As filed with the Securities and Exchange Commission on February 24, 2016
Registration No. 333-208680
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION
STATEMENT
UNDER
THE SECURITIES ACT
OF 1933
Acacia Communications, Inc.
(Exact name of
registrant as specified in its charter)
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Delaware
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3674
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27-0291921
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(State or other jurisdiction of
incorporation or organization)
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(Primary Standard Industrial
Classification Code Number)
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(I.R.S. Employer
Identification No.)
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Three Clock Tower Place, Suite 100
Maynard, Massachusetts 01754
(978) 938-4896
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Murugesan Shanmugaraj
President and Chief
Executive Officer
Acacia Communications, Inc.
Three Clock Tower Place, Suite 100
Maynard,
Massachusetts 01754
(978) 938-4896
(Name, address, including zip code, and telephone number, including area code, of agent for service)
Copies to:
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Mark G. Borden, Esq.
David A. Westenberg, Esq.
Jason L. Kropp,
Esq.
Wilmer Cutler Pickering Hale and Dorr LLP
60 State Street
Boston, Massachusetts
02109
Telephone: (617) 526-6000
Telecopy: (617) 526-5000
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Janene I. Ásgeirsson, Esq.
Vice President, General Counsel and Secretary
Acacia Communications, Inc.
Three Clock Tower
Place, Suite 100
Maynard, Massachusetts 01754
Telephone: (978) 938-4896
Telecopy: (978)
938-4899
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Mark T. Bettencourt, Esq.
Joseph C. Theis, Jr., Esq.
Goodwin Procter
LLP
Exchange Place
53 State
Street
Boston, Massachusetts 02109
Telephone: (617) 570-1000
Telecopy: (617)
523-1231
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Approximate date of commencement of proposed sale to the public:
As soon as practicable after this Registration Statement is declared 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, check the following box.
¨
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this form is a
post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.
¨
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement for the same offering.
¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting 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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(Do not check if a smaller reporting company)
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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 which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall
become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.
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 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
, 2016
PRELIMINARY PROSPECTUS
Shares
Common Stock
This is the initial public
offering of shares of common stock of Acacia Communications, Inc.
Acacia Communications is offering
of the shares to be sold in the offering.
Prior to this offering, there has
been no public market for our common stock. It is currently estimated that the initial public offering price per share will be between $ and $ . We have
applied to have our common stock listed on the Nasdaq Global Market under the symbol “ACIA.”
As an “emerging growth company,”
we are eligible for reduced public company reporting requirements. See “Prospectus Summary—Implications of Being an Emerging Growth Company.”
See “
Risk Factors
” beginning on page 11 to read about factors you should consider before buying
shares of the common stock.
Neither the Securities and Exchange Commission nor any state securities commission or other regulatory body 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 discount(1)
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$
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$
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Proceeds, before expenses, to Acacia Communications
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$
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$
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(1)
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See “Underwriting” beginning on page 131 of this prospectus for a description of the compensation paid to underwriters.
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To the extent that the underwriters sell more than shares of common stock, the
underwriters have the option to purchase up to an additional shares from Acacia Communications, Inc. and up to an additional
shares from the selling stockholders at the initial public offering price less the underwriting discount.
The underwriters expect to deliver the shares against payment in New York, New York on
, 2016.
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Goldman, Sachs & Co.
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BofA Merrill Lynch
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Deutsche Bank Securities
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Needham & Company
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Cowen and Company
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Northland Capital Markets
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Prospectus dated , 2016
TABLE OF CONTENTS
Through and including , 2016
(the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This delivery requirement is in addition to a
dealer’s obligation to deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
No dealer, salesperson or
other person is authorized to give any information or to represent anything not contained in this prospectus or in any free writing prospectus that we file with the Securities and Exchange Commission. We take no responsibility for, and can provide
no assurance as to the reliability of, any other information that others may give you. You must not rely on any unauthorized information or representations. This prospectus is an offer to sell only the shares offered hereby, but only under
circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date regardless of the time of delivery of this prospectus or of any sale of our common stock.
For investors outside the United States: None of us, the selling stockholders, or the underwriters have done anything that would permit our initial
public offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside 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 our common stock and the distribution of this prospectus outside of the United States.
PROSPECTUS SUMMARY
This summary highlights information contained elsewhere in this prospectus. You should read the following summary together with the more detailed
information appearing in this prospectus, including our consolidated financial statements and related notes, and the risk factors beginning on page 11, before deciding whether to purchase shares of our common stock. Unless the context otherwise
requires, we use the terms “Acacia Communications,” “Acacia,” “our company,” “we,” “us” and “our” in this prospectus to refer to Acacia Communications, Inc. and its subsidiaries.
Overview
Our mission is to deliver high-speed coherent
optical interconnect products that transform communications networks, relied upon by cloud infrastructure operators and content and communication service providers, through improvements in performance and capacity and a reduction in associated
costs. By converting optical interconnect technology to a silicon-based technology, a process we refer to as the siliconization of optical interconnect, we believe we are leading a disruption that is analogous to the computing industry’s
integration of multiple functions into a microprocessor. Our products include a series of low-power coherent digital signal processor application-specific integrated circuits, or DSP ASICs, and silicon photonic integrated circuits, or silicon PICs,
which we have integrated into families of optical interconnect modules with transmission speeds ranging from 40 to 400 gigabits per second, or Gbps, for use in long-haul, metro and inter-data center markets. We are also developing optical
interconnect modules that will enable transmission speeds of one terabit (1,000 gigabits) per second and more. Our modules perform a majority of the digital signal processing and optical functions in optical interconnects and offer low power
consumption, high density and high speeds at attractive price points. Through the use of standard interfaces, our modules can be easily integrated with customers’ network equipment. The advanced software in our modules enables increased
configurability and automation, provides insight into network and connection point characteristics and helps identify network performance problems, all of which increase flexibility and reduce operating costs.
Our modules are rooted in our low-power coherent DSP ASICs and silicon PICs, which we have specifically developed for our target markets. Our coherent
DSP ASICs are manufactured using complementary metal oxide semiconductor, or CMOS, and our silicon PICs are manufactured using a CMOS-compatible process. CMOS is a widely-used and cost-effective semiconductor process technology. Using CMOS to
siliconize optical interconnect technology enables us to continue to integrate increasing functionality into our products, benefit from higher yields and reliability associated with CMOS and capitalize on regular improvements in CMOS performance,
density and cost. Our use of CMOS also enables us to use outsourced foundry services rather than requiring custom fabrication to manufacture our products. In addition, our use of CMOS and CMOS compatible processes enables us to take advantage of the
major investments in manufacturing and the technology and integration improvements driven by other computer and communications markets that rely on CMOS.
Our engineering and management teams have extensive experience in optical systems and networking, digital signal processing, large-scale ASIC design and
verification, silicon photonic integration, system software development, hardware design and high-speed electronics design. This broad expertise in a range of advanced technologies, methodologies and processes enhances our innovation, design and
development capabilities and has enabled us to develop and introduce nine optical interconnect modules, five coherent DSP ASICs and two silicon PICs since 2009. In the course of our product development cycles, we continuously engage with our
customers as they design their current and next-generation network equipment, which provides us with insights into current and future market needs.
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We sell our products through a direct sales force to leading network equipment manufacturers.
The number of customers who have purchased and deployed our products has increased from eight in 2011 to more than 25 during 2015. We have experienced rapid revenue growth over the last several years. Our revenue for 2015 was $239.1 million, a 63.5%
increase from $146.2 million of revenue in 2014. In 2015, we generated net income of $40.5 million and our adjusted EBITDA was $47.5 million, compared to net income of $13.5 million and adjusted EBITDA of $20.4 million in 2014. See
“Selected Consolidated Financial Data—Non-GAAP Financial Measures” for more information regarding our use of adjusted EBITDA and other non-GAAP financial measures and a reconciliation of adjusted EBITDA to net (loss) income.
Industry Background
According to Cisco’s Visual
Networking Index Report dated May 2015, or the VNI Report, global internet protocol, or IP, traffic is projected to nearly triple from 2.0 exabytes per day in 2014 to 5.5 exabytes per day in 2019, representing a 23% compound annual growth rate, or
CAGR. This growth is expected to be driven by a variety of factors, including increased data and video consumption, growth in mobile and 4G/LTE communications, proliferation of cloud services, changing traffic patterns in metro and inter-data center
networks, and adoption of the “Internet of Things.” To satisfy this growth in demand for bandwidth, cloud infrastructure operators and content and communications service providers, which we refer to collectively as cloud and service
providers, are investing in the capacity and performance of their network equipment.
The table below outlines the principal types of networks and
estimated annual spend on high-speed optical network hardware related to the long-haul, metro and inter-data center markets, as described in the ACG Research Market Release DCI Optical Networking Market 2Q 2014 Worldwide report:
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Estimated Spend
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Network Type
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Description
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2014
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Forecast for
2019
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CAGR
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Long-haul
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Distances greater than
1,500 km, and subsea connections
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4.7 billion
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7.0 billion
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8.6
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Metro
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Distances less than 1,500 km connecting regions and cities
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6.4 billion
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$
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11.8 billion
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13.0
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Inter-data center
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Various lengths connecting large data centers
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$
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0.4 billion
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$
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4.0 billion
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58.4
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Importance of Optical Interconnect Technologies
Optical equipment that interfaces directly with fiber relies on optical interconnect technologies that take digital signals from network equipment,
perform signal processing to convert these digital signals to optical signals for transmission over a fiber network, and then perform the reverse functions on the receive side. These technologies also incorporate advanced signal processing that can
monitor, manage and reduce errors and distortion in the fiber connection between the transmit and receive sides. Advanced optical interconnect technologies can enhance network performance by improving the capabilities and increasing the capacities
of optical equipment and routers and switches, while also reducing operating costs. The key characteristics of advanced optical interconnect technologies that dictate performance and capacity include speed, density, robustness, power consumption,
automation and manageability.
2
Our Solution—The Siliconization of Optical Interconnect
We have developed families of high-speed coherent optical interconnect products that reduce the complexity and cost of optical interconnect technology,
while simultaneously improving network performance and the pace of innovation in the optical networking industry. Our optical interconnect solution includes sophisticated modules that perform a majority of the digital signal processing and optical
functions required to process network traffic at transmission speeds of 100 Gbps and above in long-haul, metro and inter-data center networks. These modules meet the needs of cloud and service providers for optical interconnect products in a simple,
open, high-performance form factor that can be easily integrated in a cost-effective manner with existing network equipment.
Our interconnect
products are powered by our internally developed and purpose-built coherent DSP ASICs and silicon PICs. Our coherent DSP ASICs and silicon PICs are engineered to work together and each integrates numerous signal processing and optical transmission
functions that together deliver a complete, cost-effective high-speed coherent optical interconnect solution in a small footprint that requires low power and provides significant automation and management capabilities. We believe that our highly
integrated optical interconnect modules, which are based on our coherent DSP ASIC and silicon PIC, were, at the time market introduction, the industry’s first interconnect modules to deliver transmission speeds of 100 Gbps and higher. Prior to
the introduction of our highly integrated optical interconnect modules, we believe that these transmission speeds were not possible in modules in an industry standard form factor without sacrificing signal quality or other performance
characteristics.
Our Competitive Strengths
We believe
the following strengths will enable us to maintain and extend our position in the high-speed optical interconnect market:
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Leading provider of high-speed integrated optical interconnect modules.
We believe we are the first independent vendor to introduce at commercial scale both a coherent DSP ASIC and a
silicon PIC integrated into an optical interconnect module capable of transmission speeds of 100 Gbps and above.
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Track record of rapid innovation driven by advanced design methodologies.
Our development capabilities and advanced design methodologies have enabled us to introduce nine optical
interconnect modules, five coherent DSP ASICs and two silicon PICs since 2009.
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Leveraging the strength of CMOS for photonics.
By using CMOS as the basis for both our coherent DSP ASICs and silicon PICs, our products achieve significant improvements in density
and cost and benefit from ongoing advances in CMOS.
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Proprietary software framework enables simplified configuration and deployment.
Our software framework is key to increasing the performance of and reducing the capital expenditures
and operating expenses associated with high-speed networks, and enables our customers to integrate our products easily into their existing networks.
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Customer collaboration provides deep understanding of market needs.
We collaborate closely with our customers, as well as directly with many cloud and service providers, which allows
us to better understand their needs and anticipate next generation product and service requirements.
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Strong management and engineering teams with significant industry expertise.
Our management and engineering teams, of which our founders remain a key part, include personnel with
extensive experience in optical systems and networking, digital signal processing, large-scale ASIC design and verification, silicon photonic integration, system software development, hardware design and high-speed electronics design.
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Our Growth Strategy
Our goal is to become the leading provider of high-speed optical interconnect technology that underpins the world’s data and communication networks.
To grow our business and achieve our vision, we are pursuing the following strategies:
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Continue to innovate and extend our technology leadership.
We intend to continue to invest in our technology to deliver innovative and high-performance DSP ASICs, silicon PICs and
optical interconnect modules and to identify and solve challenging optical interconnect needs.
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Increase penetration within our existing customer base.
As we continue to enhance and expand our product families, and as our existing customers seek to expand and improve their
network equipment technology, we expect to generate additional revenue through sales to these customers.
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Continue to expand customer base.
We believe that the benefits of our solution, supported by the success of existing customers as references, will drive more network equipment
manufacturers to purchase their optical interconnect products from us.
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Grow into adjacent markets.
We believe that growth in fiber optics-based communications is likely to accelerate and that this growth, together with expansion in other markets that
depend on high-speed networking capabilities, such as intra-data center and network access markets, will result in demand for additional applications for our products.
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Selectively pursue strategic investments or acquisitions.
Although we expect to focus our growth strategy on expanding our market share organically, we may pursue future investments
or acquisitions that complement our existing business.
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Risks Associated with Our Business
You should consider carefully the risks described under the “Risk Factors” section beginning on page 11 and elsewhere in this prospectus. These
risks, which include the following, could materially and adversely affect our business, financial condition, operating results, cash flow and prospects, which could cause the trading price of our common stock to decline and could result in a partial
or total loss of your investment:
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We have a history of operating losses, and we may not maintain or increase our profitability.
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Our limited operating history makes it difficult to evaluate our current business and future prospects.
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We depend on a limited number of customers for a significant percentage of our revenue and the loss of a major customer could harm our financial condition.
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Our revenue growth is substantially dependent on our successful development and release of new products.
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We depend on third parties for a significant portion of the fabrication, assembly and testing of our products.
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We depend on a limited number of suppliers, some of which are sole sources, and our business could be disrupted if they are unable to meet our needs.
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Our revenue growth rate in recent periods may not be indicative of our future growth or performance.
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We may not be able to maintain or improve our gross margins.
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We generate a significant portion of our revenue from international sales and therefore are subject to additional risks associated with our international operations.
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Quality control problems in manufacturing could result in delays in product shipments to customers or in quality problems with our products.
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Our sales cycles can be long and unpredictable, and our sales efforts require considerable effort and expense, so our sales and revenue are difficult to predict and may vary substantially from period to period, which
may cause our results of operations to fluctuate significantly.
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If our products are found to infringe the intellectual property rights of others, we could be required to obtain a license to use the infringed technology from third parties, or we may be prohibited from selling certain
products in the future.
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Our Corporate Information
We were incorporated in the State of Delaware in June 2009. Our principal executive offices are located at Three Clock Tower Place, Suite 100, Maynard,
MA 01754, and our telephone number at that address is (978) 938-4896. Our website address is www.acacia-inc.com. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information
contained on our website to be part of this prospectus or in deciding whether to purchase shares of our common stock.
“Acacia Communications
®
,” “Acacia
®
,” our logo, and other trademarks or tradenames of Acacia Communications, Inc. appearing in this prospectus are
our property. This prospectus also contains trademarks and trade names of other companies, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this prospectus may appear without the
®
or ™ symbols, but such references are not intended to indicate, in any way, that we will not assert, to the fullest extent under applicable law, our rights or the right of the applicable
licensor to these trademarks and trade names.
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 an emerging
growth company, we may take advantage of specified reduced disclosure and other requirements that are otherwise applicable generally to public companies, including:
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reduced disclosure about our executive compensation arrangements;
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exemption from the requirements of holding a non-binding advisory votes on executive compensation or stockholder approval with respect to golden parachute arrangements; and
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exemption from the auditor attestation requirement in the assessment of our internal control over financial reporting.
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We may take advantage of these exemptions up until the last day of the fiscal year following the fifth anniversary of this offering or such earlier time
that we are no longer an emerging growth company. We would cease to be an emerging growth company if we have more than $1 billion in annual revenue, we have more than $700 million in market value of our stock held by non-affiliates (and we have been
a public company for at least 12 months and have filed one annual report on Form 10-K) or we issue more than $1 billion of non-convertible debt securities over a three-year period.
5
We may choose to take advantage of some, but not all, of the available exemptions. We have taken advantage of certain reduced reporting obligations in this prospectus. Accordingly, the
information contained herein may be different than the information you receive from other public companies in which you hold stock.
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 avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to new or revised accounting standards
that are applicable to other public companies that are not emerging growth companies.
