
of installments permitted by law and not included in Real Estate Taxes except in the year in which the assessment is actually paid.
Notwithstanding anything to the contrary contained in this Lease, the following shall be excluded from Real Estate Taxes
and shall be paid solely by Landlord: inheritance, estate, succession, transfer, gift, franchise, or capital stock tax, or any
income taxes arising out of or related to ownership and operation of income-producing real estate, or any excise taxes imposed
upon Landlord based upon gross or net rentals or other income received by it; any increase in taxes and assessments resulting from
Landlord's sale of, or other transfer of its interest in, the Building; and assessments, charges, taxes, rents, fees, rates, levies,
excises, license fees, permit fees, inspection fees, or other authorization fees or charges to the extent allocable to or caused
by the development or installation of on- or off-site improvements or utilities (including without limitation street and intersection
improvements, roads, rights of way, lighting, and signalization) necessary for the development or construction of the Building,
or any past, present or future system development reimbursement schedule or sinking fund related to any of the foregoing.
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5.2.2
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Insurance.
Tenant shall pay during the Term hereof Tenant's Percentage, as indicated above in Section 1.1, of all premiums for insurance carried
by Landlord for the Building and the Property and Landlord's business in the Building in any calendar year.
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5.2.3
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Operating Costs. Tenant shall pay during the
Term hereof Tenant's Percentage, as indicated above in Section 1.1, of all Operating Costs (as hereinafter defined) incurred
by Landlord in any calendar year.
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The term "Operating Costs
for Pappas Commerce Center" or "Operating Costs" shall mean all costs or expenses incurred by Landlord in owning,
operating, cleaning, managing, administering, maintaining, repairing, replacing, and improving the Pappas Commerce Center, including,
without limitation, all costs of maintenance and repair (including snow removal, landscaping and grounds maintenance, parking lot
operation and maintenance) and of all repairs and replacements (other than repairs or replacements for which Landlord has received
reimbursement from contractors, other tenants of the Building or from others) necessary to keep the Pappas Commerce Center in good
working order, repair, appearance and condition; all costs, including material and equipment costs; all costs related to provision
of heat (including oil, electric, steam and/or gas) and water (including sewer charges) and other utilities to the Building; payments
under all service contracts relating to the foregoing; all compensation, fringe benefits, payroll taxes and workmen's compensation
insurance premiums related thereto with respect to any employees of Landlord or its affiliates engaged in maintenance or management
of the Pappas Commerce Center; attorneys' fees and disbursements and auditing and other professional fees and expenses; all expenses
including fees of attorneys, appraisers and other consultants, incurred in connection with any efforts to obtain abatements or
reductions or to assure maintenance or to resist increase of Landlord's taxes for any tax fiscal year wholly or partially included
in the Term, whether or not successful and whether or not such efforts involve filing of actual abatement applications or initiation
of formal proceedings; and a management fee not to exceed 4% of gross receipts from the Building.
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5.2.4
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Building Operating Expenses. Tenant shall pay during the Term hereof Tenant's Percentage, as indicated above in Section
1.1, of all Building Operating Expenses (as hereinafter defined) incurred by Landlord in any calendar year.
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The term "Building Operating
Costs" shall mean all costs or expenses incurred by Landlord in owning, operating, cleaning, managing, administering, maintaining,
repairing, replacing, and improving the Building, including, without limitation, all costs of ground lease rent, maintaining and
repairing the Property (including snow removal, landscaping and grounds maintenance, parking lot operation and maintenance, security,
operation and repair of heating and air-conditioning equipment, lighting and any other Building equipment or systems attributable
to the Common Areas) and of all repairs and replacements (other than repairs or replacements for which Landlord has received full
reimbursement from contractors, other tenants of the Building or from others) necessary to keep the Property in good working order,
repair, appearance and condition; all costs, including material and equipment costs, for cleaning and janitorial services to the
Common Areas of the Building (including window cleaning of the Building); all costs related to provision of heat (including oil,
electric, steam and/or gas), air-conditioning, and water (including sewer charges) and other utilities to the Building; payments
under all service contracts relating to the foregoing; all compensation, fringe benefits, payroll taxes and workmen's compensation
insurance premiums related thereto with respect to any employees of Landlord or its affiliates engaged in maintenance or management
of the Property; attorneys' fees and disbursements and auditing and other professional fees and expenses; all expenses including
fees of attorneys, appraisers and other consultants, incurred in connection with any efforts to obtain abatements or reductions
or to assure maintenance or to resist increase of Landlord's taxes for any tax fiscal year wholly or partially included in the
Term, whether or not successful and whether or not such efforts involve filing of actual abatement applications or initiation of
formal proceedings; and a management fee.
There shall not be included
in such Building Operating Expenses brokerage fees (including rental fees) related to the leasing of space in the Building;
interest and depreciation charges incurred on the Property; or expenditures made by Tenant with respect to cleaning,
maintenance and upkeep of the Premises. Notwithstanding anything to the contrary set forth in this Lease, Operating Costs and
Building Operating Expenses shall not include the following:; bad debt expenses and interest, principal, points and fees on
debts or amortization on any mortgage or other debt instrument encumbering the Building or the Property; costs which may be
considered capital improvements, capital repairs, capital changes or any other capital costs as determined under generally
accepted accounting principles except for capital improvements required by any laws not in existence and not in effect as of
the Commencement Date, in which case such costs shall be capitalized and amortized over their useful life determined in
accordance with generally accepted accounting principles; rentals for items which if purchased, rather than rented, would
constitute a capital cost; costs incurred by Landlord to the extent that Landlord is reimbursed by insurance proceeds or is
otherwise reimbursed; depreciation, amortization and interest payments, except on equipment, materials, tools, supplies and
vendor-type equipment purchased by Landlord to enable Landlord to supply services Landlord might otherwise contract for with
a third party where such depreciation, amortization and interest payments would otherwise have been included in the charge
for such third party's services, all as determined in accordance with generally accepted accounting principles, consistently
applied, and when depreciation or amortization is permitted or required, the item shall be amortized over its reasonably
anticipated useful life; advertising and promotional expenditures, and costs of acquisition and maintenance of signs in or on
the Building identifying the owner of the Building or other tenants; marketing costs, including leasing commissions,
attorneys' fees (in connection with the negotiation and preparation of letters, deal memos, letters of intent, leases,
subleases and/or assignments), space planning costs, and other costs and expenses incurred in connection with lease, sublease
and/or assignment negotiations and transactions with present or prospective tenants or other occupants of the Building;
costs, including permit, license and inspection costs, incurred with respect to the installation of other tenants' or other
occupants' improvements or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space
for tenants or other occupants of the Building; expenses in connection with services or other benefits which are not offered
to Tenant or for which Tenant is charged for directly; costs incurred by Landlord due to the violation by Landlord or any
tenant of the terms and conditions of any lease of space in the Building; management fees paid or charged by Landlord in
connection with the management of the Building to the extent such management fee is in excess of the management fee
customarily paid or charged by landlords of comparable buildings in the vicinity of the Building; salaries and other benefits
paid to the employees of Landlord to the extent customarily included in or covered by a management fee, provided that in no
event shall Operating Costs or Building Operating Expenses include salaries and/or benefits attributable to personnel above
the level of Building manager; rent for any office space occupied by Building management personnel to the extent the size or
rental rate for of such office space exceeds the size or fair market rental value of office space occupied by management
personnel of comparable buildings in the vicinity of the Building; amounts paid to Landlord or to subsidiaries or affiliates
of Landlord for goods and/or services in the Building to the extent the same exceeds the costs of such goods and/or services
rendered by unaffiliated third parties on a competitive basis; Landlord's general corporate overhead and general and
administrative expenses; any compensation paid to clerks, attendants or other persons in commercial concessions operated by
Landlord; services provided, taxes, attributable to, and costs incurred in connection with the operation of any retail,
restaurant and garage operations for the Building, and any replacement garages or parking facilities and any shuttle
services; costs incurred in connection with upgrading the Building to comply with laws, rules, regulations and codes in
effect prior to the Commencement Date; all assessments and premiums which are not specifically charged to Tenant because of
what Tenant has done, which can be paid by Landlord in installments, shall be paid by Landlord in the maximum number of
installments permitted by law and not included as Operating Costs or Building Operating Expenses except in the year in which
the assessment or premium installment is actually paid; costs arising from the negligence or willful misconduct of Landlord
or other tenants or occupants of the Building or their respective agents, employees, licensees, vendors, contractors or
providers of materials or services; costs arising from Landlord's charitable or political contributions; costs arising from
latent defects or repair thereof; costs for sculpture, paintings or other objects of art; costs associated with the operation
of the business of the entity which constitutes Landlord as the same are distinguished from the costs of operation of the
Building, including accounting and legal matters, costs of defending any lawsuits with any mortgagee (except as the actions
of Tenant may be in issue), costs of selling, syndicating, financing, mortgaging or hypothecating any of Landlord's interest
in the Building, costs incurred in connection with any disputes between Landlord and its employees, between Landlord and
Building management, or between Landlord and other tenants or occupants; any other costs or expenses which would not normally
be treated as operating costs by landlords of comparable buildings in the vicinity of the Building.