6
THE OFFERING
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Common stock offered by us
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shares
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Common stock to be outstanding after this offering
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shares
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Underwriters’ option to purchase additional shares
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shares from us and shares from the selling stockholders
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Use of proceeds
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We intend to use the net proceeds of this offering for working capital and general corporate purposes. We will not receive any proceeds from the sale of shares by the selling stockholders if the underwriters exercise their option to purchase
additional shares from the selling stockholders in this offering. See “Use of Proceeds” for more information.
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Dividend policy
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We intend to retain all future earnings, if any, to fund the development and growth of our business. We do not anticipate paying cash dividends on our common stock. See “Dividend Policy” for more information.
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Risk factors
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You should read the “Risk Factors” section and other information included in this prospectus for a discussion of factors to consider before deciding to invest in shares of our common stock.
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Proposed Nasdaq Global Market symbol
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“ACIA”
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The number of shares of our common stock to be outstanding after this offering is based on 31,092,419 shares of common stock outstanding as of
February 15, 2016 and excludes:
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2,409,278 shares of common stock issuable upon the exercise of options outstanding under our 2009 Stock Plan as of February 15, 2016, with a weighted-average exercise price of $2.89 per share;
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1,063,846 shares of common stock issuable upon the vesting of restricted stock units, or RSUs, outstanding under our 2009 Stock Plan as of February 15, 2016;
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450,000 shares of common stock issuable upon the vesting of RSUs granted under our 2016 Equity Incentive Plan contingent upon the closing of this offering;
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245,000 shares of common stock issuable upon the exercise of preferred stock warrants outstanding as of February 15, 2016, with a weighted-average exercise price of $1.61 per share; and
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3,462,642 shares of common stock reserved for future issuance under our stock-based compensation plans, including 542,642 shares of common stock reserved for issuance under our 2009 Stock Plan,
2,220,000 shares of common stock reserved for issuance under our 2016 Equity Incentive Plan and 700,000 shares of common stock reserved for issuance under our 2016 Employee Stock Purchase Plan. Immediately prior to the effectiveness of the
registration statement of which this prospectus is a part, any remaining shares available for issuance under our 2009 Stock Plan will be added to the shares reserved under our 2016 Equity Incentive Plan and we will cease granting awards under the
2009 Stock Plan. Our 2016 Equity Incentive Plan also provides for automatic annual increases in the number of shares reserved thereunder, as more fully described in “Executive Compensation—Stock Option and Other Compensation Plans.”
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Except as otherwise noted, all information in this prospectus assumes:
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the effectiveness of our restated certificate of incorporation and the adoption of our amended and restated bylaws in connection with the closing of this offering;
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the automatic conversion of our outstanding convertible preferred stock into an aggregate of 24,177,495 shares of our common stock, the conversion of which will occur immediately prior to the closing of this
offering;
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the warrants outstanding as of February 15, 2016 to purchase 245,000 shares of our preferred stock, at a weighted-average exercise price of $1.61 per share, will become exercisable for 245,000 shares of our common
stock, with a weighted-average exercise price of $1.61 per share, upon the closing of this offering;
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no exercise of outstanding options or warrants; and
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no exercise by the underwriters of their option to purchase up to an additional shares from us and up to an additional
shares from the selling stockholders.
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8
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table presents summary consolidated financial and other data for our business for the periods indicated. The summary consolidated
statements of operations data presented below for the years ended December 31, 2013, 2014 and 2015 and the balance sheet data as of December 31, 2015 have been derived from our audited financial statements appearing elsewhere in this
prospectus. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” You should read this summary consolidated financial data in conjunction with “Management’s Discussion and Analysis of
Financial Condition and Results of Operations” and our consolidated financial statements and related notes, all included elsewhere in this prospectus.
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Year Ended December 31,
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2013
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2014
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2015
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(in thousands, except per
share amounts)
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Consolidated Statements of Operations Data:
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|
|
|
|
|
Revenue
|
|
$
|
77,652
|
|
|
$
|
146,234
|
|
|
$
|
239,056
|
|
|
Cost of revenue(1)
|
|
|
47,983
|
|
|
|
93,558
|
|
|
|
145,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
29,669
|
|
|
|
52,676
|
|
|
|
93,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development(1)
|
|
|
24,248
|
|
|
|
28,471
|
|
|
|
38,645
|
|
|
Sales, general and administrative(1)
|
|
|
5,099
|
|
|
|
6,615
|
|
|
|
13,124
|
|
|
Loss on disposal of property and equipment
|
|
|
745
|
|
|
|
108
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
30,092
|
|
|
|
35,194
|
|
|
|
51,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(423
|
)
|
|
|
17,482
|
|
|
|
41,937
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
|
(770
|
)
|
|
|
(1,029
|
)
|
|
|
(2,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(1,193
|
)
|
|
|
16,453
|
|
|
|
39,805
|
|
|
Provision (benefit) for income taxes
|
|
|
—
|
|
|
|
2,933
|
|
|
|
(715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(1,193
|
)
|
|
|
13,520
|
|
|
|
40,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to common stockholders—basic and diluted
|
|
$
|
(4,971
|
)
|
|
$
|
1,728
|
|
|
$
|
7,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share attributable to common stockholders(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.12
|
)
|
|
$
|
0.31
|
|
|
$
|
1.18
|
|
|
Diluted
|
|
$
|
(1.12
|
)
|
|
$
|
0.23
|
|
|
$
|
0.91
|
|
|
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,429
|
|
|
|
5,629
|
|
|
|
6,429
|
|
|
Diluted
|
|
|
4,429
|
|
|
|
7,447
|
|
|
|
8,311
|
|
|
Pro forma net income per share attributable to common stockholders (unaudited)(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
$
|
1.39
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
$
|
1.30
|
|
|
Pro forma weighted-average shares used to compute net income per share attributable to common stockholders (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
30,606
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
32,733
|
|
|
|
|
|
|
|
Other Operational and Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP gross profit(3)
|
|
$
|
29,694
|
|
|
$
|
52,693
|
|
|
$
|
93,781
|
|
|
Non-GAAP income from operations(3)
|
|
$
|
1,081
|
|
|
$
|
17,889
|
|
|
$
|
42,762
|
|
|
Non-GAAP net income(3)
|
|
$
|
405
|
|
|
$
|
14,410
|
|
|
$
|
32,310
|
|
|
Adjusted EBITDA(3)
|
|
$
|
3,550
|
|
|
$
|
20,395
|
|
|
$
|
47,495
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2015
|
|
|
|
Actual
|
|
|
Pro Forma(4)
|
|
|
Pro Forma
As Adjusted(5)
|
|
|
|
(in thousands)
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
27,610
|
|
|
$
|
27,610
|
|
|
|
|
Working capital
|
|
|
55,147
|
|
|
|
55,147
|
|
|
|
|
Total assets
|
|
|
130,744
|
|
|
|
130,744
|
|
|
|
|
Redeemable convertible preferred stock warrant liability
|
|
|
3,254
|
|
|
|
—
|
|
|
|
|
Total liabilities
|
|
|
51,948
|
|
|
|
48,694
|
|
|
|
|
Redeemable convertible preferred stock
|
|
|
70,780
|
|
|
|
—
|
|
|
|
|
Total stockholders’ equity
|
|
|
8,016
|
|
|
|
82,050
|
|
|
|
|
(1)
|
Includes stock-based compensation as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
(in thousands)
|
|
|
Cost of revenue
|
|
$
|
25
|
|
|
$
|
17
|
|
|
$
|
75
|
|
|
Research and development
|
|
|
960
|
|
|
|
258
|
|
|
|
561
|
|
|
Sales, general and administrative
|
|
|
519
|
|
|
|
132
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
|
|
$
|
1,504
|
|
|
$
|
407
|
|
|
$
|
825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
See Notes 2, 3 and 12 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our net income (loss) per share attributable to common stockholders, basic
and diluted, and pro forma net income per share attributable to common stockholders, basic and diluted.
|
|
(3)
|
See “Selected Consolidated Financial Data—Non-GAAP Financial Measures” for information regarding our use of non-GAAP financial measures and a reconciliation of such measures to their nearest GAAP
equivalents.
|
|
(4)
|
The pro forma column in the consolidated balance sheet data table above reflects the automatic conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 24,177,495 shares of
common stock, as well as the conversion of our outstanding warrants exercisable for 245,000 shares of redeemable convertible preferred stock into warrants exercisable for 245,000 shares of common stock and the related reclassification of
$3.3 million of other long-term liabilities into stockholders’ equity, which will occur immediately prior to the closing of this offering.
|
|
(5)
|
The pro forma as adjusted column in the consolidated balance sheet data table above also reflects our sale of shares of common stock in this
offering at an assumed initial public offering price of $ per share, which is the midpoint of the initial public offering price range reflected on the cover page of this prospectus, and after deducting
estimated underwriting discounts and commissions and estimated offering expenses payable by us. A $1.00 increase or decrease in the assumed initial public offering price of $ per share, which is the
midpoint of the initial public offering price range reflected on the cover page of this prospectus, would increase or decrease each of cash and cash equivalents, working capital and total stockholders’ equity on a pro forma as adjusted basis by
approximately $ 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.
|
10
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together
with all of the other information included in this prospectus, including our financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in our common stock. Our business, financial condition,
operating results, cash flow and prospects could be materially and adversely affected by any of these risks or uncertainties. In that case, the trading price of our common stock could decline, and you may lose all or part of your investment.
Risks Related to Our Business and Industry
We have a history
of operating losses, and we may not maintain or increase our profitability.
Although we were profitable in 2014 and 2015, we incurred
operating losses in 2009 through 2013. We may not be able to sustain or increase profitability on a quarterly or annual basis. If we are unable to maintain profitability, the market value of our stock may decline, and you could lose all or a part of
your investment.
Our limited operating history makes it difficult to evaluate our current business and future prospects and may increase the risk
associated with your investment.
We were founded in 2009 and shipped our first products in 2011. Our limited operating history, combined
with the rapidly evolving and competitive nature and consolidation of our industry, suppliers, manufacturers and customers, makes it difficult to evaluate our current business and future prospects. We have encountered and may continue to encounter
risks and difficulties frequently experienced by rapidly growing companies in constantly evolving industries, including unpredictable and volatile revenues and increased expenses as we continue to grow our business. If we do not manage these risks
and overcome these difficulties successfully, our business, financial condition, results of operations and prospects could be adversely affected, and the market price of our common stock could decline. Further, we have limited historic financial
data, and we operate in a rapidly evolving market. As such, any predictions about our future revenue and expenses may not be as accurate as they would be if we had a longer operating history or operated in a more predictable market.
Since we began commercial shipments of our products, our revenue, gross profit and results of operations have varied and are likely to continue to vary
from quarter to quarter due to a number of factors, many of which are not within our control. It is difficult for us to accurately forecast our future revenue and gross profit and plan expenses accordingly and, therefore, it is difficult for us to
predict our future results of operations.
We depend on a limited number of customers for a significant percentage of our revenue and the loss of a major
customer could harm on our financial condition.
We have historically generated most of our revenue from a limited number of customers.
In 2013, 2014 and 2015, our five largest customers in each period (which differed by period) collectively accounted for 79.5%, 77.7% and 72.6% of our revenue, respectively. In 2013, 2014 and 2015, ADVA Optical Networking North America, Inc.
accounted for 13.6%, 23.4% and 22.2% of our revenue, respectively, and ZTE Kangxun Telecom Co. Ltd. accounted for 32.1%, 35.4% and 27.6% of our revenue, respectively. In addition, during 2013, Alcatel-Lucent accounted for 19.2% of our revenue. As a
consequence of the concentrated nature of our customer base, our quarterly revenue and results of operations may fluctuate from quarter to quarter and are difficult to estimate, and any cancellation of orders or any acceleration or delay in
anticipated product purchases or the acceptance of shipped
11
products by our larger customers could materially affect our revenue and results of operations in any quarterly period. We may be unable to sustain or increase our revenue from our larger
customers or offset the discontinuation of concentrated purchases by our larger customers with purchases by new or existing customers. We expect that such concentrated purchases will continue to contribute materially to our revenue for the
foreseeable future and that our results of operations may fluctuate materially as a result of such larger customers’ buying patterns. For example, in the fourth quarter of 2014, our revenue was adversely affected by a delay in anticipated
purchases by two customers. In addition, we have seen and may in the future see consolidation of our customer base which could result in loss of customers or reduced purchases. The loss of such customers, or a significant delay or reduction in their
purchases, could materially harm our business, financial condition, results of operations and prospects.
Our revenue growth is substantially dependent on our
successful development and release of new products.
The markets for our products are characterized by changes and improvements in existing
technologies and the introduction of new technology approaches. The future of our business will depend in large part upon the continuing relevance of our technological capabilities, our ability to interpret customer and market requirements in
advance of product deliveries and our ability to introduce in a timely manner new products that address our customers’ requirements for more cost-effective bandwidth solutions. The development of new products is a complex process, and we may
experience delays and failures in completing the development and introduction of new products. Our successful product development depends on a number of factors, including the following:
|
|
•
|
|
the accurate prediction of market requirements, changes in technology and evolving standards;
|
|
|
•
|
|
the availability of qualified product designers and technologies needed to solve difficult design challenges in a cost-effective, reliable manner;
|
|
|
•
|
|
our ability to design products that meet customers’ cost, size, acceptance and specification criteria and performance requirements;
|
|
|
•
|
|
our ability to manufacture new products with acceptable quality and manufacturing yields in a sufficient quantity to meet customer demand and according to customer needs;
|
|
|
•
|
|
our ability to offer new products at competitive prices;
|
|
|
•
|
|
our dependence on suppliers to deliver in a timely manner materials that are critical components of our products;
|
|
|
•
|
|
our dependence on third-party manufacturers to successfully manufacture our products;
|
|
|
•
|
|
the identification of and entry into new markets for our products;
|
|
|
•
|
|
the acceptance of our customers’ products by the market and the lifecycle of such products; and
|
|
|
•
|
|
our ability to deliver products in a timely manner within our customers’ product planning and deployment cycle.
|
A new product development effort may last two years or longer, and requires significant investments in engineering hours, third-party development costs,
prototypes and sample materials, as well as sales and marketing expenses, which will not be recouped if the product launch is unsuccessful. We may not be able to design and introduce new products in a timely or cost-efficient manner, and our new
products may fail to meet the requirements of the market or our customers, or may be adopted by customers slower than we expect. In that case, we may not reach our expected level of production orders and may lose market share, which could adversely
affect our ability to sustain our revenue growth or maintain our current revenue levels.
12
We depend on third parties for a significant portion of the fabrication, assembly and testing of our products.
A significant portion of the fabrication, assembly and testing of our products is done by third party contract manufacturers and foundries.
As a result, we face competition for manufacturing capacity in the open market. We rely on foundries to manufacture wafers and on third-party manufacturers to assemble, test and manufacture substantially all of our coherent DSP ASICs, silicon PICs
and modules. Accordingly, we cannot directly control our product delivery schedules and quality assurance. This lack of control could result in product shortages or quality assurance problems. These issues could delay shipments of our products,
increase our assembly or testing costs or lead to costly epidemic failure claims. In addition, the consolidation of contract manufacturers and foundries, as well as the increasing capital intensity and complexity associated with fabrication in
smaller process geometries, has limited the number of available contract manufacturers and foundries and increased our dependence on a smaller number of contract manufacturers and foundries. The small number of contract manufacturers or foundries
could also increase the costs of components or manufacturing and adversely affect our results of operations, including our gross margins. In addition, to the extent we engage additional contract manufacturers or foundries, introduce new products
with new manufacturers or foundries and/or move existing internal or external production lines to new manufacturers or foundries, we could experience supply disruptions during the transition process.
Because we rely on contract manufacturers and foundries, we face several significant risks in addition to those discussed above, including:
|
|
•
|
|
a lack of guaranteed supply of manufactured wafers and other raw and finished components and potential higher wafer and component prices due to supply constraints;
|
|
|
•
|
|
the limited availability of, or potential delays in obtaining access to, key process technologies;
|
|
|
•
|
|
the location of contract manufacturers and foundries in regions that are subject to earthquakes, typhoons, tsunamis and other natural disasters; and
|
|
|
•
|
|
competition with our contract manufacturers’ or foundries’ other customers when contract manufacturers or foundries allocate capacity or supply during periods of capacity constraint or supply shortages.
|
The manufacture of our products is a complex and technologically demanding process that utilizes many state of the art manufacturing
processes and specialized components. Our foundries have from time to time experienced lower than anticipated manufacturing yields for our wafers. This often occurs during the production of new products or the installation and start-up of new
process technologies and can occur even in mature processes due to break downs in mechanical systems, clean room controls, equipment failures, calibration errors and the handling of the material from station to station as well as damage resulting
from the shipment and handling of the products to various points of processing.
We depend on a limited number of suppliers, some of which are sole sources,
and our business could be disrupted if they are unable to meet our needs.