Landlord shall keep, in the Building manager's office,
complete books and records regarding Operating Costs, Building Operating Expenses, Real Estate Taxes and all Additional Rent (collectively,
"Charges"). All records shall be retained for at least three (3) years. Tenant shall have the right to audit such records
at any time upon reasonable written notice to Landlord. If such audit reveals that Tenant's pro rata share of any Charges has been
overstated, then Landlord shall immediately refund the overpayment to Tenant. If such audit reveals that Tenant's pro rata share
of any Charges has been overstated by five percent (5%) or more, then Landlord shall pay the costs of Tenant's audit up to $5,000.
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5.2.5
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Utilities. Tenant acknowledges that Rent does not include the cost of supplying
utilities to the Premises and agrees to pay all charges for heat, electricity and other utilities (whether they are used for
furnishing heat or other purposes) that are furnished to the Premises and presently separately metered, except for water and
sewer. Landlord agrees to provide (and shall include such provision in its Operating Costs) all other utility service and
to furnish reasonably hot and cold water and reasonable heat and air conditioning (except to the extent that the same are
furnished through separately metered utilities) to the Premises, the hallways, stairways, and lavatories during normal business
hours on regular business days of the heating and air conditioning seasons of each year, all subject to interruption due to
any accident, to the making of repairs, alterations, or improvements, to labor difficulties, to trouble in obtaining electricity,
service, or supplies from the sources from which they are usually obtained for the Building, or to any other cause beyond
the Landlord's control. Landlord's failure to furnish, or any interruption or termination of, services due to the application
of laws, the failure of any equipment, the performance of repairs, improvements or alterations, or the occurrence of any event
or cause beyond the reasonable control of Landlord (a "Service Failure") shall not render Landlord liable to Tenant,
constitute a constructive eviction of Tenant, give rise to an abatement of Rent, nor relieve Tenant from the obligation to
fulfill any covenant or agreement. However, if the Premises, or a material portion of the Premises, is made untenantable for
a period in excess of three (3) consecutive business days as a result of the Service Failure, then Tenant, as its sole remedy,
shall be entitled to receive an abatement of Rent payable hereunder during the period beginning on the fourth (4th)
consecutive business day of the Service Failure and ending on the day the service has been restored and if the Service Failure
continues for a period in excess of ninety (90) consecutive business days, Tenant may terminate this Lease upon written notice
to Landlord at any time thereafter before Landlord cures such Service Failure. If the entire Premises has not been rendered
untenantable by the Service Failure, the amount of the abatement that Tenant is entitled to receive shall be prorated based
upon the percentage of the Premises rendered untenantable and not used by Tenant. In no event, however, shall Landlord be
liable to Tenant for any loss or damage, including the theft of Tenant's property, arising out of or in connection with the
failure of any security services, personnel or equipment.
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Landlord shall have no obligation
to provide utilities or equipment other than the utilities and equipment within the Premises as of the Commencement Date of this
Lease. In the event Tenant requires additional utilities or equipment, the installation and maintenance thereof shall be subject
to the prior written consent of the Landlord and shall be Tenant's sole cost and responsibility. Except as otherwise provided in
Article 5, it is understood and agreed that Tenant shall make its own arrangements for the installation or provision of all such
utilities and that Landlord shall be under no obligation to furnish any utilities to the Premises and shall not be liable for any
interruption or failure in the supply of any such utilities to the Premises.
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5.2.6
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Additional
Rent Commencement. Commencing on the Rent Commencement Date, Tenant shall pay to Landlord Tenant's Percentage of Real
Estate Taxes, Insurance and Building Operating Expenses on a square footage basis as applied to the square footages in the
Fixed Rent schedules shown in Article 1.1, above. As an example, Tenant shall pay Real Estate Taxes, Insurance and Building
Operating Expenses on a per square foot basis for 12,500 RSF during months 1-9 of the Lease Term, on a per square foot basis
for 27,500 RSF during months 10 through 12, and on a per square foot basis for 37,500 RSF for the remainder of the Lease
Term. Notwithstanding the foregoing, commencing on the Rent Commencement Date and continuing for the Lease Term, Tenant shall
pay to Landlord Operating Costs for Pappas Commerce Center on a per square foot basis (as set forth in Section 1.1, above)
for 37,500 RSF.
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5.3
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Late Payment of Rent. If any installment of Rent is not paid within ten (10) days
after written notice than such installment is past due, Tenant shall pay Landlord a late fee payment equal to five percent (5%)
of the overdue payment. All unpaid late fees shall compound on a monthly basis. As used herein, the term "rent" or "Rent"
shall mean Monthly Fixed Rent Rate, Additional Rent and other sums and charges due from Tenant under the terms of this Lease.
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5.4
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Security Deposit. Upon the execution of this Lease, Tenant shall deposit with Landlord
the Security Deposit, which Landlord shall not be required to hold in a separate account or separate from Landlord's other funds,
but which shall be held in an interest bearing account with such interest accruing to Tenant and paid to Tenant at the time of
the return of the security deposit. Said deposit shall be held by Landlord as security for the faithful performance by Tenant of
all the terms of this Lease by said Tenant to be observed and performed.
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If the Rent payable hereunder
shall be overdue and unpaid or should Landlord make payments on behalf of Tenant, or Tenant shall fail to perform any of its covenants,
agreements and obligations set forth in this Lease, then Landlord may, at its option and without prejudice to any other remedy
which Landlord may have on account thereof after the expiration of all applicable notice and cure periods, appropriate and apply
said Security Deposit or so much thereof as may be necessary to compensate Landlord toward the payment of Rent or other sums or
loss or damage sustained by Landlord due to such breach on the part of Tenant; and Tenant shall forthwith within ten (10) days
upon written demand restore said Security Deposit to the original sum deposited. Should Tenant not be in default as of the end
of the Term, the Security Deposit shall be returned in full to Tenant at the end of the Term and surrender of the Premises to Landlord
in the condition required hereunder.
In the event of bankruptcy or
other creditor-debtor proceedings against Tenant, all securities shall be deemed to be applied first to the payment of rent and
other charges due Landlord for all periods prior to the filing of such proceedings.
ARTICLE 6
Tenant's Additional Covenants
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6.1
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Affirmative Covenants. Tenant covenants at all times during the Term and for such
further time (prior or subsequent thereto) as Tenant occupies the Premises or any part thereof:
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6.1.1
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Perform Obligations. To perform promptly all of the obligations of Tenant set forth
in this Lease; and to pay when due the Fixed Rent and Additional Rent and all charges, rates and other sums which by the terms
of this Lease are to be paid by Tenant.
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6.1.2
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Use. To use the Premises only for the Permitted Uses, and from time to time to procure
all licenses and permits necessary therefor, at Tenant's sole expense. With respect to any licenses or permits for which Tenant
may apply, pursuant to this subsection 6.1.2 or any other provision hereof, Tenant shall furnish Landlord copies of applications
therefor on or before their submission to the governmental authority.
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6.1.3
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Repair
and Maintenance. To maintain the Premises in neat order and in good condition and repair and to perform all necessary repairs
to the interior of the Premises and to any plumbing, heating, electrical, ventilating and air-conditioning systems exclusively
serving the Premises, whether installed by Tenant or not, such as are necessary to keep them in good working order, appearance
and condition, as the case may require, reasonable wear and tear thereof and damage by fire or by casualty only excepted; to keep
all glass in windows and doors of the Premises (except glass in the exterior walls of the Building) whole and in good condition
with glass of the same quality as that damaged or broken; and to make as and when needed as a result of misuse by, or neglect or
improper conduct of Tenant or Tenant's servants, contractors, employees, agents, invitees or licensees (together "Tenant Parties")
or otherwise, all repairs necessary, which repairs and replacements shall be in quality and class equal to the original work. (Landlord,
upon Tenant failure to perform its repair obligation in this Section 6.1.3 which failure is not cured within thirty (30) days after
prior notice to Tenant, may elect, at the expense of Tenant, to perform all such cleaning and maintenance and to make any such
repairs or to repair any damage or injury to the Building or the Premises caused by moving personal property of Tenant in or out
of the Building, or by installation or removal of furniture or other property, or by misuse by, or neglect, or improper conduct
of, Tenant or Tenant's servants, employees, agents, contractors, customers, patrons, invitees, or licensees.) Except as stated
above, other required repairs shall be performed by the Landlord subject to reimbursement by Tenant through Tenant's Percentage
of applicable Operating Costs, provided however that any repairs necessitated as a result of gross negligence or willful misconduct
of Tenant or Tenant Parties shall be performed at Tenant's sole cost and expense. Tenant shall be responsible, at Tenant's sole
cost and expense, for all janitorial services required within the Premises.
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6.1.4
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Compliance
with Law. So long as the Premises are delivered to Tenant in compliance with all applicable laws including, without limitation,
all ordinances and all orders or regulations of any public authority, to make all repairs, alterations, additions or replacements
to the Premises required by any law or ordinance or any order or regulation of any public authority; to keep the Premises equipped
with all safety appliances so required; and to comply with the orders and regulations of all governmental authorities with respect
to zoning, building, fire, health and other codes, regulations, ordinances or laws applicable to the Premises; provided that, Landlord
shall, as part of the Tenant Improvements, install all sprinklers and fire safety systems required by any such law or ordinance
or any order or regulation of any public authority. Notwithstanding the foregoing or any other provision of this Lease, however,
Tenant shall not be responsible for compliance with any such laws, regulations, or the like requiring (a) structural repairs or
modifications; or (b) repairs or modifications to the utility or building service equipment; or (c) installation of new building
service equipment, such as fire detection or suppression equipment, unless such repairs, modifications, or installations shall
be due to the gross negligence or willful misconduct of Tenant or any agent, employee, or contractor of Tenant or are due to Tenant's
specific manner of use of the Premises (as opposed to the Permitted Uses, generally).
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6.1.5
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Indemnification. Pursuant
to the terms of Article 10, below, to save Landlord harmless, and to exonerate and indemnify Landlord from and against any
and all claims, liabilities or penalties asserted by or on behalf of any person, firm, corporation or public authority on
account of injury, death, damage or loss to person or property in or upon the Premises arising out of the use or occupancy of
the Premises by Tenant or by any person claiming by, through or under Tenant (including, without limitation, all patrons,
employees and customers of Tenant), or arising out of any delivery to or service supplied to the Premises, or on account of
or based upon anything whatsoever done on the Premises by Tenant, except if the same was caused by the gross negligence or
willful misconduct of Landlord, its agents, servants or employees. In respect of all of the foregoing, Tenant shall indemnify
Landlord from and against all reasonable costs, expenses (including reasonable attorneys' fees), and liabilities incurred in
or in connection with any such claim, action or proceeding brought thereon; and, in case of any action or proceeding brought
against Landlord by reason of any such claim, Tenant, upon notice from Landlord and at Tenant's expense, shall resist or
defend such action or proceeding and employ counsel therefor reasonably satisfactory to Landlord.
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6.1.6
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Landlord's
Right to Enter. To permit Landlord and its agents, upon reasonable prior notice which may be oral (except for
emergency situations, where no prior notice shall be required, provided Landlord shall notify Tenant after such entry has
occurred), to enter into and examine the Premises at reasonable times and to show the Premises, and to make repairs to the
Premises, and, during the last six (6) months prior to the expiration of this Lease, to keep affixed in suitable places
notices of availability of the Premises.
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6.1.7
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Personal
Property at Tenant's Risk To place and keep all of the furnishings, fixtures, equipment, effects and property of every
kind, nature and description of Tenant and of all persons claiming by, through or under Tenant which, during the continuance of
this Lease or any occupancy of the Premises by Tenant or anyone claiming under Tenant, may be on the Premises, at the sole risk
and hazard of Tenant, except to the extent any damage thereto is caused by the gross negligence or willful misconduct of Landlord.
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6.1.8
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Payment of Landlord's Cost of Enforcement. To pay on demand Landlord's reasonable
expenses, including reasonable attorney's fees, incurred in enforcing any obligation of Tenant under this Lease as provided
in Section 8.4.
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6.1.9
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Yield Up. At the
expiration of the Term or earlier termination of this Lease: to surrender all keys to
the Premises; to remove all of its trade fixtures and personal property in the Premises;
to remove such installations, improvements and alterations made by Tenant in the Premises
as Landlord may have requested at the time such installments, improvements and alterations
were installed and all Tenant's signs wherever located; to repair all damage caused by
such removal and to yield up the Premises (including all installations and improvements
made by Tenant except for trade fixtures and such of said installations or improvements
as Landlord shall request Tenant to remove at the time of installation), broom-clean
and in the same good order and repair in which Tenant is obliged to keep and maintain
the Premises by the provisions of this Lease. In no event shall Tenant have any responsibility
for any repairs or maintenance made necessary, in whole or in part, by the negligence
or willful misconduct of Landlord, fire, casualty, eminent domain, or ordinary wear and
tear, or by alterations, improvements, restoration, repairs, replacements, or renovations
that are the responsibility of Landlord or are not expressly required of Tenant herein.
Any property not so removed shall be deemed abandoned and may be removed and disposed
of by Landlord in such manner as Landlord shall determine and Tenant shall pay Landlord
the entire cost and expense incurred by Landlord in effecting such removal and disposition
and in making any incidental repairs and replacements to the Premises and for use and
occupancy of the Premises during the period after the expiration of the Term and prior
to its performance of its obligations under this subsection 6.1.9 at the rate set forth
in Section 11.8. Tenant shall further indemnify Landlord against all loss, cost and damage
resulting from Tenant's failure and delay in surrendering the Premises as above provided.
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6.1.10
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Estoppel
Certificate. Upon not less than fifteen (15) days' prior written request by Landlord, to execute, acknowledge and deliver
to Landlord a statement in writing certifying that this Lease is unmodified and in full force and effect and that Tenant has no
defenses, offsets or counterclaims against its obligations to pay the Fixed Rent and Additional Rent and any other charges and
to perform its other covenants under this Lease (or, if there have been any modifications, that the Lease is in full force and
effect as modified and stating the modifications and, if there are any defenses, offsets or counterclaims, setting them forth in
reasonable detail), and the dates to which the Fixed Rent and Additional Rent and other charges have been paid and such other certifications
as Landlord may reasonably require. Any such statement delivered pursuant to this subsection 6.1.10 may be relied upon by Landlord,
any prospective purchaser or mortgagee of the Premises, or any prospective assignee of such mortgage. Tenant shall also deliver
to Landlord such financial information as may be reasonably required by Landlord to be provided to any mortgagee or prospective
purchaser of the Premises.
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6.1.11
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Landlord's
Expenses Re Consents. To reimburse Landlord promptly on demand for all reasonable legal expenses incurred by Landlord in
connection with all requests by Tenant for consent or approval hereunder.
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6.2
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Negative Covenants. Tenant covenants at all times during the Term and such further
time (prior or subsequent thereto) as Tenant occupies the Premises or any part thereof:
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6.2.1
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Assignment
and Subletting. Except as otherwise set forth herein, not to assign, transfer, mortgage or pledge this Lease or to
sublease (which term shall be deemed to include the granting of concessions and licenses and the like) all or any part of the
Premises or suffer or permit this Lease or the leasehold estate hereby created or any other rights arising under this Lease
to be assigned, transferred or encumbered, in whole or in part, whether voluntarily, involuntarily or by operation of law, or
permit the occupancy of the Premises by anyone other than Tenant without the prior written consent of Landlord, which consent
shall not be unreasonably withheld or delayed. The Landlord shall respond to Tenant's written request within thirty (30) days
after receipt by Landlord of all information and materials reasonably required by Landlord. In the event Tenant desires to
assign this Lease or sublet any portion or all of the Premises, Tenant shall notify Landlord in writing of Tenant's intent to
so assign this Lease or sublet the Premises and the proposed effective date of such subletting or assignment, and shall
request in such notification that Landlord consent thereto. Landlord's consent shall not be unreasonably withheld to an
assignment or to a subletting, provided that the assignee or subtenant shall use the Premises only for the Permitted Uses,
the proposed assignee or subtenant has sufficient financial resources to discharge its obligations under the Lease and the
proposed transfer agreement, the proposed assignment or sublease shall not, in Landlord's reasonable judgment, cause harm to
the Property or harm to the reputation of the Building or the Property. Tenant shall, as Additional Rent, reimburse Landlord
promptly for Landlord's reasonable legal expenses incurred in connection with any request by Tenant for such consent. If
Landlord consents thereto, no such subletting or assignment shall in any way impair or release the Tenant from the continuing
primary liability of Tenant hereunder, and no consent to any subletting or assignment in a particular instance shall be
deemed to be a waiver of the obligation to obtain the Landlord's written approval in case of any other subletting or
assignment.