We depend on a limited number of suppliers of the key materials,
including silicon wafers and components, equipment used to manufacture our products, and key design tools used in the design, testing and manufacturing of our products. Some of these suppliers are sole sources. With some of these suppliers, we do
not have long-term agreements and instead purchase materials and equipment through a purchase order process. As a result, these suppliers may stop supplying us materials and equipment or significantly increase their prices at any time with little or
no advance notice. Our reliance on sole source suppliers or a limited number of suppliers could result in delivery problems, reduced control over product pricing and quality, and our inability to identify and qualify another supplier in a
13
timely manner. Some of our suppliers may experience financial difficulties that could prevent them from supplying us materials, or equipment used in the design and manufacture of our products. In
addition, our suppliers, including our sole source suppliers, may experience manufacturing delays or shut downs due to circumstances beyond their control such as labor issues, political unrest or natural disasters. Our suppliers, including our sole
source suppliers, could also determine to discontinue the manufacture of materials, equipment and tools that may be difficult for us to obtain from alternative sources. In addition, the suppliers of design tools that we rely on may not maintain or
advance the capabilities of their tools in a manner sufficient to meet the technological requirements for us to design advanced products or provide such tools to us at reasonable prices. Further, the industry in which our suppliers operate is
subject to a trend of consolidation. To the extent these trends continue, we may become dependent on even fewer suppliers to meet our material and equipment needs.
Any supply deficiencies relating to the quantities of materials, equipment or tools we use to design and manufacture our products could materially and
adversely affect our ability to fulfill customer orders and our results of operations. Lead times for the purchase of certain materials, equipment and tools from suppliers have increased and in some instances have exceeded the lead times provided to
us by our customers. In some cases these lead time increases have limited our ability to respond to or meet customer demand. We have in the past and may in the future, experience delays or reductions in supply shipments, which could reduce our
revenue and profitability. If key components or materials are unavailable, our costs would increase and our revenue would decline.
Although we are
developing relationships with additional suppliers, doing so is a time-consuming process, and we may not be able to enter into necessary arrangements with these additional suppliers in time to avoid supply constraints in sole sourced components.
Our revenue growth rate in recent periods may not be indicative of our future growth or performance.
Our revenue growth rate in recent periods may not be indicative of our future growth or performance. We experienced revenue growth rates of 88.3% and
63.5% in 2014 and 2015, respectively, compared to the corresponding periods in the immediately preceding year. We may not achieve similar revenue growth rates in future periods. You should not rely on our revenue for any prior quarterly or annual
period as any indication of our future revenue or revenue growth. If we are unable to maintain consistent revenue or revenue growth, our business, financial condition, results of operations and prospects could be materially adversely affected.
We may not be able to maintain or improve our gross margins.
We may not be able to maintain or improve our gross margins. Factors such as slow introductions of new products, our failure to effectively reduce the
cost of existing products, our failure to maintain or improve our product mix or pricing, changes in customer demand, annual or semi-annual price reductions and pricing discounts required under the terms of our customer contracts, pricing pressure
resulting from increased competition, the availability of superior or lower-cost technologies, market consolidation or the potential for future macroeconomic or market volatility to reduce sales volumes. Our gross margins could also be adversely
affected by unfavorable production yields or variances, increases in costs of components and materials, the timing changes in our inventory, warranty costs and related returns, changes in foreign currency exchange rates, our inability to reduce
manufacturing costs in response to any decrease in revenue, possible exposure to inventory valuation reserves and failure to obtain the benefits of future tax planning strategies. Our competitors have a history of reducing their prices to increase
or avoid losing market share, and if and as we continue to gain market share we may have to reduce our prices to continue to effectively compete. If we are unable to maintain or improve our gross margins, our financial results will be adversely
affected.
14
Product quality problems, defects, errors or vulnerabilities in our products could harm our reputation and adversely
affect our business, financial condition, results of operations and prospects.
We produce complex products that incorporate advanced
technologies. Despite our testing prior to their release, our products may contain undetected defects or errors, especially when first introduced or when new versions are released. Product defects or errors could affect the performance of our
products and could delay the development or release of new products or new versions of products. Allegations of unsatisfactory performance could cause us to lose revenue or market share, increase our service costs, cause us to incur substantial
costs in redesigning the products, cause us to lose significant customers, subject us to liability for damages or divert our resources from other tasks, any one of which could materially adversely affect our business, financial condition, results of
operations and prospects.
From time to time, we have had to replace certain components of products that we had shipped and provide remediation in
response to the discovery of defects or bugs, including failures in software protocols or defective component batches resulting in reliability issues, in such products, and we may be required to do so in the future. We may also be required to
provide full replacements or refunds for such defective products. Such remediation could have a material effect on our business, financial condition, results of operations and prospects.
We generate a significant portion of our revenue from international sales and therefore are subject to additional risks associated with our international
operations.
Since January 1, 2013, we have shipped our products to customers located in 14 foreign countries. In 2013, 2014 and 2015, we
derived 85.1%, 79.2% and 82.3%, respectively, of our revenue from sales to customers with delivery locations outside the United States. A significant portion of our international sales are made to customers with delivery locations in China. In 2013,
2014 and 2015, we derived 32.1%, 36.5% and 36.0%, respectively, of our revenue from sales to customers with delivery locations in China. We also work with manufacturing facilities outside of the United States. In the future, we intend to expand our
international operations to locate additional functions related to the development, manufacturing and sale of our products outside of the United States. Our current and anticipated future international operations are subject to inherent risks, and
our future results could be adversely affected by a variety of factors, many of which are beyond our control, including:
|
|
•
|
|
greater difficulty in enforcing contracts and accounts receivable obligations and longer collection periods;
|
|
|
•
|
|
difficulties in managing and staffing international offices, and the increased travel, infrastructure and legal compliance costs associated with multiple international locations;
|
|
|
•
|
|
the impact of general economic and political conditions in economies outside the United States;
|
|
|
•
|
|
tariff and trade barriers, changes in custom and duties requirements or compliance interpretations and other regulatory requirements or contractual limitations on our ability to sell or develop our products in certain
foreign markets;
|
|
|
•
|
|
heightened risk of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, or irregularities in,
financial statements;
|
|
|
•
|
|
certification requirements;
|
|
|
•
|
|
greater difficulty documenting and testing our internal controls;
|
|
|
•
|
|
reduced protection for intellectual property rights in some countries;
|
|
|
•
|
|
potentially adverse tax consequences;
|
15
|
|
•
|
|
the effects of changes in currency exchange rates;
|
|
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•
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changes in service provider and government spending patterns;
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social, political and economic instability;
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higher incidence of corruption or unethical business practices that could expose us to liability or damage our reputation; and
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natural disasters, health epidemics and acts of war or terrorism.
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International customers may also
require that we comply with additional testing or customization of our products to conform to local standards, which could materially increase the costs to sell our products in those markets.
As we continue to operate on an international basis, 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 failure to manage any of these risks could harm our international operations and reduce our international sales.
If we fail to attract, retain and motivate key personnel, or if we fail to retain and motivate our founders, our business could suffer.
Our business depends on the services of highly qualified employees in a variety of disciplines, including optical systems and networking, digital signal
processing, large-scale ASIC design and verification, silicon photonic integration, system software development, hardware design and high-speed electronics design. Our success depends on the skills, experience and performance of these employees, our
founders and other members of our senior management team, as well as our ability to attract and retain other highly qualified management and technical personnel. There is intense competition for qualified personnel in our industry and a limited
number of qualified personnel with expertise in the areas that are relevant to our business, and as a result we may not be able to attract and retain the personnel necessary for the expansion and success of our business. All of our co-founders are
currently employees of our company. The loss of services of any of our founders or of any other officers or key personnel, or our inability to continue to attract qualified personnel, could have a material adverse effect on our business.
The failure to increase sales to our existing customers as anticipated could adversely affect our future revenue growth and adversely affect our business.
We believe that our future success will depend, in part, on our ability to expand sales to our existing customers for use in a
customer’s existing or new product offerings. Our efforts to increase product sales to existing customers may generate less revenue than anticipated or take longer than anticipated. If we are unable to increase sales to our existing customers
as anticipated, our business, financial condition, results of operations and prospects could be adversely affected.
If we do not effectively expand and train
our direct sales force, we may be unable to add new customers or increase sales to our existing customers, and our business will be adversely affected.
We depend on our direct sales force to increase sales with existing customers and to obtain new customers. As such, we have invested and will continue to
invest in our sales organization. In recent periods, we have been adding personnel and other resources to our sales function as we focus on growing our business, entering new markets and increasing our market share, and we expect to incur additional
expenses in expanding our sales personnel in order to achieve revenue growth. There is significant competition for sales personnel with the skills and technical knowledge that we require. Our
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ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training, retaining and integrating sufficient numbers of sales personnel to support our
growth, particularly in international markets. New hires require significant training and may take significant time before they achieve full productivity. Our planned hires may not become productive as quickly as we expect, and we may be unable to
hire, retain or integrate into our corporate culture sufficient numbers of qualified individuals in the markets where we do business or plan to do business. If we are unable to hire, integrate and train a sufficient number of effective sales
personnel, or the sales personnel we hire are not successful in increasing sales to our existing customer base or obtaining new customers, our business, financial condition, results of operations and prospects will be adversely affected.
Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the innovation, creativity and teamwork
fostered by our culture, and our business may be harmed.
We believe that a critical contributor to our success has been our corporate
culture, which we believe fosters innovation, teamwork, passion for customers and focus on execution, as well as facilitating critical knowledge transfer and knowledge sharing. As we grow and change, we may find it difficult to maintain these
important aspects of our corporate culture, which could limit our ability to innovate and operate effectively. Any failure to preserve our culture could also negatively affect our ability to retain and recruit personnel, continue to perform at
current levels or execute on our business strategy.
Quality control problems in manufacturing could result in delays in product shipments to customers or in
quality problems with our products which could adversely affect our business.
We may experience quality control problems in our
manufacturing operations or the manufacturing operations of our contract manufacturers. If we are unable to identify and correct certain quality issues in our products prior to the products’ being shipped to customers, failure of our deployed
products could cause failures in our customers’ products, which could require us to issue a product recall or trigger epidemic failure claims pursuant to our customer contracts, which may require us to indemnify or pay liquidated damages to
affected customers, repair or replace damaged products, or discontinue or significantly delay shipments. As a result, we could incur additional costs that would adversely affect our gross margins. In addition, even if a problem is identified and
corrected at the manufacturing stage, product shipments to our customers could be delayed, which would negatively affect our revenue, competitive position and reputation.
We may not be able to manufacture our products in volumes or at times sufficient to meet customer demands, which could result in delayed or lost revenue and harm
to our reputation.
Given the high level of sophisticated functionality embedded in our products, our manufacturing processes are complex and
often involve more than one manufacturer. This complexity may result in lower manufacturing yields and may make it more difficult for our current and future contract manufacturers to scale to higher production volumes. If we are unable to
manufacture our products in volumes or at times sufficient to meet demand, our customers could postpone or cancel orders or seek alternative suppliers for these products, which would harm our reputation and adversely affect our results of
operations.
Customer requirements for new products are increasingly challenging, which could lead to significant executional risk in designing such products.
We may incur significant expenses long before we can recognize revenue from new products, if at all, due to the costs and length of research, development and manufacturing process cycles.
Network equipment manufacturers seek increased performance optical interconnect products, at lower prices and in smaller and lower-power designs. These
requirements can be technically challenging, and are sometimes customer-specific, which can require numerous design iterations.
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Because of the complexity of design requirements, including stringent customer-imposed acceptance criteria, executing on our product development goals is difficult and sometimes unpredictable.
These difficulties could result in product sampling delays and/or missing targets on key specifications and customer requirements and acceptance criteria. Our failure to meet our customers’ requirements could result in our customers seeking
alternative suppliers, which would adversely affect our reputation and results of operations.
Additionally, we and our competitors often incur
significant research and development and sales and marketing costs for products that, at the earliest, will be purchased by our customers long after much of the cost is incurred and, in some cases, may never be purchased due to changes in industry
or customer requirements in the interim.
Our sales cycles can be long and unpredictable, and our sales efforts require considerable effort and expense. As a
result, our sales and revenue are difficult to predict and may vary substantially from period to period, which may cause our results of operations to fluctuate significantly.
The timing of our sales and revenue recognition is difficult to predict because of the length and unpredictability of our products’ sales cycles. A
sales cycle is the period between initial contact with a prospective network equipment manufacturer customer and any sale of our products. Customer orders are complex and difficult to complete because prospective customers generally consider a
number of factors over an extended period of time before committing to purchase the products we sell. Customers often view the purchase of our products as a significant and strategic decision and require considerable time to evaluate, test and
qualify our products prior to making a purchase decision and placing an order. The length of time that customers devote to their evaluation, contract negotiation and budgeting processes varies significantly. Our products’ sales cycles can be
lengthy in certain cases. During the sales cycle, we expend significant time and money on sales and marketing activities and make investments in evaluation equipment, all of which lower our operating margins, particularly if no sale occurs or if the
sale is delayed as a result of extended qualification processes or delays from our customers’ customers. Even if a customer decides to purchase our products, there are many factors affecting the timing of our recognition of revenue, which makes
our revenue difficult to forecast. For example, there may be unexpected delays in a customer’s internal procurement processes.
Even after a
customer makes a purchase, there may be circumstances or terms relating to the purchase that delay our ability to recognize revenue from that purchase. For example, the sale of our products may be subject to acceptance testing or may be placed into
a remote stocking location. In addition, the significance and timing of our product enhancements, and the introduction of new products by our competitors, may also affect customers’ purchases. For all of these reasons, it is difficult to
predict whether a sale will be completed, the particular period in which a sale will be completed or the period in which revenue from a sale will be recognized. If our sales cycles lengthen, our revenue could be lower than expected, which would have
an adverse effect on our business, financial condition, results of operations and prospects.
If we fail to accurately predict market requirements or market
demand for our products, our business, competitive position and operating results will suffer.
We operate in a dynamic industry and use
significant resources to develop new products for existing and new markets. After we have developed a product, there is no guarantee that our customers will integrate our product into their equipment or devices and, ultimately, bring the equipment
and devices incorporating our product to market. In addition, there is no guarantee that cloud, network and communications service providers will ultimately choose to purchase network equipment that incorporates our products. In these situations, we
may never produce or deliver significant quantities of our products, even after incurring substantial development expenses. From the
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time a customer elects to integrate our interconnect technology into their product, it typically takes up to 24 months for high-volume production of that product to commence. After volume
production begins, we cannot be assured that the equipment or devices incorporating our product will gain market acceptance by network operators.
If we fail to accurately predict and interpret market requirements or market demand for our new products, our business and growth prospects will be
harmed. If high-speed networks are deployed to a lesser extent or more slowly than we currently anticipate, we may not realize anticipated benefits from our investments in research and development. As a result, our business, competitive position,
market share and operating results will be harmed.
As demand for our products in one market grows, demand in another market may decrease. For
example, if we sell our products directly to content providers in addition to network equipment manufacturers, our sales to network equipment manufacturers may decrease due to reduced demand from their customers or due to dissatisfaction by network
equipment manufacturers with this change in our business model. Any reduction in demand in one market that is not offset by an increase in demand in another market could adversely affect our market share or results of operations.
Most of our long-term customer contracts do not commit customers to specified purchase commitments, and our customers may decrease, cancel or delay their
purchases at any time with little or no advance notice to us.
Most of our customers purchase our products pursuant to individual purchase
orders or contracts that do not contain purchase commitments. Although some of our customers have committed to purchase a specified share of their required volume for a particular product from us, monitoring and enforcing these commitments can be
difficult. Some customers provide us with their expected forecasts for our products several months in advance, but customers may decrease, cancel or delay purchase orders already in place, and the impact of any such actions may be intensified given
our dependence on a small number of large customers. If any of our major customers decrease, stop or delay purchasing our products for any reason, our business and results of operations would be harmed. For example, several of our customers have
historically elected to defer purchases scheduled for the fourth quarter into the first quarter of the following year, resulting in a decrease in our anticipated revenue during the fourth quarter. Cancellation or delays of such orders may cause us
to fail to achieve our short-term and long-term financial and operating goals and result in excess and obsolete inventory.
The markets in which we operate
are highly competitive.
The market for high-speed interconnect is highly competitive. We are aware of a number of companies that have
developed or are developing coherent DSP ASICs, non-coherent PICs and 100 Gbps and 400 Gbps modules, among other technologies, that compete directly with some or all of our current and proposed product offerings.
Competitors may be able to more quickly and effectively:
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develop or respond to new technologies or technical standards;
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react to changing customer requirements and expectations;
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devote needed resources to the development, production, promotion and sale of products;
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attain high manufacturing yields on new product designs;
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establish and take advantage of operations in lower-cost regions; and
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deliver competitive products at lower prices, with lower gross margins or at lower costs than our products.
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In order to expand market acceptance of our products, we must differentiate our products from those of our
competition. We cannot assure you that we will be successful in making this differentiation or increasing acceptance of our products as we have limited resources dedicated to marketing of our products. In addition, established companies in related
industries or newly funded companies targeting markets we serve, such as semiconductor manufacturers and data communications providers, may also have significantly more resources than we do and may in the future develop and offer competing products.
All of these risks may be increased if the market were to further consolidate through mergers or other business combinations between our competitors or if more capital is invested in the market to create additional competitors.