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Notwithstanding anything to the
contrary provided for herein, and provided that no event of Tenant default hereunder then exists beyond any applicable grace or
cure period, Tenant shall have the right to sublease or assign the Premises under this Lease, without Landlord's prior approval,
to any parent, affiliate, any related company or to a customer servicing the user group, or in the event of any corporate merger,
consolidation, or sale of assets or stock, but after Tenant provides thirty (30) days prior written notice thereof to Landlord,
PROVIDED that: (i) any such successor to Tenant pursuant hereto has a net worth computed in accordance with generally accepted
accounting principles at least equal to the greater of (x) the net worth of Tenant immediately prior to such merger, consolidation,
or transfer, or (y) the net worth of Tenant (whichever is greater) on the date of the Lease; (ii) proof satisfactory to Landlord
of such net worth shall have been delivered to Landlord at least ten (10) days prior to the effective date of any such transaction;
and (iii) the assignee agrees directly with Landlord, in form satisfactory to Landlord, to be bound by all the obligations of the
Tenant hereunder, including, without limitation, the obligation to pay the rent and other amounts provided for under this Lease.
If for any assignment or sublease
consented to by Landlord hereunder Tenant receives rent or other consideration, either initially or over the term of the assignment
or sublease, in excess of the rent called for hereunder, or in case of sublease of part, in excess of such rent fairly allocable
to the part, after appropriate adjustments to assure that all other payments called for hereunder are appropriately taken into
account and after deduction for reasonable expenses of Tenant in connection with the assignment or sublease for tenant improvements,
legal fees, commissions and rent concessions, to pay to Landlord as Additional Rent fifty (50%) percent of the excess of each such
payment of rent or other consideration received by Tenant promptly after its receipt.
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6.2.2
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Nuisance. Not to injure, deface or otherwise harm the Premises; nor commit any
nuisance; nor permit in the Premises any vending machine (except such as is used for the sale of merchandise to employees
of Tenant) or inflammable fluids or chemicals (except such as are customarily used in compliance with all applicable laws
in connection with standard office and light manufacturing equipment); nor permit any cooking to such extent as requires special
exhaust venting; nor permit the emission of any objectionable noise or odor; nor make, allow or suffer any waste; nor make
any use of the Premises which is improper, offensive or contrary to any law or ordinance or which will invalidate any of Landlord's
insurance; nor conduct any auction, fire, "going out of business" or bankruptcy sales.
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6.2.3
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Hazardous
Wastes and Materials. Not to dispose of any hazardous wastes, hazardous materials or oil on the Premises or the Pappas
Commerce Center, or into any of the plumbing, sewage, or drainage systems thereon, and to indemnify and save Landlord harmless
from all claims, liability, loss or damage arising on account of the use or disposal of hazardous wastes, hazardous materials or
oil, including, without limitation, liability under any federal, state, or local laws, requirements and regulations, or damage
to any of the aforesaid systems. Tenant shall comply with all governmental reporting requirements with respect to hazardous wastes,
hazardous materials and oil, and shall deliver to Landlord copies of all reports filed with governmental authorities. Notwithstanding
anything to the contrary contained herein, Tenant shall be permitted to use, generate and dispose of substances as are typically
found in similar premises used for general office, and light manufacturing purposes, provided, the same are being used by Tenant
in a safe manner and in compliance with all applicable laws. Notwithstanding Tenant's obligations under this Section 6.2.3, Landlord
hereby agrees to defend, indemnify and hold Tenant harmless from and against any and all loss, cost, damage, claim or expense (including
legal fees) incurred in connection with or arising out of or relating in any way to the presence of hazardous or toxic materials
or oil as of the date hereof in or on the Property or the Building.
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6.2.4
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Installation, Alterations or Additions. Not to make any installations, alterations
or additions in, to or on the Premises nor to permit the making of any holes in the walls, partitions, ceilings or floors without
on each occasion obtaining the prior written consent of Landlord (which consent shall not be unreasonably withheld), and then only
pursuant to plans and specifications approved by Landlord in advance in each instance; and Tenant shall pay promptly when due the
entire cost of any work undertaken by Tenant so that the Premises shall at all times be free of liens for labor and materials.
In any event, Tenant shall within ten (10) days after the same is filed discharge any mechanics' liens or other encumbrances that
may arise out of such work. Tenant shall procure all necessary licenses and permits at Tenant's sole expense before undertaking
such work. All such work shall be done in a good and workmanlike manner employing materials of good quality and so as to conform
to all applicable zoning, building, fire, health and other codes, regulations, ordinances and laws. Tenant shall save Landlord
harmless and indemnified from all injury, loss, claims or damage to any person or property occasioned by or growing out of such
work, except to the extent caused by the gross negligence or willful misconduct of Landlord. Tenant shall reimburse Landlord for
any reasonable expenses incurred by Landlord in the review and approval of Tenant's plans and specifications for the construction
of improvements to the Premises performed during the Lease Term.
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6.2.5
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Abandonment. Not to abandon or
vacate the Premises during the Term.
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6.2.6
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Signs. Not to paint or place any signs or place any curtains, blinds, shades, awnings,
aerials, or the like, visible from outside the Premises without Landlord's prior written approval. Landlord shall provide, at its
sole cost and expense, Tenant signage in the lobby directory and in the Building's second floor elevator lobby. Pursuant to the
terms and conditions of this Article 6.2.6, and provided that Tenant occupies a minimum of 37,500 RSF, Tenant may arrange for the
placement of signage on the exterior of the Building that is proportionate in size to the percentage of the rentable square feet
in the Building that Tenant occupies. Landlord shall assist Tenant in securing whatever permits and consents required for the placement
of said exterior signage, and said signage shall conform with all applicable ordinances and regulations. The installation and maintenance
of all signage on the Building exterior shall be at Tenant's sole cost and expense. Tenant shall remove all of its signage upon
expiration or earlier termination of this Lease.
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ARTICLE 7
Casualty or Taking
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7.1
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Termination. In the event that the Premises or the Building, or any material
part thereof or the access thereto, shall be taken by any public authority or for any public use, or shall be destroyed or
damaged by fire or casualty, or by the action of any public authority, then this Lease may be terminated at the election of
either party. Such election, which may be made notwithstanding the fact that Landlord's entire interest may have been divested,
shall be made by the giving of notice to the other party within thirty (30) days after the date of the taking or casualty.
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7.2
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Restoration. If the parties do not elect to so terminate (or if no termination right
arises under Section 7.1), this Lease shall continue in force and a just proportion of the rent reserved, according to the nature
and extent of the damages sustained by the Premises (or the access thereto), shall be abated until the Premises, or what may remain
thereof, shall be put by Landlord in proper condition for use, which Landlord covenants to do with reasonable diligence to the
extent permitted by the net proceeds of insurance recovered or damages awarded for such taking, destruction or damage and subject
to zoning and building laws or ordinances then in existence. "Net proceeds of insurance recovered or damages awarded"
refers to the gross amount of such insurance or damages less the reasonable expenses of Landlord incurred in connection with the
collection of the same, including without limitation, fees and expenses for legal and appraisal services
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7.3
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Award. Irrespective of the form in which recovery may be had by law, all rights to
damages or compensation for a taking shall belong to Landlord in all cases (not including any awards specifically made to Tenant
for its relocation costs and personal property, which shall belong to Tenant, provided Landlord's award is not reduced or otherwise
adversely affected thereby).
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ARTICLE 8
Defaults
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8.1
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Events of Default. (a) If Tenant shall default
in the performance of any of its obligations to pay the Fixed Rent or Additional Rent hereunder
and if such default shall continue for five (5) days after written notice from Landlord designating
such default, or (b) if Tenant shall default in the performance of any of its other obligations
under the Lease and such default is not cured within thirty (30) days after written notice from
Landlord to Tenant specifying any such default or defaults, provided that if such default cannot
reasonably be cured within such 30-day period, Tenant shall have additional commercially reasonable
period to cure such default so long as Tenant has commenced diligently to correct the default
within such 30-day period and diligently pursues such cure to completion, or (c) if any assignment
shall be made by Tenant or any guarantor of Tenant for the benefit of creditors, or (d) if Tenant's
leasehold interest shall be taken on execution, or (e) if a lien or other involuntary encumbrance
is filed against Tenant's leasehold interest or Tenant's other property, including said leasehold
interest, and is not discharged within ten (10) business days thereafter, or (f) if a petition
is filed by Tenant or any guarantor of Tenant for liquidation, or for reorganization or an arrangement
under any provision of any bankruptcy law or code as then in force and effect, or (g) if an involuntary
petition under any of the provisions of any bankruptcy law or code is filed against Tenant or
any guarantor of Tenant and such involuntary petition is not dismissed within thirty (30) days
thereafter, then, and in any of such cases, Landlord and the agents and servants of Landlord
lawfully may, in addition to and not in derogation of any other remedies set forth in this Lease
or any applicable laws, immediately or at any time thereafter upon written notice and with or
without process of law (forcibly, if necessary) lawfully enter into and upon the Premises or
any part thereof or mail a notice of termination addressed to Tenant, and repossess the same
and expel Tenant and those claiming through or under Tenant and remove its and their effects
(forcibly, if necessary) without being deemed guilty of any manner of trespass and without prejudice
to any remedies which might otherwise be used for arrears of rent or prior breach of covenants,
and upon such written notice as aforesaid this Lease shall terminate, Tenant hereby waiving all
statutory rights to the Premises (including without limitation rights of redemption, if any,
to the extent such rights may be lawfully waived).