We may not be able to compete successfully with our competitors and aggressive competition in the market may result in lower prices for our products
and/or decreased gross margins. New technology and investments from existing competitors and competitive threats from newly funded companies may erode our technology and product advantages and slow our overall growth and profitability. Any such
development could have a material adverse effect on our business, financial condition and results of operations.
Our results of operations may suffer if we
do not effectively manage our inventory, and we may continue to incur inventory-related charges.
We need to manage our inventory of
component parts and finished goods effectively to meet changing customer requirements. Accurately forecasting customers’ product needs is difficult. Our product demand forecasts are based on multiple assumptions, each of which may introduce
error into our estimates. In the event we overestimate customer demand, we may allocate resources to manufacturing products that we may not be able to sell. As a result, we could hold excess or obsolete inventory, which would reduce our profit
margins and adversely affect our financial results. Conversely, if we underestimate customer demand or if insufficient manufacturing capacity is available, we could forego revenue opportunities, lose market share and damage our customer
relationships. Also, due to our industry’s use of management techniques to reduce inventory levels and the period of time inventory is held, any disruption in the supply chain could lead to more immediate shortages in product or component
supply. Additionally, any enterprise system failures, including in connection with implementing new systems or upgrading existing systems that help us manage our financial, purchasing, inventory, sales, invoicing and product return functions, could
harm our ability to fulfill orders and interrupt other billing and logistical processes.
Some of our products and supplies have in the past, and
may in the future, become obsolete or be deemed excess while in inventory due to rapidly changing customer specifications, changes to product structure, components or bills of material as a result of engineering changes, or a decrease in customer
demand. We also have exposure to contractual liabilities to our contract manufacturers for inventories purchased by them on our behalf, based on our forecasted requirements, which may become excess or obsolete. Our inventory balances also represent
an investment of cash. To the extent our inventory turns are slower than we anticipate based on historical practice, our cash conversion cycle extends and more of our cash remains invested in working capital. If we are not able to manage our
inventory effectively, we may need to write down the value of some of our existing inventory or write off non-saleable or obsolete inventory. We have from time to time incurred significant inventory-related charges. Any such charges we incur in
future periods could materially and adversely affect our results of operations.
Increasingly, our customers require that we ship our finished
products to a central location, which is not controlled by us. If that facility is damaged, or if our relationship with that facility deteriorates, we may suffer losses or be forced to find an alternate facility. In addition, revenue is only
recognized once our customers take delivery of the products from this location, rather than when we ship them, which could have an adverse effect on our results of operations. We often lack insight into when customers will take delivery of our
products, making it difficult to forecast our revenue.
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The industry in which we operate is subject to significant cyclicality.
Industries focused on semiconductor and optical network technologies can be highly cyclical and characterized by constant and rapid technological change
and price erosion, evolving technical standards, increasing effects of competition, frequent new product introductions and technology displacement, short product life cycles both for semiconductors and optical technologies and for many of the end
products in which they are used, and wide fluctuations in product supply and demand. From time to time, these factors, together with changes in general economic conditions, have caused significant industry upturns and downturns that have had a
direct impact on the financial stability of our customers, their customers and our suppliers. Periods of industry downturns have been characterized by diminished demand for products, unanticipated declines in telecommunications and communications
system capital expenditures, industry consolidation, excess capacity compared to demand, high inventory levels and periods of inventory adjustment, under-utilization of manufacturing capacity, changes in revenue mix and erosion of average selling
prices, any of which could result in an adverse effect on our business, financial condition and results of operations. We expect our business to continue to be subject to cyclical downturns even when overall economic conditions are relatively
stable. To the extent we cannot offset recessionary periods or periods of reduced growth that may occur in the industry or in our target markets in particular through increased market share or otherwise, our business can be adversely affected,
revenue may decline and our financial condition and results of operations may be harmed. In addition, in any future economic downturn or periods of inflationary increase we may be unable to reduce our costs quickly enough to maintain profitability
levels.
Our business is subject to currency fluctuations that have adversely affected our results of operations in recent quarters and may continue to do so
in the future.
Our financial results have and in the future could continue to be adversely affected by foreign currency fluctuations.
Historically, a significant portion of our expenses, predominately related to outsourced development services, were denominated in Euros while substantially all of our revenue is denominated in U.S. dollars. Fluctuations in the exchange rates
between these currencies and other currencies in which we collect revenue and/or pay expenses have and could have a material effect on our future operating results. For example, in 2014, we agreed with one of our suppliers to pay for supplies in
U.S. dollars instead of Euros, based on a predetermined exchange rate, which resulted in a significant increase in the cost of those supplies when the Euro to U.S. dollar exchange rate fell substantially below the predetermined rate. Currency rate
fluctuations may also affect the ability of our customers to purchase our products in the event that such fluctuations result in a significant increase to the purchase price of our products under the customers’ local currency.
Although we do not currently engage in currency hedging transactions, we may choose to do so in the future in an effort to reduce our exposure to U.S.
dollar to Euro or other currency fluctuations. In connection with any currency hedging transaction in the future, we may be required to convert currencies to meet our obligations. These transactions may not operate to fully hedge our exposure to
currency fluctuations, and under certain circumstances, these transactions could have an adverse effect on our financial condition.
If our customers do not
qualify our manufacturing lines or the manufacturing lines of our subcontractors for volume shipments, our operating results could suffer.
Our manufacturing lines have passed our qualification standards, as well as our technical standards. However, our customers may also require that our
manufacturing lines pass their specific qualification standards and that we, and any subcontractors that we may use, be registered under international quality standards. In addition, many of our customers require that we maintain our ISO
certification. In the event we are unable to maintain process controls required to maintain ISO certification, or in the event we fail to pass the ISO certification audit for any reason, we could lose our
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ISO certification. In addition, we may encounter quality control issues in the future as a result of relocating our manufacturing lines or ramping new products to full volume production. We may
be unable to obtain customer qualification of our or our subcontractors’ manufacturing lines or we may experience delays in obtaining customer qualification of our or our subcontractors’ manufacturing lines. Such delays or failure to
obtain qualifications would harm our operating results and customer relationships. If we introduce new contract manufacturers and move any production lines from existing internal or external facilities, the new production lines will likely need to
be re-qualified with our customers. Any delay in the qualification of our or our subcontractors’ manufacturing lines may adversely affect our operations and financial results. Any delay in the qualification or requalification of our or our
subcontractors’ manufacturing lines may delay the manufacturing of our products or require us to divert resources away from other areas of our business, which could adversely affect our operations and financial results.
Acquisitions that we may pursue in the future, whether or not consummated, could result in operating and financial difficulties.
We may in the future acquire businesses or assets in an effort to increase our growth, enhance our ability to compete, complement our product offerings,
enter new and adjacent markets, obtain access to additional technical resources, enhance our intellectual property rights or pursue other competitive opportunities. If we seek acquisitions, we may not be able to identify suitable acquisition
candidates at prices we consider appropriate. We are in an industry that is actively consolidating and, as a result, there is no guarantee that we will successfully and satisfactorily bid against third parties, including competitors, when we
identify a target we seek to acquire.
We cannot readily predict the timing or size of our future acquisitions, or the success of any future
acquisitions. Failure to successfully execute on any future acquisition plans could have a material adverse effect on our business, prospects, financial condition and results of operations.
To the extent that we consummate acquisitions, we may face financial risks as a result, including increased costs associated with merged or acquired
operations, increased indebtedness, economic dilution to gross and operating profit and earnings per share, or unanticipated costs and liabilities, including the impairment of assets and expenses associated with restructuring costs and reserves, and
unforeseen accounting charges. We would also face operational risks, such as difficulties in integrating the operations, retention of key personnel and our ability to maintain and support products of the acquired businesses, disrupting their or our
ongoing business, increasing the complexity of our business, failing to successfully further develop the combined, acquired or remaining technology, and impairing management resources and management’s relationships with employees and customers
as a result of changes in their ownership and management. Further, the evaluation and negotiation of potential acquisitions, as well as the integration of an acquired business, may divert management time and other resources.
We may need additional equity, debt or other financing in the future, which we may not be able to obtain on acceptable terms, or at all, and any additional
financing may result in restrictions on our operations or substantial dilution to our stockholders.
We may need to raise funds in the
future, for example, to develop new technologies, expand our business or acquire complementary businesses. We may try to raise additional funds through public or private financings, strategic relationships or other arrangements. Our ability to
obtain debt or equity funding will depend on a number of factors, including market conditions, interest rates, our operating performance and investor interest. Additional funding may not be available to us on acceptable terms or at all. If adequate
funding is not available, we may be required to reduce expenditures, including curtailing our growth strategies and reducing our product development efforts, or forgo acquisition opportunities. If we succeed in raising additional funds through the
issuance of equity or convertible securities, then the issuance could result in substantial dilution to existing stockholders. If we raise additional funds through
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the issuance of debt securities or preferred stock, these new securities would have rights, preferences and privileges senior to those of the holders of our common stock. In addition, any
preferred equity issuance or debt financing that we may obtain in the future could have restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain
additional capital and to pursue business opportunities, including potential acquisitions.
If our estimates or judgments relating to our critical accounting
policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below expectations of securities analysts and investors, resulting in a decline in the market price of our stock.
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in
our consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as described in “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” the results of which form the basis for making judgments about the carrying values of assets, liabilities, equity, revenue and expenses that are not readily apparent
from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, stock-based compensation, contract manufacturing liabilities and income taxes. If our
assumptions change or if actual circumstances differ from those in our assumptions, our results of operations may be adversely affected and may fall below the expectations of securities analysts and investors, resulting in a decline in the market
price of our stock.
Our loan and security agreement contains operating covenants and restrictions that may restrict our business and financing activities.
We are party to a loan and security agreement with Silicon Valley Bank. This agreement restricts our ability to, among other things:
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engage in any business other than our current business;
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merge or consolidate with other entities;
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incur additional indebtedness;
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create liens on our assets;
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pay or declare dividends, or, in certain cases, repurchase our stock;
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enter into transactions with affiliates; or
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make any payment on subordinated indebtedness.
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The operating covenants and restrictions in the loan and
security agreement, as well as covenants and restrictions in any future financing agreements that we may enter into, may restrict our ability to finance our operations, engage in business activities or expand or fully pursue our business strategies.
Our ability to comply with these covenants may be affected by events beyond our control, and we may not be able to meet those covenants. A breach of any of these covenants could result in a default under the loan and security agreement or any future
financing agreement, which could cause all of the outstanding indebtedness under the facility to become immediately due and payable and terminate all commitments to extend further credit.
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We cannot assure you that we will continue to maintain sufficient cash reserves or that our business will
ever generate cash flow from operations at levels sufficient to permit us to pay principal, premium, if any, and interest on our indebtedness, or that our cash needs will not increase. If we are unable to generate sufficient cash flow or otherwise
obtain funds necessary to make required payments, or if we fail to comply with the various requirements of our loan and security agreement with Silicon Valley Bank, or any indebtedness which we may incur in the future, we would be in default under
our agreement with Silicon Valley Bank or other indebtedness we may incur in the future. Any default under our agreement with Silicon Valley Bank, or any indebtedness that we may incur in the future, could have a material adverse effect on our
business, results of operations and financial condition.
We may face product liability claims, which could be expensive and time consuming and result in
substantial damages to us and increases in our insurance rates.
Despite quality assurance measures, defects may occur in our products. The
occurrence of any defects in our products could give rise to product liability or epidemic failure claims, which could divert management’s attention from our core business, be expensive to defend, result in the loss of key customer contracts
and result in sizable damage awards against us and, depending on the nature or scope of any network outage caused by a defect in or epidemic failure related to our products, could also harm our reputation. Our current insurance coverage may not be
sufficient to cover these claims. Moreover, in the future, we may not be able to obtain insurance in amount or scope sufficient to provide us with adequate coverage against potential liabilities. Any product liability claims brought against us, with
or without merit, could increase our product liability insurance rates or prevent us from securing continuing coverage, could harm our reputation in the industry and reduce product sales. We would need to pay any product losses in excess of our
insurance coverage out of cash reserves, harming our financial condition and adversely affecting our operating results.
Our business and operating results
may be adversely affected by natural disasters, health epidemics or other catastrophic events beyond our control.
Our internal manufacturing
headquarters and new product introduction labs, design facilities, assembly and test facilities, and supply chain, and those of our contract manufacturers, are subject to risks associated with natural disasters, such as earthquakes, fires, tsunami,
typhoons, volcanic activity, floods and health epidemics as well as other events beyond our control such as power loss, telecommunications failures and uncertainties arising out of terrorist attacks in the United States and armed conflicts overseas.
The majority of our semiconductor products are currently fabricated and assembled in Canada, Japan, Singapore, Taiwan and Thailand. The majority of the internal and outsourced assembly and test facilities we utilize or plan to utilize are located in
California, New Hampshire, Canada, Germany, Japan, Thailand and other non-U.S. jurisdictions, and some of our internal design, assembly and test facilities are located in Massachusetts and New Jersey, regions with severe weather activity and, in the
case of California, above average seismic activity. In addition, our research and development personnel are concentrated primarily in our headquarters in Maynard, Massachusetts and in our research center in Hazlet, New Jersey. Any catastrophic loss
or significant damage to any of these facilities or facilities we use in the future would likely disrupt our operations, delay production, and adversely affect our product development schedules, shipments and revenue. In addition, any such
catastrophic loss or significant damage could result in significant expense to repair or replace the facility and could significantly curtail our research and development efforts in a particular product area or primary market, which could have a
material adverse effect on our operations and operating results.
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Breaches of our cybersecurity systems could degrade our ability to conduct our business operations and deliver
products to our customers, compromise the integrity of the software embedded in our products, result in significant data losses and the theft of our intellectual property, damage our reputation, expose us to liability to third parties and require us
to incur significant additional costs to maintain the security of our networks and data.
We increasingly depend upon our information
technology, or IT, systems to conduct virtually all of our business operations, ranging from our internal operations and product development activities to our marketing and sales efforts and communications with our customers and business partners.
Computer programmers may attempt to penetrate our network security, or that of our website, and misappropriate our proprietary information, embed malicious code in our products or cause interruptions of our service. Because the techniques used by
such computer programmers to access or sabotage networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques. In addition, sophisticated hardware and operating system software
and applications that we produce or procure from third parties may contain defects in design or manufacture, including “bugs” and other problems that could unexpectedly interfere with the operation of the system. We have also outsourced a
number of our business functions to third-party contractors, including our manufacturers and logistics providers, and our business operations also depend, in part, on the success of our contractors’ own cybersecurity measures. Additionally, we
depend upon our employees to appropriately handle confidential data and deploy our IT resources in safe and secure fashion that does not expose our network systems to security breaches and the loss of data. Accordingly, if our cybersecurity systems
and those of our contractors fail to protect against unauthorized access, sophisticated cyberattacks and the mishandling of data by our employees and contractors, our ability to conduct our business effectively could be damaged in a number of ways,
including:
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sensitive data regarding our business, including intellectual property and other proprietary data, could be stolen;
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our electronic communications systems, including email and other methods, could be disrupted, and our ability to conduct our business operations could be seriously damaged until such systems can be restored;
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our ability to process customer orders and deliver products could be degraded or disrupted, resulting in delays in revenue recognition; and
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defects and security vulnerabilities could be introduced into the software embedded in or used in the development of our products, thereby damaging the reputation and perceived reliability and security of our products.
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Should any of the above events occur, we could be subject to significant claims for liability from our customers and regulatory
actions from governmental agencies. In addition, our ability to protect our intellectual property rights could be compromised and our reputation and competitive position could be significantly harmed. Additionally, we could incur significant costs
in order to upgrade our cybersecurity systems and remediate damages. Consequently, our financial performance and results of operations could be adversely affected.
We may not be able to successfully manage the growth of our business if we are unable to improve our internal systems, processes and controls.
Our business is growing rapidly and we anticipate that it will continue to do so in the future. In order to effectively manage our operations and growth,
we need to continue to improve our internal systems, processes and controls. We may not be able to successfully implement improvements to these systems, processes and controls in an efficient or timely manner. In addition, our systems and processes
may not prevent or detect all errors, omissions or fraud. We may experience difficulties in
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managing improvements to our systems or processes and controls, which could impair our ability to provide products to our customers in a timely manner, causing us to lose customers, limit us to
smaller deployments of our products or increase our technical support costs.
We are subject to government regulation, including import, export, economic
sanctions, and anti-corruption laws and regulations that may expose us to liability and increase our costs.
Our products and services are
subject to export controls, including the U.S. Department of Commerce’s Export Administration Regulations and economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls, and
similar laws and regulations that apply in other jurisdictions in which we distribute or sell our products or services. Export control and economic sanctions laws and regulations include prohibitions on the sale or supply of certain products and
services and on our transfer of parts, components, and related technical information or know-how to certain countries, regions, governments, persons and entities. In addition, various countries regulate the importation of certain products, through
import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our products and provide services. The exportation, re-exportation, and importation of our products and the provision of services,
including by our partners, must comply with these laws and regulations, or we may be adversely affected, through reputational harm, government investigations, penalties, and/or a denial or curtailment of our ability to export our products or provide
services. Complying with export control and sanctions laws for a particular sale may be time consuming and may result in the delay or loss of sales opportunities. Although we take precautions to prevent our products and services from being
provided in violation of such laws and regulations, if we are found to be in violation of U.S. sanctions or export control laws, we and the individuals working for us could incur substantial fines and penalties. Changes in export, sanctions or
import laws or regulations, may delay the introduction and sale of our products or services in international markets, require us to spend resources to develop different versions of our products and services, or, in some cases, prevent the export or
import of our products or services to certain countries, regions, governments, persons or entities altogether, which could adversely affect our business, financial condition and operating results.