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8.2
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Remedies. In the event that this Lease is terminated under any of the provisions
contained in Section 8.1 or shall be otherwise terminated for breach of any obligation of Tenant, Tenant shall pay to Landlord
within thirty (30) days of such termination, as compensation, the discounted value (calculated using a discount factor equal to
the then prime rate of the Bank of America plus 2%) of the excess of the total rent reserved for the residue of the Term over the
rental value of the Premises for said residue of the Term. In calculating the rent reserved there shall be included,
in addition to the Fixed Rent and Additional Rent, the value of all other considerations agreed to be paid or performed by Tenant
for said Term as set forth in this Lease. In the event Landlord elects, in its sole and absolute discretion, not to terminate the
Lease but terminate Tenant's right to possession of the Premises, Tenant shall pay punctually to Landlord as additional and cumulative
obligations, all rent when due under the Lease and perform all obligations which Tenant covenants in this Lease to pay and to perform
in the same manner and to the same extent and at the same time as provided in the Lease. In calculating the amounts to be paid
by Tenant pursuant to the next preceding sentence Tenant shall be credited with the net proceeds of any rent obtained by Landlord
by reletting the Premises, after deducting all Landlord's expense in connection with such reletting, including, without limitation,
all repossession costs, brokerage commissions, fees for legal services and expenses of preparing the Premises for such reletting,
it being agreed by Tenant that Landlord may (i) relet the Premises or any part or parts thereof, for a term or terms which may
at Landlord's option be equal to or less than or exceed the period which would otherwise have constituted the balance of the Term
and may grant such concessions and free rent as Landlord in its sole judgment considers advisable or necessary to relet the same
and (ii) make such alterations, repairs and decorations in the Premises as Landlord in its sole judgment considers advisable or
necessary to relet the same, and no action of Landlord in accordance with the foregoing or failure to relet or to collect rent
under reletting shall operate or be construed to release or reduce Tenant's liability as aforesaid. In the event of any termination
of this Lease for a Tenant default, Landlord shall make reasonable efforts to mitigate its damages. Notwithstanding any provision
of this Lease to the contrary, in no event shall Landlord or Tenant be liable for any consequential, indirect or special damages
under or in connection with this Lease.
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Nothing contained in this Lease
shall, however, limit or prejudice the right of Landlord to prove for and obtain in proceedings for bankruptcy or insolvency by
reason of the termination of this Lease, an amount equal to the maximum allowed by any statute or rule of law in effect at the
time when, and governing the proceedings in which, the damages are to be proved, whether or not the amount be greater than, equal
to, or less than the amount of the loss or damages referred to above.
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8.3
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Remedies Cumulative. Any and all rights and remedies which Landlord may have
under this Lease, and at law and equity, shall be cumulative and shall not be deemed inconsistent with each other, and any
two or more of all such rights and remedies may be exercised
at the same time insofar as permitted by law.
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8.4
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Landlord's Right to Cure Defaults. Landlord may, but shall not be obligated to, cure,
at any time after the expiration of all applicable notice and cure periods hereunder, any default by Tenant under this Lease; and
whenever Landlord so elects, all costs and expenses incurred by Landlord, including reasonable attorneys' fees, in curing a default
shall be paid, as Additional Rent, by Tenant to Landlord on demand, together with interest thereon at the maximum rate permitted
by law (but not to exceed 12% per annum) from the date of payment by Landlord to the date of payment by Tenant.
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8.5
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Effect of Waivers of Default. Any consent or permission by Landlord to any act or
omission which otherwise would be a breach of any covenant or condition herein, shall not in any way be held or construed (unless
expressly so declared) to operate as waiver of such default or to impair the continuing obligation of any covenant or condition
herein, or otherwise, except as to the specific instance, operate to permit similar acts or omissions.
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8.6
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No Waiver, etc. The failure of Landlord to seek redress for violation of, or to insist
upon the strict performance of, any covenant or condition of this Lease shall not be deemed a waiver of such violation nor prevent
a subsequent act, which would have originally constituted a violation, from having all the force and effect of an original violation.
The receipt by Landlord of rent with knowledge of the breach of any covenant of this Lease shall not be deemed to have been a waiver
of such breach by Landlord. No consent or waiver, express or implied, by Landlord to or of any breach of any agreement or duty
shall be construed as a waiver or consent to or of any other breach of the same or any other agreement or duty.
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8.7
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No Accord and Satisfaction. No acceptance by Landlord of a lesser sum than the Fixed
Rent, Additional Rent or any other charge then due shall be deemed to be other than on account of the earliest installment of such
rent or charge due, nor shall any endorsement or statement on any check or any letter accompanying any check or payment as rent
or other charge be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord's
right to recover the balance of such installment or pursue any other remedy in this Lease provided.
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8.8
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Landlord's Default. Landlord shall not be deemed to be in default in the performance
of any of its obligations hereunder unless it shall fail to perform such obligations and such failure shall continue for a period
of thirty (30) days or such additional time as is reasonably required to correct any such default after written notice has been
given by Tenant to Landlord specifying the nature of Landlord's alleged default. Landlord shall not be liable in any event for
special, punitive, incidental or consequential damages to Tenant by reason of Landlord's default, whether or not notice is given.
Tenant shall have no right to terminate this Lease or offset or counterclaim against any rent due hereunder on account of a Landlord's
default, except in the event of eviction or as expressly set forth herein.
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ARTICLE 9
Rights of Mortgage Holders
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9.1
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Rights of Mortgage Holders. The word "mortgage" as used herein includes
mortgages, deeds of trust, ground leases, superior leases, or other similar instruments evidencing other voluntary liens or encumbrances,
and modifications, consolidations, extensions, renewals, replacements and substitutes thereof. The word "holder" shall
mean a mortgagee, and any subsequent holder or holders of a mortgage. Until the holder of a mortgage shall enter and take possession
of the Property for the purpose of foreclosure, such holder shall have only such rights of Landlord as are necessary to preserve
the integrity of this Lease as security. Upon entry and taking possession of the Property for the purpose of foreclosure, such
holder shall have all the rights of Landlord. No such holder of a mortgage shall be liable either as mortgagee or as assignee,
to perform, or be liable in damages for failure to perform, any of the obligations of Landlord unless and until such holder shall
enter and take possession of the Property for the purpose of foreclosure. Upon entry for the purpose of foreclosure, such holder
shall be liable to perform all of the obligations of Landlord, subject to and with the benefit of the provisions of Section 11.4,
provided that a discontinuance of any foreclosure proceeding shall be deemed a conveyance under said provisions to the owner of
the equity of the Property. Landlord shall make best efforts to secure a non-disturbance agreement in form acceptable to Tenant
from the holders of all mortgages affecting the Premises, Building or Property from time to time and shall make best efforts to
secure a non-disturbance agreement from the existing holders of mortgages simultaneously with Landlord's execution of this Lease.
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The covenants and agreements
contained in this Lease with respect to the rights, powers and benefits of a holder of a mortgage (particularly, without limitation
thereby, the covenants and agreements contained in this Section 9.1) constitute a continuing offer to any person, corporation or
other entity, which by accepting a mortgage subject to this Lease, assumes the obligations herein set forth with respect to such
holder; such holder is hereby constituted a party of this Lease as an obligee hereunder to the same extent as though its name were
written hereon as such; and such holder shall be entitled to enforce such provisions in its own name. Tenant agrees within ten
(10) days after receipt of request of Landlord to execute and deliver from time to time any commercially reasonable agreement which
may be necessary to implement the provisions of this Section 9.1.
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9.2
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Lease Superior or Subordinate to Mortgages. It is agreed that the rights and interest
of Tenant under this Lease shall be (i) automatically subject or subordinate to any present or future mortgage or mortgages and
to any and all advances to be made thereunder, and to the interest of the holder thereof in the Premises or (ii) prior to any present
or future mortgage or mortgages, if Landlord shall elect, by notice to Tenant, to give the rights and interest of Tenant under
this Lease priority to such mortgage; in the event of either of such cases, the rights and interest of Tenant under this Lease
should be deemed to be subordinate to, or have priority over, as the case may be, said mortgage or mortgages, irrespective of the
time of execution or time of recording of any such mortgage or mortgages (provided that, in the case of subordination of this Lease
to any mortgages, the holder thereof agrees not to disturb the possession of Tenant so long as Tenant is not in default hereunder
beyond all applicable notice and cure periods). Tenant shall, within ten (10) days after request of Landlord, execute, acknowledge
and deliver any and all commercially reasonable instruments deemed by Landlord necessary or desirable
to give effect to or notice of such subordination or priority. Any mortgage to which this Lease shall be subordinated may contain
such terms, provisions and conditions as the holder deems usual or customary.
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ARTICLE 10
Indemnity and Public Liability Insurance
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10.1.1
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Subject
to the provisions of Section 10.7, to the maximum extent permitted by law, Tenant shall indemnify and save harmless Landlord from
and against all claims of whatever nature arising from any negligence or willful misconduct of Tenant, or Tenant Parties, or arising
from any accident, injury or damage whatsoever caused to any person, or to the property of any person, occurring in or about the
Premises after the date that possession of the Premises is first delivered to Tenant and until the end of the Term of this Lease,
so long as Tenant is in occupancy of any part of the Premises, or arising from any accident, injury or damage occurring inside
or outside the Premises but within the Property or on the Pappas Commerce Center, where such accident, injury or damage results,
or is claimed to have resulted, from the negligence or willful misconduct on the part of Tenant or Tenant Parties.
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10.1.2
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Landlord
agrees to indemnify and save harmless Tenant from and against all claims of whatever nature arising from gross negligence or willful
misconduct of Landlord, or Landlord's contractors, agents, servants or employees.
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10.1.3
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Each
indemnity and hold harmless agreement contained in this Section shall include indemnity against all costs, expenses and liabilities
incurred in or in connection with any such claim or proceeding brought thereon, and the defense thereof with counsel approved by
the party entitled to such indemnity which approval shall not be unreasonably withheld. The indemnity provisions set forth in this
Section and elsewhere in this Lease shall survive expiration or earlier termination of the Lease.
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10.2
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Public Liability Insurance.
Tenant agrees to maintain in full force from the date upon which Tenant first enters the Premises for any reason, throughout the
Term of this Lease, and thereafter, so long as Tenant is in occupancy of any part of the Premises, a policy of general liability
and property damage insurance under which Landlord (and such other persons as are in privity of estate with Landlord as may be
set out in notice from time to time), and the Massachusetts Port Authority are named as additional insureds, and under which the
insurer agrees to indemnify and hold Landlord, the Massachusetts Port Authority and those in privity of estate with Landlord,
harmless from and against all cost, expense and/or liability arising out of or based upon any and all claims, accidents, injuries,
and damages set forth in Section 10.1.1 of this Article, in the form of coverage consistent to what is prudent for responsible
tenants in the greater Boston area in the same business as Tenant. Each such policy shall be non-cancelable and non-amendable
with respect to Landlord, the Massachusetts Port Authority and Landlord's said designees of which Tenant has written notice without
thirty (30) days prior notice to Landlord, and shall be in at least in the amounts set forth in Section 1.1, or in such higher
limits as Landlord shall from time to time reasonably request if, during the Term of this Lease, such higher limits are carried
customarily in the Greater Boston Area with respect to similar properties. Tenant agrees that, as a condition to first entering
the Premises, Landlord shall be furnished with a duplicate original or certificate of the insurance required to be maintained
by Tenant under this Section. Said insurance may be maintained by Tenant under a so-called blanket policy covering the Premises
as well as other premises of the Tenant, provided such insurance has a landlord protective liability endorsement attached thereto.
Neither the issuance of any insurance policy required hereunder, nor the minimum limits specified herein with respect to Tenant's
insurance coverage, shall be deemed to limit or restrict in any way Tenant's liability arising under or out of this Lease, including,
without limitation, Tenant's liabilities and obligations under Section 6.23.
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10.3
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Property Insurance.
Landlord shall procure and maintain, and shall pay the cost thereof (subject to reimbursement from Tenant as set forth in
Article 5) with respect to the Building a policy or policies of All Risk of Physical Loss insurance required by the holder of
any fee or leasehold mortgage covering all of any portion of the Property, in an amount equal to the limits set forth in
Section 1.1 and commercial general liability insurance in the amounts deemed appropriate by Landlord.
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10.4
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Tenant's Risk. Except to the extent said damage is caused by or results from the
gross negligence or willful misconduct of Landlord or Landlord's agents, servants or employees, Landlord shall have no responsibility
or liability for any loss of or damage to fixtures or other personal property of Tenant.
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Except to the extent specifically
provided in Section 10.1.2, in no event shall Landlord's obligation to make repairs as provided in this Lease be construed as an
agreement to indemnify Tenant against any loss or damage sustained by the Tenant resulting from the non-performance, or negligent
performance, of Landlord's repair obligations under this Lease.
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10.5
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Injury Caused by Third Parties. To the maximum extent permitted by law, Tenant agrees
that Landlord shall not be responsible or liable to Tenant, or to those claiming by, through or under Tenant, for any loss or damage
that may be occasioned by or through the acts or omissions of persons occupying adjoining premises or any part of the premises
adjacent to or connecting with the Premises or any part of the Property, or otherwise, or for any loss or damage resulting to Tenant
or those claiming by, through or under Tenant, or its or their property, from the breaking, bursting, stopping or leaking of electric
cables or wires, and water, gas, sewer or steam pipes unless said damage or loss results or is claimed to have resulted from the
gross negligence or willful misconduct of Landlord, its agent, servants or employees.
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10.6
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Tenant's Failure. If Tenant fails to obtain and or maintain any insurance required by the terms of the Lease
to be obtained by Tenant, Tenant shall be liable for all losses and costs resulting from said failure. Nothing herein shall be
a waiver of any of Landlord's rights and remedies under any other Article of this Lease or at law or equity.
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10.7
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Waiver of Subrogation. Landlord and Tenant mutually agree that any property damage
insurance carried by either shall provide for the waiver by the insurance carrier of any right of subrogation against the other,
and they further mutually agree that, with respect to any damage to property, the loss from which is covered by the insurance then
being carrier by them, respectively, the one carrying such insurance and suffering such loss releases the other of and from any
and all claims with respect to such loss to the extent of the limits of insurance carried with respect thereto, plus the amount
of any commercially reasonable deductible.
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10.8
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Insurance Certificates. Tenant shall furnish to Landlord on the Commencement Date,
and thereafter within thirty (30) days prior to the expiration of each such policy, certificates of insurance required by the terms
of this Lease to be obtained and maintained by Tenant. Each certificate shall evidence the thirty (30) days non-cancellability
and non-amendability of such policies, as required by this Article. Landlord, Landlord's successors and assigns, and any nominee
or Landlord in privity of estate with Landlord or otherwise holding any interest in the Premises of whom Tenant has prior written
notice, including, without limitation, any ground lessor and the holder of any fee or leasehold mortgage, shall be named as loss
payees and/or additional insureds (as applicable) under each policy of insurance required by the terms of this Lease to be obtained
and maintained by Tenant pursuant to the Article.
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ARTICLE 11
Miscellaneous Provisions
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11.1
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Notices from One Party
to the Other. All notices required or permitted hereunder shall be in writing and addressed, if to the Tenant, at the Original
Notice Address of Tenant or such other address as Tenant shall have last designated by notice in writing to Landlord and, if to
Landlord, at the Original Notice Address of Landlord or such other address as Landlord shall have last designated by notice in
writing to Tenant. Any notice shall be deemed duly given when mailed to such address postage prepaid, by registered or certified
mail, return receipt requested, by nationally recognized overnight delivery courier (e.g., Fed Ex) or when delivered to such address
by hand.
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11.2
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Quiet Enjoyment. Landlord agrees that upon Tenant's paying the rent and performing
and observing the agreements, conditions and other provisions on its part to be performed and observed, Tenant shall and may peaceably
and quietly have, hold and enjoy the Premises during the Term hereof without hindrance from Landlord or anyone claiming under Landlord,
subject, however, to the terms of this Lease.