We are also subject to various domestic and international anti-corruption laws, such as the U.S. Foreign Corrupt Practices Act and the U.K. Bribery Act,
as well as other similar anti-bribery and anti-kickback laws and regulations. These laws and regulations generally prohibit companies and their intermediaries from offering or making improper payments to non-U.S. officials for the purpose of
obtaining or retaining business. Our exposure for violating these laws and regulations increases as our international presence expands and as we increase sales and operations in foreign jurisdictions.
We are subject to environmental, health and safety laws and regulations, which could subject us to liabilities, increase our costs or restrict our business or
operations in the future.
Our manufacturing operations and our products are subject to a variety of environmental, health and safety laws
and regulations in each of the jurisdictions in which we operate or sell our products. These laws and regulations govern, among other things, the handling and disposal of hazardous substances and wastes, employee health and safety and the use of
hazardous materials in, and the recycling of, our products. Failure to comply with present and future environmental, health or safety requirements, or the identification of contamination, could cause us to incur substantial costs, monetary fines,
civil or criminal penalties and curtailment of operations. In addition, these laws and regulations have increasingly become more stringent over time. The identification of presently unidentified environmental conditions, more vigorous enforcement of
current environmental, health and safety requirements by regulatory agencies, the enactment of more stringent laws and regulations or other unanticipated events could restrict our ability to use or expand our facilities, require us to incur
additional expenses or require us to modify our manufacturing processes or the contents of our products, which could have a material adverse effect on our business, financial condition and results of operations.
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Changes in industry standards and regulations could make our products obsolete, which would cause our net revenues
and results of operations to suffer.
We design our products to conform to regulations established by governments and to standards set by
industry standards bodies worldwide. Various industry organizations are currently considering whether and to what extent to create standards applicable to our current products or those under development. Because certain of our products are designed
to conform to current specific industry standards, if competing or new standards emerge that are preferred by our customers, we may have to make significant expenditures to develop new products. If our customers adopt new or competing industry
standards with which our products are not compatible, or industry groups adopt standards or governments issue regulations with which our products are not compatible, our existing products would become less desirable to our customers and our net
revenues and results of operations would suffer.
We recently implemented a corporate restructuring that is more closely aligned with the international
nature of our business activities, and if we do not achieve the anticipated financial, operational and effective tax rate efficiencies as a result of our new corporate structure, our financial condition and results of operations could be adversely
affected.
We recently implemented a reorganization of our corporate structure and intercompany relationships to more closely align our
corporate structure with the international nature of our business activities. This corporate restructuring may allow us to reduce our overall effective tax rate through changes in our use of intellectual property, international procurement and
manufacturing and sales operations. This corporate restructuring may also allow us to achieve financial operational and effective tax rate efficiencies. Our efforts in connection with this corporate restructuring have required and will continue to
require us to incur expenses for which we may not realize related benefits. If the intended structure is not accepted by the applicable taxing authorities upon audit or if there are adverse changes in domestic or international tax laws, including
changes in any proposed legislation to reform U.S. taxation of international business activities, the proposed structure may be negatively affected. In addition, if we do not operate our business in a manner that is consistent with this corporate
restructuring or any applicable tax provisions, we may fail to achieve the financial, operational and effective tax rate efficiencies that we anticipate and our results of operations may be negatively affected.
The implementation of our corporate restructuring, increases the likelihood that unfavorable tax law changes, unfavorable government review of our tax returns,
changes in our geographic earnings mix or imposition of withholding taxes on repatriated earnings could have an adverse effect on our effective tax rate and our operating results.
We have expanded and will likely continue to expand our operations into multiple non-U.S. jurisdictions in connection with our recent corporate
restructuring, including those having lower tax rates than those we are subject to in the United States. As a result, our effective tax rate will be influenced by the amounts of income and expense attributed to each such jurisdiction. If such
amounts were to change so as to increase the amounts of our net income subject to taxation in higher tax jurisdictions, or if we were to commence operations in jurisdictions assessing relatively higher tax rates, our effective tax rate could be
adversely affected. The continued availability of lower tax rates in non-U.S. jurisdictions, if any, will be dependent on how we conduct our business operation on a going forward basis across all tax jurisdictions. As a result of our corporate
restructuring, we will be subject to periodic audits or other reviews by tax authorities in the jurisdictions in which we conduct our activities in the future and there is a risk that tax authorities could challenge our assertion that we have
conducted or will conduct our business operations appropriately in order to benefit from these lower tax rate jurisdictions. In addition, tax proposals being considered by the U.S. Congress and the legislative bodies in some of the foreign
jurisdictions that we are considering in connection with our corporate restructuring could affect our tax rate, the carrying value of deferred tax assets or our other tax liabilities. We cannot predict the form or timing of potential legislative
changes, but any newly enacted
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tax law could have a material adverse impact on our tax provision, net income and cash flows. This could result in additional tax liabilities or other adjustments to our historical results. In
addition, we may determine that it is advisable from time to time to repatriate earnings from non-U.S. subsidiaries under circumstances that could give rise to imposition of potentially significant withholding taxes by the jurisdictions in which
such amounts were earned and substantial tax liabilities in the United States. In addition, we may not receive the benefit of any offsetting tax credits, which also could adversely affect our effective tax rate.
Although we believe our tax estimates, which in the future will include the impact of anticipated tax rate benefits with the implementation of our
corporate restructuring, are and will be reasonable, the ultimate tax outcome may materially differ from the tax amounts recorded in our consolidated financial statements and may materially affect our income tax provision, net income or cash flows
in the period or periods for which such determination is made.
The final determination of our income tax liability may be materially different from our
income tax provision.
The final determination of our income tax liability, which includes the impact of our corporate restructuring, may
be materially different from our income tax provision. We are subject to income taxes in the United States and, as a result of our corporate restructuring, have become subject to income taxes in international jurisdictions. Significant judgment is
required in determining our worldwide provision for income taxes. In the ordinary course of our business, there are many transactions where the ultimate tax determination is uncertain. Additionally, our calculations of income taxes are based on our
interpretations of applicable tax laws in the jurisdictions in which we file or will file as a result of the proposed corporate restructuring. Although we believe our tax estimates, which include the impact of anticipated tax rate benefits in
connection with our corporate restructuring, are and will be appropriate, there is no assurance that the final determination of our income tax liability will not be materially different than what is reflected in our income tax provisions and
accruals.
We are also subject to periodic examination of our income tax returns by the Internal Revenue Service in the United States and will be
subject to periodic examination of our income tax returns by taxing authorities in other tax jurisdictions. We assess and will continue to assess on a regular basis the likelihood of adverse outcomes resulting from these examinations to determine
the adequacy of our provision for income taxes. The outcomes from these examinations may have an adverse effect on our operating results and financial condition.
Furthermore, our provision for income tax could increase as we further expand our international operations, adopt new products or undertake intercompany
transactions in light of acquisitions, changing tax laws, expiring rulings and our current and anticipated business and operational requirements.
Our
ability to utilize certain net operating loss carryforwards and tax credit carryforwards may be limited under Sections 382 and 383 of the Internal Revenue Code.
As of December 31, 2015, we had net operating loss carryforward amounts, or NOLs, of approximately $12.2 million and $12.8 million for
U.S. federal and state income tax purposes, respectively, and tax credit carryforward amounts of approximately $2.5 million and $4.5 million for U.S. federal and state income tax purposes, respectively. The federal and state tax credit
carryforwards will expire at various dates beginning in 2016 through 2033 and $0.2 million of such carryforwards will expire between 2016 and 2018 if not used. The federal and state net operating loss carryforwards will expire at various dates
beginning in 2029 through 2033. Utilization of these net operating loss and tax credit carryforward amounts is subject to a substantial annual limitation if the ownership change limitations under Sections 382 and 383 of the Internal Revenue Code and
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state provisions are triggered by changes in the ownership of our capital stock. Such an annual limitation would result in the expiration of the net operating loss and tax credit carryforward
amounts before utilization. Our existing NOLs may be subject to limitations arising from previous ownership changes, including in connection with our proposed initial public offering or any future follow-on public offerings. Future changes in our
stock ownership, some of which are outside of our control, could result in an ownership change. There is also a risk that due to regulatory changes, such as suspensions on the use of NOLs, or other unforeseen reasons, our existing NOLs could expire
or otherwise be unavailable to offset future income tax liabilities. Additionally, state NOLs generated in one state cannot be used to offset income generated in another state. For these reasons, we may be limited in our ability to fully utilize the
tax benefit from the use of our NOLs, even if our profitably would otherwise allow for it.
Risks Related to Our Intellectual Property
Our products may infringe the intellectual property rights of others, which could result in expensive litigation or require us to obtain a license to use the
technology from third parties, or we may be prohibited from selling certain products in the future.
Companies in the industry in which we
operate frequently are sued or receive informal claims of patent infringement or infringement of other intellectual property rights. We have, from time to time, received such claims from companies, including from competitors and customers, some of
whom have substantially more resources and have been developing relevant technologies for much longer than us.
Third parties may in the future
assert claims against us concerning our existing products or with respect to future products under development, or with respect to products that we may acquire through acquisitions. We have entered into and may in the future enter into
indemnification obligations in favor of our customers that could be triggered upon an allegation or finding that we are infringing other parties’ proprietary rights. If we do infringe a third party’s rights and are unable to provide a
sufficient work around, we may need to negotiate with holders of those rights in order to obtain a license to those rights or otherwise settle any infringement claim. A party that makes a claim of infringement against us may obtain an injunction
preventing us from shipping products containing the allegedly infringing technology. We have from time to time received notices from third parties alleging infringement of their intellectual property and in one case have entered into a license
agreement with a third party with respect to such intellectual property. Any license agreements that we wish to enter into the future with respect to intellectual property rights may not be available to us on commercially reasonable terms, or at
all. Generally, a license, if granted, would include payments of up-front fees, ongoing royalties or both. These payments or other terms, including any that restrict our ability to utilize the licensed technology in specified markets or geographic
locations, could have a significant adverse effect on our operating results. In addition, in the event we are granted such a license, it is possible the license would be non-exclusive and other parties, including competitors, may be able to utilize
such technology. Our larger competitors may be able to obtain licenses or cross-license their technology on better terms than we can, which could put us at a competitive disadvantage. In addition, our larger competitors may be able to buy such
technology and preclude us from licensing or using such technology.
We may not in all cases be able to resolve allegations of infringement
through licensing arrangements, settlement, alternative designs or otherwise. We may take legal action to determine the validity and scope of the third-party rights or to defend against any allegations of infringement. Holders of intellectual
property rights could become more aggressive in alleging infringement of their intellectual property rights and we may be the subject of such claims asserted by a third party. For example, as described further under “Business—Legal
Proceedings”, on January 22, 2016, ViaSat, Inc. informed us that it had filed a suit against us alleging, among other things, breach of contract, breach of the implied covenant of good faith and fair dealing and misappropriation of trade
secrets. In the course of pursuing any of these means or defending against any lawsuits filed against us, we could incur significant costs and diversion of our resources and our management’s attention. Due to the competitive nature of our
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industry, it is unlikely that we could increase our prices to cover such costs. In addition, such claims could result in significant penalties or injunctions that could prevent us from selling
some of our products in certain markets or result in settlements or judgments that require payment of significant royalties or damages.
Our intellectual
property rights are valuable, and any inability to protect them could reduce the value of our products, services and brand.
Our future
success will depend, in large part, upon our intellectual property rights, including patents, copyrights, design rights, trade secrets, trademarks and know-how. We maintain a program of identifying technology appropriate for patent and trade secret
protection. Our practice is to require employees and consultants to execute non-disclosure and proprietary rights agreements upon commencement of employment or consulting arrangements. These agreements acknowledge our exclusive ownership of all
intellectual property developed by the individuals during their work for us and require that all proprietary information disclosed will remain confidential. Such agreements may not be enforceable in full or in part in all jurisdictions and any
breach could have a negative effect on our business and our remedy for such breach may be limited.
Despite our efforts, these measures can only
provide limited protection. Unauthorized third parties may try to copy or reverse engineer portions of our products, may breach our cybersecurity defenses or may otherwise obtain and use our intellectual property. Patents owned by us may be
invalidated, circumvented or challenged. Any of our pending or future patent applications, whether or not being currently challenged, may not be issued with the scope of the claims we seek, if at all. Legal standards relating to the validity,
enforceability and scope of protection of intellectual property rights in other countries are uncertain and may afford little or no effective protection for our proprietary rights. Consequently, we may be unable to prevent our intellectual property
rights from being exploited abroad. Policing the unauthorized use of our proprietary rights is expensive, difficult and, in some cases, impossible. Litigation may be necessary in the future to enforce or defend our intellectual property rights, to
protect our trade secrets or to determine the validity and scope of the proprietary rights of others. Such litigation could result in substantial costs and diversion of management resources, either of which could harm our business. Accordingly,
despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating our intellectual property. If we cannot protect our proprietary technology against unauthorized copying or use, we may not remain competitive.
Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to developing and
protecting their technology or intellectual property rights than we do. In addition, our attempts to protect our proprietary technology and intellectual property rights may be further limited as our employees may be recruited by our current or
future competitors and may take with them significant knowledge of our proprietary information. Consequently, others may develop services and methodologies that are similar or superior to our services and methodologies or may design around our
intellectual property.
We may be subject to intellectual property litigation that could divert our resources.
In recent years, there has been significant litigation involving patents and other intellectual property rights in our industry. To the extent we gain
greater market visibility, we face a higher risk of being the subject of intellectual property infringement claims. The risk of patent litigation has been amplified by the increase in the number of a type of patent holder, which we refer to as a
non-practicing entity, whose sole business is to assert such claims. We could incur substantial costs in prosecuting or defending any intellectual property litigation. If we sue to enforce our rights or are sued by a third party that claims that our
products infringe its rights, the litigation could be expensive and could divert our management resources.
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Confidentiality arrangements with employees and others may not adequately prevent disclosure of trade secrets and
other proprietary information.
We have devoted substantial resources to the development of our technology, business operations and business
plans. In order to protect our trade secrets and proprietary information, we rely in significant part on confidentiality arrangements with our employees, licensees, independent contractors, advisers, channel partners, resellers and customers. These
arrangements may not be effective to prevent disclosure of confidential information, including trade secrets, and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. In addition, if others
independently discover trade secrets and proprietary information, we would not be able to assert trade secret rights against such parties. Effective trade secret protection may not be available in every country in which our services are available or
where we have employees or independent contractors. The loss of trade secret protection could make it easier for third parties to compete with our products by copying functionality. In addition, any changes in, or unexpected interpretations of, the
trade secret and employment laws in any country in which we operate may compromise our ability to enforce our trade secret and intellectual property rights. Costly and time-consuming litigation could be necessary to enforce and determine the scope
of our proprietary rights, and failure to obtain or maintain trade secret protection could adversely affect our competitive business position.
We may be
subject to damages resulting from claims that our employees or contractors have wrongfully used or disclosed alleged trade secrets of their former employees or other parties.
We could in the future be subject to claims that employees or contractors, or we, have inadvertently or otherwise used or disclosed trade secrets or
other proprietary information of our competitors or other parties. Litigation may be necessary to defend against these claims. If we fail in defending against such claims, a court could order us to pay substantial damages and prohibit us from using
technologies or features that are essential to our products, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of these parties. In addition, we may lose valuable
intellectual property rights or personnel. A loss of key personnel or their work product could hamper or prevent our ability to develop, market and support potential products or enhancements, which could severely harm our business. Even if we are
successful in defending against these claims, such litigation could result in substantial costs and be a distraction to management.
We license technology
from third parties, and our inability to maintain those licenses could harm our business.
We incorporate technology, including software,
that we license from third parties into our products. We cannot be certain that our licensors are not infringing the intellectual property rights of third parties or that our licensors have sufficient rights to the licensed intellectual property in
all jurisdictions in which we may sell our products. Some of our agreements with our licensors may be terminated for convenience by them. If we are unable to continue to license any of this technology because of intellectual property infringement
claims brought by third parties against our licensors or against us, or if we are unable to continue our license agreements or enter into new licenses on commercially reasonable terms, our ability to develop and sell products containing that
technology would be severely limited, and our business could be harmed. Additionally if we are unable to license necessary technology from third parties, we may be forced to acquire or develop alternative technology of lower quality or performance
standards. This would limit and delay our ability to offer new or competitive products and increase our costs of production. As a result, our margins, market share and operating results could be significantly harmed.
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The use of open source software in our offerings may expose us to additional risks and harm our intellectual
property.