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11.3
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Lease not to be Recorded. Tenant agrees that it will not record this Lease. Both
parties shall, upon the request of either, execute and deliver and record a notice or short form of this Lease in such form, if
any, as may be permitted by applicable statute.
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11.4
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Limitation of Parties' Liability. The term "Landlord" as used in this
Lease, so far as covenants or obligations to be performed by Landlord are concerned, shall be limited to mean and include
only the owner or owners at the time in question of the Property or the holder of the Landlord's interest under this Lease,
and in the event of any transfer or transfers of title to said Property or the Landlord's leasehold interest, the Landlord
(and in case of any subsequent transfers or conveyances, the then grantor) shall be concurrently freed and relieved from and
after the date of such transfer or conveyance, without any further instrument or agreement of all liability as respects the
performance of any covenants or obligations on the part of the Landlord contained in this Lease thereafter to be performed,
it being intended hereby that the covenants and obligations contained in this Lease on the part of Landlord, shall, subject
as aforesaid, be binding on the Landlord, its successors and assigns, only during and in respect of their respective
successive periods of ownership of said leasehold interest or fee, as the case may be. Tenant, its successors and assigns,
shall not assert nor seek to enforce any claim for breach of this Lease against any of Landlord's assets other than
landlord's interest in the Building and Property, and Tenant agrees to look solely to such interest for the satisfaction of
any liability or claim against Landlord under this Lease, it being specifically agreed that in no event whatsoever shall
Landlord (which term shall include, without limitation, any general or limited partner, trustees, beneficiaries, officers,
directors, or stockholders of Landlord) ever be personally liable for any such liability. The foregoing provision shall not
limit Tenant's right to seek injunctive relief in a dispute with Landlord.
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11.5
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Acts of God. Except with respect to Tenant's obligation to pay Rent, in any case
where either party hereto is required to do any act, delays caused by or resulting from Acts of God, war, civil commotion, fire,
flood or other casualty, labor difficulties, shortages of labor, materials or equipment, government regulations, unusually severe
weather, or other causes beyond such party's reasonable control shall not be counted in determining the time during which work
shall be completed, whether such time be designated by a fixed date, a fixed time or a "reasonable time," and such time
shall be deemed to be extended by the period of such delay.
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11.6
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Brokerage. Tenant and Landlord warrant and represent that they have dealt with no
broker in connection with the consummation of this Lease, other than Colliers International (the "Tenant's Broker"),
and CBRE/New England (the "Landlord's Broker"), and in the event of any brokerage claims, other than by the Tenant's
Broker or the Landlord's Broker, against either party predicated upon prior dealings with the warranting party, the warranting
party agrees to defend the same and indemnify and hold the other party harmless against any such claim. By separate agreement,
Landlord shall pay the commissions for this transaction to Landlord's Broker and Tenant's Broker.
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11.7
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Applicable Law and Construction. This Lease shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts and, if any provisions of this Lease shall to any extent be invalid,
the remainder of this Lease shall not be affected thereby. There are no oral or written agreements between Landlord and Tenant
affecting this Lease. This Lease may be amended, and the provisions hereof may be waived or modified, only by instruments in writing
executed by Landlord and Tenant. The titles of the several Articles and Sections contained herein are for convenience only and
shall not be considered in construing this Lease. Unless repugnant to the context, and subject to the provisions of Section 6.2.1,
the words "Landlord" and "Tenant" appearing in this Lease shall be construed to mean those named above and
their respective heirs, executors, administrators, successors and assigns, and those claiming through or under them respectively.
If there be more than one tenant, the obligations imposed by this Lease upon Tenant shall be joint and several.
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11.8
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Holding Over. Any holding over by Tenant after the expiration of the Term of the
lease, with or without the written consent of the Landlord, shall be treated as a daily tenancy at sufferance at a rate equal to
1.5 times the Monthly Fixed Rent Rate then in effect immediately prior to such holdover (prorated on a daily basis) (the "Holdover
Rate") and shall otherwise be on the terms and conditions set forth in this Lease, as far as applicable. In addition, Tenant
shall be liable for all damages incurred by Landlord by reason of Tenant's holdover in the Premises.
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11.9
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Lease Subject to and Subordinate to Ground Lease. This Lease shall be subject and
subordinate to the Amended, Restated and Consolidated Ground Lease between the Massachusetts Port Authority (as Landlord) and Boston
Harbor Industrial Development LLC (as Tenant), dated as of March 31, 2010, notice of which is recorded with the Suffolk County
Registry of Deeds in Book 46261, Page 23, and filed with the Suffolk Registry District of the Land Court as Document No. 776685
(the "MassPort Lease").
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11.9.1 Ground Lease Terminates
Prior to Lease. In the event the Ground Lease is terminated prior to the termination of this Lease, the Massachusetts Port
Authority, at its option, may require Tenant to attorn to the Massachusetts Port Authority as landlord and waive any right Tenant
has to terminate this Lease, or surrender possession to the Premises as a result of the termination of the Ground Lease, at which
time this Lease shall terminate simultaneously with the Ground Lease.
11.9.2 Tenant Receives
Notice of Landlord Default. In the event Tenant receives notice from Massachusetts Port Authority that an "Event of
Default" has occurred under the terms of the Ground Lease, Tenant shall thereafter be obligated to pay all Fixed Rent, Additional
Rent and all other sums due hereunder to Massachusetts Port Authority or as Massachusetts Port Authority may direct in full satisfaction
of Tenant's rental obligations under this Lease.
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11.10
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Compliance with Massachusetts Port Authority's
Non-discrimination and Affirmative Action Requirements. Tenant shall:
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11.10.1
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Not discriminate against any person, employee, or applicant
for employment because of that person's membership in any legally protected class, including, but not limited to, their race,
color, gender, religion, creed, national origin, ancestry, age being greater than forty years, sex, sexual orientation, disability,
genetic information, or Vietnam-era veteran status in the use of the Premises, including the hiring and discharging of employees,
the provision or use of services, the selection of suppliers and contractors, in the subleasing or refusing to sublease any portion
of the Premises or providing or refusing to provide any services or use of any facility. In addition, Tenant its successors in
interest, Subtenants, licensees, managers, operators, and assigns shall not discriminate against any person, employee, or applicant
for employment who is a member of, or applies to perform service in, or has an obligation to perform service in a uniformed military
service of the United States, including the National Guard, on the basis of that membership, application or obligation.
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11.10.2
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Conspicuously post notices to employees and prospective
employees setting forth the Fair Employee Practices Law of the Commonwealth of Massachusetts.
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11.10.3
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Comply with all applicable federal, state and local laws,
rules, regulations and orders and the Authority's rules and orders (provided that, with respect to the Authority rules and orders,
copies of such rules and orders have been provided to Tenant) pertaining to Civil Rights and Equal Opportunity, including but
not limited to Executive Orders 11246 and 11478 as amended, unless otherwise exempt therefrom.
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11.11
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Waiver of Jury Trial. LANDLORD AND TENANT
HEREBY WAIVE TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM BROUGHT BY EITHER OF THEM AGAINST THE OTHER ON ANY MATTERS
WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE RELATIONSHIP OF LANDLORD AND TENANT, TENANT'S USE OR OCCUPANCY
OF THE PREMISES AND/OR ANY CLAIM OF INJURY OR DAMAGE. The waiver of trial by jury in the immediately preceding sentence is voluntarily
and intentionally made by Landlord and Tenant.
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11.12
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Time of Essence.
TIME IS OF THE ESSENCE WITH RESPECT TO THE TERMS, CONDITIONS AND PROVISIONS OF THIS
LEASE.
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11.13
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Survival of Obligations. The provisions
of this Lease with respect to any obligation of Tenant or Landlord to pay any sum owing in order to perform any act after the
expiration or other termination of this Lease shall survive the expiration or other termination of this Lease.
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11.14
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Representations. Tenant acknowledges that
neither Landlord nor Landlord's agents, employees or contractors have made any representations or promises with respect to the
Premises, the Pappas Commerce Center or this Lease except as expressly set forth herein.
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11.15
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Patriot Act. Tenant represents and warrants
to, and covenants with, Landlord that neither Tenant nor any of its respective constituent owners or affiliates currently are,
or shall be at any time during the Term hereof, in violation of any laws relating to terrorism or money laundering, including
without limitation Executive Order No. 13224 on Terrorist Financing, effective September 24, 2001, and relating to Blocking Property
and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism and/or the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56).
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11.16
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No Offer. The submission of this Lease
to Tenant shall not be construed as an offer, and Tenant shall not have any rights under this Lease unless Landlord executes a
copy of this Lease and delivers it to Tenant.