Open source software is typically freely accessible, usable and modifiable. Certain open source software licenses require a user
who intends to distribute the open source software as a component of the user’s software to disclose publicly part or all of the source code to the user’s software. In addition, certain open source software licenses require the user of
such software to make any derivative works of the open source code available to others on unfavorable terms or at no cost. This can subject previously proprietary software to open source license terms.
We monitor and control our use of open source software in an effort to avoid unanticipated conditions or restrictions on our ability to successfully
commercialize our products and believe that our compliance with the obligations under the various applicable licenses has mitigated the risks that we have triggered any such conditions or restrictions. However, such use may have inadvertently
occurred in the development and offering of our products. Additionally, if a third-party software provider has incorporated certain types of open source software into software that we have licensed from such third party, we could be subject to the
obligations and requirements of the applicable open source software licenses. This could harm our intellectual property position and have a material adverse effect on our business, results of operations and financial condition.
The terms of many open source software licenses have not been interpreted by U.S. or foreign courts, and there is a risk that those licenses could be
construed in a manner that imposes unanticipated conditions or restrictions on our ability to successfully commercialize our products. For example, certain open source software licenses may be interpreted to require that we offer our products that
use the open source software for no cost; that we make available the source code for modifications or derivative works we create based upon, incorporating or using the open source software (or that we grant third parties the right to decompile,
disassemble, reverse engineer, or otherwise derive such source code); that we license such modifications or derivative works under the terms of the particular open source license; or that otherwise impose limitations, restrictions or conditions on
our ability to use, license, host, or distribute our products in a manner that limits our ability to successfully commercialize our products.
We
could, therefore, be subject to claims alleging that we have not complied with the restrictions or limitations of the applicable open source software license terms or that our use of open source software infringes the intellectual property rights of
a third party. In that event, we could incur significant legal expenses, be subject to significant damages, be enjoined from further sale and distribution of our products that use the open source software, be required to pay a license fee, be forced
to reengineer our products, or be required to comply with the foregoing conditions of the open source software licenses (including the release of the source code to our proprietary software), any of which could adversely affect our business. Even if
these claims do not result in litigation or are resolved in our favor or without significant cash settlements, the time and resources necessary to resolve them could harm our business, results of operations, financial condition and reputation.
Additionally, the use of open source software can lead to greater risks than the use of third-party commercial software, as open source software does
not come with warranties or other contractual protections regarding indemnification, infringement claims or the quality of the code.
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Risks Related to Our Common Stock and this Offering
An active trading market for our common stock may not develop, and you may not be able to resell your shares of our common stock at or above the initial offering
price.
Before this offering, there was no public trading market for our common stock. If a market for our common stock does not develop or
is not sustained, it may be difficult for you to sell your shares of common stock at an attractive price, at the time that you would like to sell them, or at all. The initial public offering price of our common stock was determined through
negotiations between us and the underwriters. This initial public offering price may not be indicative of the market price of our common stock after the offering. We cannot predict the prices at which our common stock will trade. It is possible that
in one or more future periods our results of operations may be below the expectations of public market analysts and investors and, as a result of these and other factors, the price of our common stock may fall.
The market price of our common stock may be volatile, which could result in substantial losses for investors purchasing shares in this offering.
The market price of our common stock could be subject to significant fluctuations after this offering, and it may decline below the initial public
offering price. Some of the factors that may cause the market price of our common stock to fluctuate include:
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price and volume fluctuations in the overall stock market from time to time;
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volatility in the market price and trading volume of comparable companies;
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actual or anticipated changes in our earnings or fluctuations in our operating results or in the expectations of securities analysts;
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announcements of technological innovations, new products, strategic alliances, or significant agreements by us or by our competitors;
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announcements by our customers regarding significant increases or decreases in capital expenditures;
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departure of key personnel;
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litigation involving us or that may be perceived as having an impact on our business;
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changes in general economic, industry and market conditions and trends, including the recent economic slowdown in China;
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investors’ general perception of us;
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sales of large blocks of our stock; and
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announcements regarding further industry consolidation.
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In the past, following periods of volatility in
the market price of a company’s securities, securities class action litigation has often been brought against that company. Because of the potential volatility of our stock price, we may become the target of securities litigation in the future.
Securities litigation could result in substantial costs and divert management’s attention and resources from our business.
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Our quarterly operating results or other operating metrics may fluctuate significantly, which could cause the trading
price of our common stock to decline.
Our quarterly operating results and other operating metrics have fluctuated in the past and may
continue to fluctuate from quarter to quarter. We expect that this trend will continue as a result of a number of factors, many of which are outside of our control and may be difficult to predict, including:
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the level of demand for our products and our ability to maintain and increase our customer base;
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the timing and success of new product introductions by us or our competitors or any other change in the competitive landscape of our market;
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the mix of products sold in a quarter;
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pricing pressure as a result of competition or otherwise or price discounts negotiated by our customers;
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delays or disruptions in our supply or manufacturing chain;
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our ability to reduce manufacturing costs;
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errors in our forecasting of the demand for our products, which could lead to lower revenue or increased costs;
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seasonal buying patterns of some of our customers;
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introduction of new products, with initial sales at relatively small volumes with resulting higher product costs;
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increases in and timing of sales and marketing, research and development and other operating expenses that we may incur to grow and expand our operations and to remain competitive;
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insolvency, credit, or other difficulties faced by our customers, affecting their ability to purchase or pay for our products;
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insolvency, credit, or other difficulties confronting our suppliers and contract manufacturers leading to disruptions in our supply or distribution chain;
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levels of product returns and contractual price protection rights;
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adverse litigation judgments, settlements or other litigation-related costs;
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product recalls, regulatory proceedings or other adverse publicity about our products;
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fluctuations in foreign exchange rates;
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costs related to the acquisition of businesses, talent, technologies or intellectual property, including potentially significant amortization costs and possible write-downs; and
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Any one of the factors above
or the cumulative effect of some of the factors above may result in significant fluctuations in our operating results.
The variability and
unpredictability of our quarterly operating results or other operating metrics could result in our failure to meet our expectations or those of any analysts that cover us or investors with respect to revenue or other operating results for a
particular period. If we fail to meet or exceed such expectations for these or any other reasons, the market price of our common stock could fall substantially, and we could face costly lawsuits, including securities class action suits.
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We will have broad discretion in the use of the proceeds of this offering and may not use them effectively.
Our management will have broad discretion to use our net proceeds from this offering, and you will be relying on the judgment of our
management regarding the application of these proceeds. We expect to use the proceeds of this offering for working capital and other general corporate purposes. Because we will have broad discretion in the application of the net proceeds from this
offering, our management may fail to apply these funds effectively, which could adversely affect our ability to operate and grow our business. You will not have the opportunity to influence our decisions on how to use our net proceeds from this
offering.
If securities or industry analysts do not publish, or cease publishing, research or reports about us, our business or our market, or if they
publish negative evaluations of our stock or the stock of other companies in our industry, the price of our stock and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our
business, our market or our competitors. We do not currently have and may never obtain research coverage by industry or financial analysts. If no or few analysts commence coverage of us, the trading price of our stock would likely decrease. Even if
we do obtain analyst coverage, if one or more of the analysts covering our business downgrade their evaluations of our stock or the stock of other companies in our industry, the price of our stock could decline. If one or more of these analysts
cease to cover our stock, we could lose visibility in the market for our stock, which in turn could cause our stock price to decline.
Purchasers in this
offering will incur immediate and substantial dilution in the book value of their investment 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 and our pro forma net tangible book value per share after giving effect to this offering and the automatic conversion of all outstanding shares of our preferred stock upon completion of
this offering. Moreover, we issued warrants and options in the past to acquire common stock at prices significantly below the assumed initial public offering price. As of February 15, 2016, there were 245,000 shares subject to outstanding
warrants with a weighted-average exercise price of $1.61 per share and 2,409,278 shares subject to outstanding options with a weighted-average exercise price of $2.89 per share. To the extent that these outstanding warrants or options are
ultimately exercised, you will incur further dilution.
Because we do not expect to pay any dividends on our common stock for the foreseeable future,
investors in this offering may never receive a return on their investment.
You should not rely on an investment in our common stock to
provide dividend income. We do not anticipate that we will pay any cash dividends to holders of our common stock in the foreseeable future. Instead, we plan to retain any earnings to maintain and expand our existing operations. Accordingly,
investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any return on their investment. As a result, investors seeking cash dividends should not purchase our common stock.
Insiders will continue to have substantial control over us after this offering, which could limit your ability to influence the outcome of key transactions,
including a change of control.
After this offering, our directors and executive officers and their affiliates will beneficially own, in the
aggregate, approximately % of our outstanding common stock, assuming no exercise of the underwriters’ option to purchase additional shares of our common stock in this offering. As a result,
35
these stockholders could have significant influence over the outcome of matters submitted to our stockholders for approval, including the election of directors and any merger, consolidation or
sale of all or substantially all of our assets, and over the management and affairs of our company. This concentration of ownership 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.
Some of these persons or entities may have interests different than yours. For example, because many of these stockholders
purchased their shares at prices substantially below the price at which shares are being sold in this offering and have held their shares for a longer period, they may be more interested in selling our company to an acquirer than other investors or
may want us to pursue strategies that deviate from the interests of other stockholders.
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 “Underwriting” 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 the closing of
this offering, we will have shares of common stock outstanding based on the number of shares outstanding as of December 31, 2015. 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, and will be following the closing of this offering, 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 with respect to affiliate sales, in the near future as set forth below.
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Number of Shares and Percentage 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 due to lock-up agreements between the holders of these shares and the underwriters. However, the underwriters 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 February 15, 2016, there were 245,000 shares subject to outstanding warrants,
2,409,278 shares subject to outstanding options, 1,063,846 shares subject to outstanding restricted stock unit awards, or RSUs, 450,000 RSUs granted contingent upon the closing of this offering and an additional 542,642 shares
reserved for future issuance under our equity incentive plans that will become eligible for sale in the public market to the extent permitted by any applicable vesting requirements, lock-up agreements and Rules 144 and 701 under the Securities Act
of 1933, as amended. Moreover, after this offering, holders of an aggregate of 24,422,495 shares of our common stock as of February 15, 2016, 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 employee benefit plans. Once we register these
shares, they can be freely sold in the public market upon issuance, subject to the lock-up agreements and the restrictions imposed on our affiliates under Rule 144.
36
Anti-takeover provisions in our restated certificate of incorporation and our amended and restated bylaws, as well as
provisions of 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.
Our restated certificate of incorporation and amended and restated bylaws and Delaware law contain provisions that 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 delay attempts
by our stockholders to replace or remove our management. Our corporate governance documents include provisions:
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establishing a classified board of directors with staggered three-year terms so that not all members of our board are elected at one time;
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providing that directors may be removed by stockholders only for cause and only with a vote of the holders of at least 75% of the issued and outstanding shares of voting stock;
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limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;
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•
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requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;
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•
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authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock; and
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•
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limiting the liability of, and providing indemnification to, our directors and officers.
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As a Delaware
corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which limits the ability of stockholders holding more than 15% of our outstanding voting stock from engaging in
certain business combinations with us. Any provision of our amended and restated certificate of incorporation or amended and restated by-laws or Delaware law that has the effect of delaying or deterring a change in control could limit the
opportunity for our stockholders to receive a premium for their shares of our common stock, and could also affect the price that some investors are willing to pay for our common stock.
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 restated certificate provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and
our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.
Our restated certificate provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding
brought on our behalf; any action asserting a breach of fiduciary duty; any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws; or any action asserting a claim
against us that is governed by the internal affairs doctrine. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers
or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision
37
contained in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which
could adversely affect our business and financial condition.
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 Jumpstart Our Business Startups Act of 2012, or the JOBS Act, and may remain an emerging growth company until the last day of our fiscal year following the fifth anniversary of this offering subject to specified
conditions. For so long as we remain an emerging growth company, we are permitted, and intend, to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not emerging growth companies. These
exemptions include reduced disclosure obligations regarding executive compensation and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not
previously approved, not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act of 2002, and not being required to comply with any requirement that may be adopted by the Public Company
Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements. In this prospectus, we have not included all of the
executive compensation related information that would be required if we were not an emerging growth company. We cannot predict whether investors will find our common stock less attractive if we rely on these exemptions. If some investors find our
common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.
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 avail ourselves of this exemption from new or
revised accounting standards and, therefore, we will be subject to new or revised accounting standards that are applicable to other public companies that are not emerging growth companies. Accordingly, we will incur additional costs in connection
with complying with the accounting standards applicable to public companies and may incur further costs when the accounting standards are revised and updated.
Our management team has limited experience managing a public company.
Most members of our management team have limited experience managing a publicly traded company, interacting with public company investors and complying
with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company subject to significant regulatory oversight and reporting obligations under
the federal securities laws and the scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our management team and could divert their attention away from the day-to-day
management of our business, which could adversely affect our business, financial condition and operating results.
The requirements of being a public company
may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.
As a
public company, we will be subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, the listing requirements of the securities exchange on which our common stock will be traded and other
applicable securities rules and regulations. Compliance with these rules and regulations will increase our legal and financial compliance costs,
38
make some activities more difficult, time-consuming or costly, and increase demand on our systems and resources, particularly after we are no longer an emerging growth company. Among other
things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and operating results and maintain effective disclosure controls and procedures and internal control over financial reporting. In order
to maintain and, if required, improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s
attention may be diverted from other business concerns, which could harm our business and operating results. Although we have already hired additional employees to comply with these requirements, we may need to hire even more employees in the
future, which will increase our costs and expenses.
We are currently evaluating our internal controls, identifying and remediating deficiencies in
those internal controls and documenting the results of our evaluation, testing and remediation. We may not be able to complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing process, if we
identify one or more material weaknesses in our internal control over financial reporting that we are unable to remediate before the end of the same fiscal year in which the material weakness is identified, we will be unable to assert that our
internal controls are effective. If we are unable to assert that our internal control over financial reporting is effective, or if our auditors are unable to attest to management’s report on the effectiveness of our internal controls, we could
lose investor confidence in the accuracy and completeness of our financial reports, which would cause the price of our common stock to decline.
In
addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time consuming.
These laws, regulations, and standards are subject to varying interpretations, in many cases due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and
governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest resources to comply with evolving laws,
regulations and standards, and this investment may result in increased general and administrative expense and a diversion of management’s time and attention from revenue-generating activities to compliance activities. If our efforts to comply
with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business may be harmed.
We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer
liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board of directors,
particularly to serve on our Audit Committee and Compensation Committee, and qualified executive officers.
39
CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements. All statements other than statements of historical fact contained in this prospectus, including
statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. These statements involve known and unknown risks,
uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements.
In some cases, you can identify forward-looking statements by terms such as “may,” “should,” “expects,” “plans,”
“anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or
the negative of these terms or other similar expressions. The forward-looking statements in this prospectus are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events
and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this prospectus and are subject to a number of risks, uncertainties and
assumptions described in the “Risk Factors” section and elsewhere in this prospectus. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not
rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the
forward-looking statements. Some of the key factors that could cause actual results to differ from our expectations include:
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our expectations regarding our expenses and revenue, our ability to maintain and expand gross profit, the sufficiency of our cash resources and needs for additional financing;
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our anticipated growth strategies;
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our expectations regarding competition;
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the anticipated trends and challenges in our business and the market in which we operate;
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•
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our expectations regarding, and the stability of our, supply chain and manufacturing;
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•
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the scope, progress, expansion, and costs of developing and commercializing our products;
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the size and growth of the potential markets for our products and the ability to serve those markets;
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the rate and degree of market acceptance of any of our products;
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our ability to establish and maintain development partnerships;
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our ability to attract or retain key personnel;
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our expectations regarding federal, state and foreign regulatory requirements, including export controls, tax law changes and interpretations, economic sanctions and anti-corruption regulations;
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regulatory developments in the United States and foreign countries;
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•
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our ability to obtain and maintain intellectual property protection for our products; and
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our use of proceeds from this offering.
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Except as required by applicable law, we do not plan to
publicly update or revise any forward-looking statements contained herein until after we distribute this prospectus, whether as a result of any new information, future events or otherwise.
40
USE OF PROCEEDS
We estimate that the net proceeds to us from the sale of our common stock in this offering will be approximately
$ million, assuming an initial public offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus, and
after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares of common stock, if any, by the selling stockholders. If the underwriters fully
exercise their option to purchase additional shares in this offering, we estimate that our net proceeds will be approximately $ million.
A $1.00 increase (decrease) in the assumed initial public offering price of $ per share would increase
(decrease) our net proceeds from this offering by approximately $ 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.
We intend to use the net proceeds
of this offering for working capital and general corporate purposes. In addition, we believe that opportunities may exist from time to time to expand our current business through acquisitions of or investments in complementary products, technologies
or businesses. While we have no current agreements, commitments or understandings for any specific acquisitions at this time, we may use a portion of our net proceeds for these purposes.
Pending use of the proceeds as described above, we intend to invest the proceeds in short-term, interest-bearing obligations, investment-grade
securities, certificates of deposit or direct or guaranteed obligations of the U.S. government. The goal with respect to the investment of these net proceeds will be capital preservation and liquidity so that these funds are readily available to
fund our operations.
41
DIVIDEND POLICY
We have never declared or paid any dividends on our capital stock. We intend to retain future earnings, if any, to finance the operation and expansion
of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to declare dividends will be subject to the discretion of our board of directors and applicable law, subject to compliance with
certain covenants under our credit facility with Silicon Valley Bank which restrict our ability to pay dividends, and will depend on various factors, including our results of operations, financial condition, prospects and any other factors deemed
relevant by our board of directors.
42
CAPITALIZATION
The following table sets forth our cash and cash equivalents and capitalization as of December 31, 2015, as follows:
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on a pro forma basis to give effect to the automatic conversion of all outstanding shares of our convertible preferred stock as of December 31, 2015, into an aggregate of 24,177,495 shares of common stock, as well as
the conversion of our outstanding warrants exercisable for 245,000 shares of preferred stock into warrants exercisable for 245,000 shares of common stock and the related reclassification of $3.3 million of other long-term liabilities into
stockholders’ equity immediately prior to the closing of this offering; and
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•
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on a pro forma as adjusted basis to give effect to our sale of shares of common stock in this offering at an assumed initial public offering price
of $ per share, which is the midpoint of the initial public offering price range listed on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and
estimated offering expenses payable by us.
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You should read this information in conjunction with our consolidated financial statements
and the related notes appearing at the end of this prospectus and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section and other financial information contained in this prospectus.
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As of December 31, 2015
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Actual
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Pro Forma
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Pro Forma
As Adjusted
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(in thousands, except share and per share amounts)
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Cash and cash equivalents
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$
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27,610
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$
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27,610
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Redeemable convertible preferred stock warrant liability
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3,254
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—
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Redeemable convertible preferred stock, $0.0001 par value, 24,507,681 shares authorized, 24,177,495 shares issued and outstanding, actual; no
shares issued or outstanding, pro forma and pro forma as adjusted
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70,780
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—
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Stockholders’ equity:
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Common stock, $0.0001 par value: 36,330,000 shares authorized; 6,668,722 shares issued and outstanding, actual; 36,330,000 shares
authorized, 30,846,217 shares issued and outstanding, pro forma; 150,000,000 shares authorized, shares issued and outstanding pro forma as adjusted
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1
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3
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Additional paid-in capital
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—
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74,032
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Retained earnings
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8,015
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8,015
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Total stockholders’ equity
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8,016
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82,050
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Total
capitalization
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$
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78,796
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$
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82,050
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A $1.00 increase (decrease) in the assumed initial public offering price of
$ per share, which is the midpoint of the range listed on the cover page of this prospectus, would increase (decrease) the pro forma as adjusted amount of each of cash and cash equivalents, total
stockholders’ equity and total cash and cash equivalents and capitalization by approximately $ , 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.
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The table above is illustrative only and does not include:
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2,471,559 shares of common stock issuable upon the exercise of options outstanding under our 2009 Stock Plan as of December 31, 2015, with a weighted-average exercise price of $2.85 per share;
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1,063,846 shares of common stock issuable upon the vesting of RSUs outstanding under our 2009 Stock Plan as of December 31, 2015;
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450,000 shares of common stock issuable upon the vesting of RSUs granted under our 2016 Equity Incentive Plan contingent on the closing of this offering;
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245,000 shares of common stock issuable upon the exercise of preferred stock warrants outstanding as of December 31, 2015, with a weighted-average exercise price of $1.61 per share, which will convert into common stock
warrants immediately prior to the closing of this offering; and
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3,455,017 shares of common stock reserved for future issuance under our stock-based compensation plans, including 535,017 shares of common stock reserved for issuance under our 2009 Stock Plan, 2,220,000 shares of
common stock reserved for issuance under our 2016 Equity Incentive Plan, and 700,000 shares of common stock reserved for issuance under our 2016 Employee Stock Purchase Plan. Immediately prior to the effectiveness of the registration statement of
which this prospectus is a part, any remaining shares available for issuance under our 2009 Stock Plan will be added to the shares reserved under our 2016 Equity Incentive Plan and we will cease granting awards under the 2009 Stock Plan. Our 2016
Equity Incentive Plan also provides for automatic annual increases in the number of shares reserved thereunder, as more fully described in “Executive Compensation—Stock Option and Other Compensation Plans.”
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44
DILUTION
If you invest in our common stock in this offering, your ownership interest will be immediately diluted to the extent of the difference between the
initial public offering price per share and the pro forma as adjusted net tangible book value per share of our common stock after this offering.
The historical net tangible book value of our common stock as of December 31, 2015 was $8.0 million, or $1.17 per share of our common stock.
Historical net tangible book value per share represents the amount of our total tangible assets less our total liabilities and our preferred stock, divided by the number of shares of our common stock outstanding as of December 31, 2015, which
includes 191,546 shares of unvested restricted stock.
The pro forma net tangible book value of our common stock as of December 31, 2015 was
$ million, or approximately $ per share of our pro forma outstanding common stock. Pro forma net tangible book value per share represents the amount of
our total tangible assets less our total liabilities, divided by the pro forma number of shares of our common stock outstanding as of December 31, 2015, which includes 191,546 shares of unvested restricted stock, after giving effect to the
conversion of all outstanding shares of our convertible preferred stock as of December 31, 2015 into an aggregate of 24,177,495 shares of common stock, as well as the conversion of our outstanding warrants exercisable for 245,000 shares of preferred
stock into warrants exercisable for 245,000 shares of common stock and the related reclassification of $3.3 million of other long-term liabilities into stockholders’ equity immediately prior to the closing of this offering.
After giving effect to (1) the sale of shares of common stock that we are
offering at an assumed initial public offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus, and after deducting estimated underwriting discounts
and commissions and estimated offering expenses payable by us, and (2) the pro forma transactions and other adjustments described in the preceding paragraph, our pro forma net tangible book value as of December 31, 2015 would have been
approximately $ million, or approximately $ per share. This amount represents an immediate increase in net tangible book value of
$ per share to our existing stockholders and an immediate dilution in net tangible book value of approximately $ per share to new investors purchasing
shares of common stock in this offering. We determine dilution by subtracting the pro forma net tangible book value per share after this offering from the amount of cash that a new investor paid for a share of common stock. The following table
illustrates this dilution:
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Assumed initial public offering price per share
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Historical net tangible book value per share as of December 31, 2015
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$1.17
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Pro forma increase in net tangible book value per share attributable to the conversion of outstanding preferred stock, including the conversion
of outstanding warrants exercisable for preferred stock
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Pro forma net tangible book value per share before this offering
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Increase in pro forma net tangible book value per share attributable to this offering
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Pro forma as adjusted net tangible book value per share after this offering
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Pro forma as adjusted dilution per share to purchasers of common stock in this offering
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A $1.00 increase (decrease) in the assumed initial public offering price of
$ per share, which is the midpoint of the range listed on the cover page of this prospectus, would increase (decrease) the pro forma net tangible book value per share after this offering by
approximately $ , and dilution in
45
net tangible book value per share to new investors by approximately $ , 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.
If the underwriters fully exercise their option to purchase additional shares in this offering, the pro forma net tangible book value after the offering
would be $ per share, the increase in net tangible book value per share to existing stockholders would be $ and the dilution per share to new investors
would be $ per share, in each case assuming an initial public offering price of $ per share, which is the midpoint of the range listed on the cover page
of this prospectus.
The following table summarizes, as of December 31, 2015, the differences between the number of shares purchased from us,
after giving effect to the conversion of our convertible preferred stock into common stock, the total consideration paid to us in cash and the average price per share that existing stockholders and new investors paid. The calculation below is based
on an assumed initial public offering price of $ per share, which is the midpoint of the range listed on the cover page of this prospectus, before deducting estimated underwriting discounts and
commissions and estimated offering expenses payable by us.
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Shares Purchased
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Total Consideration
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Average
Price
Per Share
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Number
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Percent
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Amount
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Percent
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Existing stockholders
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%
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$
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%
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$
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|
|
New investors
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
100
|
%
|
|
|
|
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
If the underwriters’ option to purchase additional shares from the selling stockholders is exercised in full, sales
of shares of common stock by the selling stockholders in this offering will reduce the number of shares of common stock held by existing stockholders to
, or approximately % of the total shares of common stock outstanding after this offering, and will increase the number of shares
held by new investors to , or approximately % of the total shares of common stock outstanding after this offering.
After giving effect to the sale of shares in this offering by us and the selling stockholders, if the underwriters fully exercise their option to
purchase additional shares in this offering, our existing stockholders would own , or approximately % of the total shares of
common stock outstanding after this offering, and our new investors would own , or approximately % of the total number of
shares of our common stock outstanding after this offering.
The foregoing tables and calculations are based on 31,037,763 shares of our common
stock outstanding as of December 31, 2015, including 191,546 shares of unvested restricted stock, and exclude:
|
|
•
|
|
2,471,559 shares of common stock issuable upon the exercise of options outstanding under our 2009 Stock Plan as of December 31, 2015, with a weighted-average exercise price of $2.85 per share;
|
|
|
•
|
|
1,063,846 shares of common stock issuable upon the vesting of RSUs outstanding under our 2009 Stock Plan as of December 31, 2015;
|
|
|
•
|
|
450,000 shares of common stock issuable upon the vesting of RSUs granted under our 2016 Equity Incentive Plan contingent on the closing of this offering;
|
|
|
•
|
|
245,000 shares of common stock issuable upon the exercise of preferred stock warrants outstanding as of December 31, 2015, at a weighted-average exercise price of $1.61 per share; and
|
|
|
•
|
|
3,455,017 shares of common stock reserved for future issuance under our stock-based compensation plans, including 535,017 shares of common stock reserved for
issuance under
|
46
|
|
our 2009 Stock Plan, 2,220,000 shares of common stock reserved for issuance under our 2016 Equity Incentive Plan, and 700,000 shares of common stock reserved for issuance under our 2016
Employee Stock Purchase Plan. Immediately prior to the effectiveness of the registration statement of which this prospectus is a part, any remaining shares available for issuance under our 2009 Stock Plan will be added to the shares reserved under
our 2016 Equity Incentive Plan and we will cease granting awards under the 2009 Stock Plan. Our 2016 Equity Incentive Plan also provides for automatic annual increases in the number of shares reserved thereunder, as more fully described in
“Executive Compensation—Stock Option and Other Compensation Plans.”
|
To the extent any of these outstanding options
or warrants are exercised, there will be further dilution to new investors. To the extent all of such outstanding options and warrants had been exercised as of December 31, 2015, the pro forma as adjusted net tangible book value per share after this
offering would be $ , and the total dilution per share to new investors would be $ .
If the underwriters fully exercise their option to purchase additional shares in this offering:
|
|
•
|
|
the percentage of shares of common stock held by existing stockholders will decrease to approximately % of the total number of shares of our common stock outstanding after this offering; and
|
|
|
•
|
|
the number of shares held by new investors will increase to , or approximately % of the total
number of shares of our common stock outstanding after this offering.
|
We may choose to raise additional capital due to market
conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or securities convertible into equity, the
issuance of these securities may result in further dilution to our stockholders.
47
SELECTED CONSOLIDATED FINANCIAL DATA
The consolidated statement of operations data for the years ended December 31, 2013, 2014 and 2015, and the selected consolidated balance sheet
data as of December 31, 2014 and 2015, are derived from our audited consolidated financial statements and related notes included elsewhere in this prospectus. You should read the following selected consolidated financial data in conjunction
with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes appearing elsewhere in this prospectus.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
(in thousands, except per share
amounts)
|
|
|
Consolidated Statements of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
77,652
|
|
|
$
|
146,234
|
|
|
$
|
239,056
|
|
|
Cost of revenue(1)
|
|
|
47,983
|
|
|
|
93,558
|
|
|
|
145,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
29,669
|
|
|
|
52,676
|
|
|
|
93,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development(1)
|
|
|
24,248
|
|
|
|
28,471
|
|
|
|
38,645
|
|
|
Sales, general and administrative(1)
|
|
|
5,099
|
|
|
|
6,615
|
|
|
|
13,124
|
|
|
Loss on disposal of property and equipment
|
|
|
745
|
|
|
|
108
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
30,092
|
|
|
|
35,194
|
|
|
|
51,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(423
|
)
|
|
|
17,482
|
|
|
|
41,937
|
|
|
Total other expense, net
|
|
|
(770
|
)
|
|
|
(1,029
|
)
|
|
|
(2,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(1,193
|
)
|
|
|
16,453
|
|
|
|
39,805
|
|
|
Provision (benefit) for income taxes
|
|
|
—
|
|
|
|
2,933
|
|
|
|
(715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(1,193
|
)
|
|
|
13,520
|
|
|
|
40,520
|
|
|
Net (loss) income attributable to common stockholders—basic and diluted(2)
|
|
$
|
(4,971
|
)
|
|
$
|
1,728
|
|
|
$
|
7,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share attributable to common stockholders(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.12
|
)
|
|
$
|
0.31
|
|
|
$
|
1.18
|
|
|
Diluted
|
|
$
|
(1.12
|
)
|
|
$
|
0.23
|
|
|
$
|
0.91
|
|
|
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,429
|
|
|
|
5,629
|
|
|
|
6,429
|
|
|
Diluted
|
|
|
4,429
|
|
|
|
7,447
|
|
|
|
8,311
|
|
|
Pro forma net income per share attributable to common stockholders (unaudited)(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
$
|
1.39
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
$
|
1.30
|
|
|
|
|
|
|
|
Pro forma weighted-average shares used to compute net income per share attributable to common stockholders (unaudited)(2):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
30,606
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
32,733
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
(in thousands)
|
|
|
Other Operational and Financial Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP gross profit(3)
|
|
$
|
29,694
|
|
|
$
|
52,693
|
|
|
$
|
93,781
|
|
|
Non-GAAP income from operations(3)
|
|
$
|
1,081
|
|
|
$
|
17,889
|
|
|
$
|
42,762
|
|
|
Non-GAAP net income(3)
|
|
$
|
405
|
|
|
$
|
14,410
|
|
|
$
|
32,310
|
|
|
Adjusted EBITDA(3)
|
|
$
|
3,550
|
|
|
$
|
20,395
|
|
|
$
|
47,495
|
|
48
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
2014
|
|
|
December 31,
2015
|
|
|
|
|
(in thousands)
|
|
|
Consolidated Balance Sheet Data:
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
21,128
|
|
|
$
|
27,610
|
|
|
Working capital
|
|
|
31,710
|
|
|
|
55,147
|
|
|
Total assets
|
|
|
65,660
|
|
|
|
130,744
|
|
|
Long-term debt, including current portion
|
|
|
2,115
|
|
|
|
—
|
|
|
Total liabilities
|
|
|
28,409
|
|
|
|
51,948
|
|
|
Redeemable convertible preferred stock
|
|
|
66,427
|
|
|
|
70,780
|
|
|
Total stockholders’ (deficit) equity
|
|
|
(29,176
|
)
|
|
|
8,016
|
|
|
(1)
|
Includes stock-based compensation expense related to options granted to employees and others as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
(in thousands)
|
|
|
Cost of revenue
|
|
$
|
25
|
|
|
$
|
17
|
|
|
$
|
75
|
|
|
Research and development
|
|
|
960
|
|
|
|
258
|
|
|
|
561
|
|
|
Sales, general and administrative
|
|
|
519
|
|
|
|
132
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
|
|
$
|
1,504
|
|
|
$
|
407
|
|
|
$
|
825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2)
|
See Notes 2, 3, and 12 to our consolidated financial statements included elsewhere in this prospectus for an explanation of the calculations of our net income (loss) per share attributable to common stockholders, basic
and diluted, and pro forma net income per share attributable to common stockholders, basic and diluted.
|
|
(3)
|
See “—Non-GAAP Financial Measures” for information regarding our use of these non-GAAP financial measures and a reconciliation of such measures to their nearest GAAP equivalents.
|
Non-GAAP Financial Measures
To supplement our consolidated
financial statements presented in accordance with GAAP, we monitor and consider non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income and adjusted EBITDA, which are non-GAAP financial measures. These non-GAAP financial measures
are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly-titled measures presented by other companies.
Non-GAAP gross profit.
We define non-GAAP gross profit as gross profit as reported on our consolidated statements of
operations, excluding the impact of stock-based compensation, which is a non-cash charge. We have presented non-GAAP gross profit because we believe that the exclusion of stock-based compensation allows for more accurate comparisons of our results
of operations to other companies in our industry.
Non-GAAP income from operations
. We define non-GAAP income from
operations as income from operations as reported on our consolidated statements of operations, excluding the impact of stock-based compensation. We have presented non-GAAP income from operations because we believe that the exclusion of stock-based
compensation allows for more accurate comparisons of our results of operations to other companies in our industry.
Non-GAAP net
income
. We define non-GAAP net income as net income as reported on our consolidated statements of operations, excluding the impact of stock-based compensation and preferred stock warrant liability, both of which are
non-cash charges, and the effect of an income tax benefit related
49
to the release and reversal of a valuation allowance against deferred tax assets and the tax impact on those excluded items. We have presented non-GAAP net income because we believe that the
exclusion of stock-based compensation, preferred stock warrant liability and the reversal of the valuation allowance allows for more accurate comparisons of our results of operations to other companies in our industry.