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11.17
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Counterparts. This Lease may be executed
in any number of identical counterparts, each of which shall be deemed to be an original and all, when taken together, shall constitute
one and the same instrument. A facsimile, .PDF or similar transmission of a counterpart signed by a party hereto shall be regarded
as signed by such party for purposes hereof.
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11.18
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Building Roof Amenities and Building Condition. Tenant shall have complimentary
memberships to the Building rooftop paddle tennis club and shuffleboard courts, the number of such memberships to be
determined by Landlord in its reasonable discretion ("Rooftop Club Memberships"). Tenant may purchase additional
Rooftop Club Memberships at a discounted rate from time to time prevailing in the Building. Tenant shall also have use of the
rooftop conference room, when available, for a nominal fee. During the Lease Term, the Building shall have a 1000kVA, 13.8 kV
– 277 480V pad transformer, onsite café and property management, Building showers and lockers, Building common
mother's room and secure covered bike storage for Tenant's use.
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ARTICLE 12
Landlord's Covenants
Landlord covenants at all times during the Term:
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12.1
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Compliance with Law. To maintain the Building and Property in compliance with all
applicable laws and to make all repairs, alterations, additions or replacements to the Building and Common Areas required by any
law or ordinance or any order or regulation of any public authority except to the extent required as a result of Tenant's specific
manner of use or any work performed by or on behalf of Tenant and except that Landlord may defer compliance so long as the validity
of any such law, ordinance, order or regulations shall be contested by Landlord in good faith and by appropriate legal proceedings,
if Landlord first gives Tenant appropriate assurance or security against any loss, cost or expense on account thereof..
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12.2
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Repair and Maintenance. Subject to the provisions of Article 5, Landlord agrees to
keep in good order, condition and repair, all Common Areas and all structural elements of the Building, the roof and roof membrane
and all mechanical, electrical, life safety, sprinkler, heating, ventilation and air conditioning, and all other Building systems
except that Landlord shall in no event be responsible to Tenant for any condition of the Premises or the Building
caused by any negligent action or omission by Tenant or Tenant Parties. Landlord shall provide nightly cleaning of the Common Areas.
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12.3 Representations
and Warranties. Landlord hereby represents and warrants as follows:
12.3.1 Ownership.
Landlord is the owner of the Premises whether by fee or leasehold interest of the Property and has authority to execute this Lease.
12.3.2 Enforceability. This Lease is
enforceable against Landlord.
12.3.3 MassPort
Lease. The expiration date of the existing term of the MassPort Lease is March 30, 2085 and there are no other leases
that are superior to this Lease. Landlord shall not voluntarily terminate the MassPort Lease or amend the MassPort Lease in any
way that would have a material adverse effect on this Lease or Tenant's rights hereunder or increase Tenant's costs.
[signatures on the following page]
WITNESS the execution hereof under
seal on the day and year first above written:
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Landlord: BOSTON HARBOR INDUSTRIAL DEVELOPMENT LLC
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By:
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/s/ P. Andrew Pappas
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Name: P. Andrew Pappas
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Title: Manager and Secretary
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Tenant: 908 DEVICES INC.
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By:
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/s/ Kevin J. Knopp, Ph.D.
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Name: Kevin J. Knopp, Ph.D.
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Title: President and CEO
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EXHIBIT A
PLAN OF PREMISES
[***] Certain information in this
document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would
likely cause competitive harm to the registrant if publicly disclosed.
[***]
EXHIBIT B
LANDLORD'S WORK LETTER
[***] Certain information in
this document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and
would likely cause competitive harm to the registrant if publicly disclosed.
[***]
[***] Certain information in this
document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would
likely cause competitive harm to the registrant if publicly disclosed.
[***]
[***] Certain information in this
document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would
likely cause competitive harm to the registrant if publicly disclosed.
[***]
[***] Certain information in this
document has been excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would
likely cause competitive harm to the registrant if publicly disclosed.
[***]
FIRST AMENDMENT TO LEASE
This First Amendment
to Lease (this "First Amendment") is dated as of this 30th day of September, 2019 (the "Effective Date") by
and between Boston Harbor Industrial Development LLC, a Delaware limited liability company (the "Landlord"), with offices
located at 655 Summer Street, Boston, Massachusetts, and 908 Devices Inc. (the "Tenant"), a Delaware corporation, with
offices located at 645 Summer Street, Boston, Massachusetts.
WITNESSETH:
WHEREAS, reference
is made to a certain Lease dated January 2, 2018 between Landlord and Tenant (the "Lease"). Initial capitalized terms,
unless otherwise defined herein, shall have the respective meanings assigned to such terms in the Lease;
WHEREAS, pursuant to
the Lease, Tenant presently leases approximately 37,500 rentable square feet of space within the building located at 645 Summer
Street, Boston, Massachusetts from Landlord for a Lease Term extending through October 6, 2025;
WHEREAS, Landlord has
requested, and Tenant has agreed, to expand the size of the Premises by approximately 63 square feet to accommodate the installation
of a nitrogen tank behind the Building; and
WHEREAS, Landlord and
Tenant now desire to execute and deliver this First Amendment to confirm their mutual understandings and agreements relating thereto.
NOW, THEREFORE, in
consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant hereby covenant and agree, and amend the Lease (as applicable), as follows:
1.
The Premises shall be expanded by approximately 63 square feet in order to accommodate the installation of a nitrogen tank
at the exterior and behind the Building. Tenant shall also have non-exclusive appurtenant rights to use such areas at the exterior
and within the interior of the Building which are necessary for the connection of the nitrogen tank to Tenant's interior Premises
(the "Tank Space"). The Tank Space is shown on the plans attached hereto and incorporated herein as Exhibit A.
2.
Fixed Rent during the remainder of the Term shall include the occupancy and usage of the square footage comprising the Tank
Space.
3.
The installation and maintenance of the nitrogen tank shall be at Tenant's sole cost and expense and the operation thereof
shall otherwise conform with the requirements of the Lease.
4. Tenant
warrants and represents that Tenant has not dealt with any broker in connection with the consummation of this First
Amendment; and in the event any claim is made against Landlord relative to this First Amendment, Tenant shall be fully
responsible for such claim, and shall defend the claim against Landlord with counsel of Landlord's selection and save
harmless and indemnify Landlord on account of any and all loss, cost or damage, including reasonable attorney's fees, which
may arise by reason of such claim.
5.
As of the date of this First Amendment, to the best of Tenant's knowledge, Tenant acknowledges that Landlord has fully performed
all of its obligations under the Lease and there exists no default by Landlord thereunder.
6.
This First Amendment shall be governed exclusively by the provisions hereof and by the laws of the Commonwealth of Massachusetts,
as the same may from time to time exist.
7.
This Lease shall be subject and subordinate to the Amended and Restated and Consolidated Ground Lease between the Massachusetts
Port Authority (as Landlord) and Boston Harbor Industrial Development LLC (as Tenant), dated as of March 31, 2010, notice of which
is recorded with the Suffolk County Registry of Deeds in Book 46261, Page 23, and filed with the Suffolk Registry District of the
Land Court as Document No. 776685.
8.
Except as amended and modified hereby, the Lease shall be and remain in full force and effect and is hereby ratified and
confirmed by the parties hereto. This First Amendment shall be binding upon, and shall inure to the benefit of, Landlord and Tenant
and their respective successors and assigns. The recital paragraphs set forth at the beginning of this First Amendment are deemed
incorporated herein as true, correct and binding statements of fact. This First Amendment supersedes any and all prior oral and
written discussions and correspondence with respect to the subject matter hereof.
[Following page is signature
page]
I witness whereof,
this First Amendment has been executed under seal as of the date first above written by individuals duly authorized on behalf of
Landlord and Tenant.
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LANDLORD: BOSTON HARBOR INDUSTRIAL DEVELOPMENT LLC
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By:
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/s/
P. Andrew Pappas
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P. Andrew Pappas,
Vice President and Manager
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TENANT:
908 DEVICES INC.
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By:
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/s/
Kevin J. Knopp, Ph.D.
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Kevin J. Knopp, Ph.D.
President and CEO
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[***] Certain information in this document has been
excluded pursuant to Regulation S-K, Item 601(b)(10). Such excluded information is not material and would likely cause
competitive harm to the registrant if publicly disclosed.
EXHIBIT A
[***]
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING
FIRM
We hereby consent to the use in this Registration Statement
on Form S-1 of 908 Devices Inc. of our report dated October 2, 2020 relating to the financial statements of 908 Devices Inc., which
appears in this Registration Statement. We also consent to the reference to us under the heading “Experts” in such
Registration Statement.
/s/ PricewaterhouseCoopers LLP
Boston, Massachusetts
November 25, 2020
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