Adjusted EBITDA.
We define adjusted EBITDA as our net income excluding stock-based compensation and preferred stock
warrant liability; interest expense; depreciation; and our provision for income taxes. We have presented adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our operating performance,
to establish budgets and to develop operational goals for managing our business. In particular, we believe that the exclusion of the expenses eliminated in calculating adjusted EBITDA can provide a useful measure for period-to-period comparisons of
our core operating performance.
We use these non-GAAP financial measures to evaluate our operating performance and trends and make planning
decisions. We believe that each of these non-GAAP financial measures help identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude. Accordingly, we believe that these financial measures
provide useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects, and allowing for greater transparency with respect to key
financial metrics used by our management in its financial and operational decision-making.
Our non-GAAP financial measures are not prepared in
accordance with GAAP, and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures rather than gross
profit, (loss) income from operations or net (loss) income, which are the nearest GAAP equivalents. Some of these limitations are:
|
|
•
|
|
we exclude stock-based compensation expense from each of our non-GAAP financial measures, as it has recently been, and will continue to be for the foreseeable future, a significant recurring expense for our business and
an important part of our compensation strategy;
|
|
|
•
|
|
we exclude the revaluation of our preferred stock warrant liability from our non-GAAP net income and adjusted EBITDA measures, as it has historically been a recurring non-cash charge but it will not recur in the periods
following the completion of this offering;
|
|
|
•
|
|
adjusted EBITDA excludes depreciation expense and, although these are non-cash expenses, the assets being depreciated may have to be replaced in the future;
|
|
|
•
|
|
adjusted EBITDA does not reflect interest expense, or the cash requirements necessary to service interest, which reduces cash available to us;
|
|
|
•
|
|
adjusted EBITDA does not reflect income tax payments that reduce cash available to us; and
|
|
|
•
|
|
the expenses and other items that we exclude in our calculation of adjusted EBITDA may differ from the expenses and other items, if any, that other companies may exclude from adjusted EBITDA when they report their
operating results.
|
We believe that providing these non-GAAP measures to our investors, in addition to providing the corresponding
income statement measures, provides investors the benefit of viewing our performance using the same financial metrics that our management team uses in making many key decisions and evaluating how our results of operations may look in the future. Our
management does not believe that items not involving cash expenditures, such as non-cash compensation related to stock options and redeemable convertible preferred stock warrant liability costs derived from mark-to-market
50
adjustments, are part of our critical decision making process. Therefore, we exclude those items from non-GAAP gross profit, non-GAAP income from operations, non-GAAP net income and adjusted
EBITDA.
Because of these limitations, adjusted EBITDA should be considered along with other operating and financial performance measures presented
in accordance with GAAP.
Our non-GAAP measures have limitations as analytical tools and you should not consider them in isolation or as a
substitute for an analysis of our results under GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. Non-GAAP gross profit, income from operations and net income are
not substitutes for gross profit, income from operations or net income. In addition, other companies may calculate non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the
usefulness of our non-GAAP financial measures as tools for comparison. Adjusted EBITDA excludes some costs, namely, non-cash stock-based compensation, interest expense and provision for income taxes, which are recurring, and therefore does not
reflect the non-cash impact of stock-based compensation or working capital needs that will continue for the foreseeable future.
The following
tables reconcile the most directly comparable GAAP financial measure to each of these non-GAAP financial measures.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
(in thousands)
|
|
|
Non-GAAP Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
$
|
29,669
|
|
|
$
|
52,676
|
|
|
$
|
93,706
|
|
|
Stock-based compensation—cost of revenue
|
|
|
25
|
|
|
|
17
|
|
|
|
75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP gross profit
|
|
$
|
29,694
|
|
|
$
|
52,693
|
|
|
$
|
93,781
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP gross profit margin
|
|
|
38.2
|
%
|
|
|
36.0
|
%
|
|
|
39.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
(in thousands)
|
|
|
Non-GAAP Income from Operations
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
$
|
(423
|
)
|
|
$
|
17,482
|
|
|
$
|
41,937
|
|
|
Stock-based compensation
|
|
|
1,504
|
|
|
|
407
|
|
|
|
825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP income from operations
|
|
$
|
1,081
|
|
|
$
|
17,889
|
|
|
$
|
42,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
(in thousands)
|
|
|
Non-GAAP Net Income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(1,193
|
)
|
|
$
|
13,520
|
|
|
$
|
40,520
|
|
|
Stock-based compensation
|
|
|
1,504
|
|
|
|
407
|
|
|
|
825
|
|
|
Change in fair value of preferred stock warrant liability
|
|
|
94
|
|
|
|
483
|
|
|
|
2,154
|
|
|
Reversal of valuation allowance
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,142
|
)
|
|
Tax effect of excluded items
|
|
|
—
|
|
|
|
—
|
|
|
|
(47
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income
|
|
$
|
405
|
|
|
$
|
14,410
|
|
|
$
|
32,310
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
(in thousands)
|
|
|
Adjusted EBITDA
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(1,193
|
)
|
|
$
|
13,520
|
|
|
$
|
40,520
|
|
|
Stock-based compensation
|
|
|
1,504
|
|
|
|
407
|
|
|
|
825
|
|
|
Change in fair value of preferred stock warrant liability
|
|
|
94
|
|
|
|
483
|
|
|
|
2,154
|
|
|
Depreciation
|
|
|
2,629
|
|
|
|
2,662
|
|
|
|
4,576
|
|
|
Interest expense, net
|
|
|
516
|
|
|
|
390
|
|
|
|
135
|
|
|
Provision (benefit) for income taxes
|
|
|
—
|
|
|
|
2,933
|
|
|
|
(715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted EBITDA
|
|
$
|
3,550
|
|
|
$
|
20,395
|
|
|
$
|
47,495
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
You should read the
following discussion of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this prospectus. The following discussion
contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include
those discussed below and elsewhere in this prospectus, particularly in the section titled “Risk Factors.” In this discussion, we use financial measures that are considered non-GAAP financial measures under Securities and Exchange
Commission rules. These rules require supplemental explanation and reconciliation, which is included elsewhere in this prospectus. Investors should not consider non-GAAP financial measures in isolation from or in substitution for, financial
information presented in compliance with GAAP.
Company Overview
Our mission is to deliver high-speed coherent optical interconnect products that transform communications networks, relied upon by cloud infrastructure
operators and content and communication service providers, through improvements in performance and capacity and a reduction in associated costs. By converting optical interconnect technology to a silicon-based technology, a process we refer to as
the siliconization of optical interconnect, we believe we are leading a disruption that is analogous to the computing industry’s integration of multiple functions into a microprocessor. Our products include a series of low-power coherent
digital signal processor application-specific integrated circuits, or DSP ASICs, and silicon photonic integrated circuits, or silicon PICs, which we have integrated into families of optical interconnect modules with transmission speeds ranging from
40 to 400 gigabits per second, or Gbps, for use in long-haul, metro and inter-data center markets. We are also developing optical interconnect modules that will enable transmission speeds of one terabit (1,000 gigabits) per second and more. Our
modules perform a majority of the digital signal processing and optical functions in optical interconnects and offer low power consumption, high density and high speeds at attractive price points.
For the years ended December 31, 2013, 2014 and 2015, we generated 79.5%, 77.7% and 72.6% of our revenue, respectively, from our five largest
customers over these periods.
Key Business Metrics
In addition to the measures presented in our consolidated financial statements, we use the following key business metrics to evaluate our business,
measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
(in thousands)
|
|
|
Non-GAAP Gross Profit
|
|
$
|
29,694
|
|
|
$
|
52,693
|
|
|
$
|
93,781
|
|
|
Non-GAAP Income from Operations
|
|
$
|
1,081
|
|
|
$
|
17,889
|
|
|
$
|
42,762
|
|
|
Non-GAAP Net Income
|
|
$
|
405
|
|
|
$
|
14,410
|
|
|
$
|
32,310
|
|
|
Adjusted EBITDA
|
|
$
|
3,550
|
|
|
$
|
20,395
|
|
|
$
|
47,495
|
|
These key business metrics are non-GAAP financial measures. Please see “Selected Consolidated Financial
Data—Non-GAAP Financial Measures” for information regarding the limitations of using these financial measures and for a reconciliation of non-GAAP gross profit to gross profit, of non-GAAP income from operations to income from operations,
of non-GAAP net income to net income and of adjusted EBITDA to net income, in each case the most directly comparable financial measure calculated in accordance with GAAP.
53
Key Factors Affecting our Performance
We believe that our future success will depend on many factors, including our ability to expand sales to our existing customers and add new customers
over time. While these areas present significant opportunity, they also present risks that we must manage to ensure successful results. See “Risk Factors” for a discussion of these risks. If we are unable to address these challenges, our
business could be adversely affected.
Network Service Provider Investment in High-Speed Optical Equipment.
Cloud and
service providers are continuing to invest in higher capacity networks to support the continued growth in demand for data traffic. We believe that 100 Gbps and 400 Gbps coherent optical technologies will continue to replace older technologies in
long-haul, metro and inter-data center networks. Our business and results depend on the continued investment by network service providers in these advanced networks.
Expanding Sales to Existing Customer Base.
We expect that a substantial portion of our future sales will be follow-on
sales to existing customers. One of our sales strategies is to maintain a high level of customer satisfaction by delivering our products with compelling value propositions. We believe that our current customers present us with significant
opportunities for additional product sales given the existing and expected market share of these customers and our prior sales experience with them. We also believe that our customers will continue to design our products into their network equipment
products in an effort to maintain and potentially grow their market share over time as growth in the overall market for optical interconnect continues to grow. Our customers have historically shown a high propensity to purchase new products from us
over multiple quarters and in many cases over multiple years at increasing volumes. In addition, several of our customers have elected to integrate an increasing number of our products into their network equipment product lines. For example, the
eight customers who first purchased products from us in 2011 generated $12.7 million of revenue in 2011 compared to $174.9 million of revenue in 2015, representing a compound annual growth rate of 93%. For the period of 2011 through 2015, these
eight customers generated cumulative revenue of $400.7 million.
Adding New Customers.
We believe that the metro
and inter-data center markets are still in the early stages of adoption. We intend to add new customers over time by continuing to invest in our technology and business development team to capitalize on these new opportunities. Our products and
technology have accelerated the rate at which optical interconnect technology can be easily deployed and designed into newer generation network equipment, thus making it easier to integrate our products across many system applications. Generally, we
educate prospective customers in these markets about the technical merits and capabilities of our products, the potential cost savings of our products and the costs of designing and utilizing internally developed solutions. We build relationships
with prospective customers at all levels in a customer’s organizational hierarchy. We believe that customer references and our existing customers’ ability to gain market share combined with our product and technology strengths and
capabilities have been, and will continue to be, an important factor in winning new business.
Selling More Highly Integrated and
Higher-Performance Products.
Our results of operations have been, and we believe will continue to be, affected by our ability to design and sell more highly integrated products with improved performance and increased
functionality. We aim to grow our revenue and expand our margins by enabling customers to transition from previously deployed 10 Gbps and 40 Gbps solutions to our 100 Gbps and 400 Gbps modules and demonstrate the value proposition to the
growing number of metro and inter-data center network equipment designers and manufacturers. Our ability to sustain our revenue growth and gross margin improvement will depend, in part, upon our continued sales of our newer, more integrated and
higher performance products, and our quarterly results of operations can be significantly impacted by the mix of products sold during the period.
54
Investing in Research and Development for Growth.
We believe that the market
for our optical interconnect technology products is still in the early stages of adoption and we intend to continue investing for long-term growth. We expect to continue to invest heavily in coherent digital signal processing, optics integration,
silicon photonics, hardware engineering and software, all of which afford ongoing vertical integration of components into our core technologies. By investing in research and development, we believe we will be well positioned to continue to design
new products and grow our business and take advantage of our large market opportunity. We expect that our results of operations will be impacted by the timing and size of these investments.
Customer Concentration.
During 2013, 2014 and 2015, our five largest customers in each period (which differed by period)
accounted for 79.5%, 77.7% and 72.6% of our revenue, respectively. During 2013, 2014 and 2015, our largest customer in each period accounted for 32.1%, 35.4% and 27.6% of our revenue, respectively. We expect continued variability in our customer
concentration and timing of sales on a quarterly and annual basis. In addition, we have provided, and may in the future provide, annual and semi-annual pricing reductions and pricing discounts to large volume customers, which may result in lower
margins for the period in which such sales occur. Our gross margins may also fluctuate as a result of the timing of such sales and the mix of products sold to large volume customers.
Key Components of our Results of Operations
Revenue
We derive substantially all of our revenue from the sale of our products within our 100, 400 and 40 Gbps product families, which we sell through our
direct sales force. We sell a substantial majority of our products to network equipment manufacturers for ultimate sale to communications and content service providers and data center and cloud infrastructure operators, which we refer to together as
cloud and service providers, and we expect network equipment manufacturer customers to be the primary market for our products for the foreseeable future. Our negotiated terms and conditions of sale do not allow for product returns.
Our revenue is affected by changes in the number, product mix and average selling prices of our products. We also have experienced declines in revenue
in the fourth quarter compared to the third quarter due to our customers’ ability to delay or reschedule shipments under the terms of their contracts with us. Our product revenue is typically characterized by a life cycle that begins with sales
of pre-production samples and prototypes followed by the sale of early production models with higher average selling prices and lower volumes, followed by broader market adoption, higher volumes, and average selling prices that are lower than
initial levels. In addition, our product revenue may be affected by contractual commitments to significant customers that obligate us to reduce the selling price of our products on an annual or semi-annual basis.
Cost of Revenue
Our cost of revenue is comprised
primarily of the costs of procuring goods from our contract manufacturers and other suppliers. In addition, cost of revenue includes assembly, test, quality assurance, warranty and logistics-related fees, impacts of manufacturing yield, and costs
associated with excess and obsolete inventory.
Personnel-related expenses include salaries, benefits and stock-based compensation, as well as
consulting fees for those personnel engaged in the management of our contract manufacturers, new product manufacturing activities, logistical support and manufacturing and test engineering and supply chain management.
55
Gross Profit
Our gross profit has been, and may in the future be, influenced by several factors including changes in product mix, sales of more highly integrated
products, target end markets for our products, pricing due to competitive pressure, and favorable and unfavorable changes in production costs, including global demand for electronic components used in our products. As some products mature and unit
volumes increase, the average selling prices of those products may decline. These declines often coincide with improvements in manufacturing yields and lower wafer, component, assembly and test costs, which lower production costs and may offset some
of the margin reduction that results from lower selling prices. We anticipate that our newer modules, which integrate our silicon PIC, will contribute higher gross profit over time than some of our older products, because the integration of our
silicon PIC into these products eliminates the need for us to purchase several high-cost discrete components for the same level of functionality, thus improving margins on these products. In addition, we plan to shift the manufacturing of some of
our high volume products to contract manufacturers located in lower-cost regions, which would decrease the cost of the manufacturing of these products and correspondingly improve margins. Although we primarily procure and sell our products in U.S.
dollars, our contract manufacturers incur many costs, including labor and component costs, in other currencies. To the extent that the exchange rates move unfavorably for our contract manufacturers, they may try to pass resulting costs on to us,
which could have a material effect on our future average unit costs. Our gross profit may fluctuate from period to period as a result of changes in average selling prices related to new product introductions, existing product transitions into larger
scale commercial volumes, maturity of a product within its life cycle, the effect of prototype and sample sales and resulting mix of products within a family of products. In future periods, we may hedge certain significant transactions denominated
in currencies other than the U.S. dollar.
Operating Expenses
We classify our operating expenses as research and development and sales, general and administrative expenses.
|
|
•
|
|
Research and development expenses
consist primarily of salary and benefit expenses, including stock-based compensation, for employees and costs for contractors engaged in research, design and development
activities incurred directly and with support from external vendors, such as outsourced research and development costs, as well as costs for prototypes, depreciation, purchased intellectual property, facilities and travel. In future periods, we may
hedge certain significant outsourced research and development transactions denominated in currencies other than the U.S. dollar. Over time, we expect our research and development costs to increase in absolute dollars as we continue making
significant investments in developing new products and new technologies, including with respect to increased performance and smaller industry-standard form factors.
|
|
|
•
|
|
Sales, general and administrative expenses
include salary and benefit expenses, including stock-based compensation, for employees and costs for contractors engaged in sales, marketing, customer service, technical
support, and general and administrative activities, as well as the costs of legal expenses, trade shows, marketing programs, promotional materials, bad debt expense, legal and other professional services, facilities, general liability insurance and
travel. Over time, we expect our sales, general and administrative expenses to increase in absolute dollars primarily due to our continued growth and the costs of compliance associated with being a public company.
|
Other (Expense) Income, Net
Other (expense) income,
net consists of interest expense associated with our working capital line of credit and term loan, amortization of debt issuance costs and debt discount, interest income earned
56
on our cash balances, gain or loss on the revaluation of our redeemable convertible preferred stock warrant liability, and foreign currency transactions gains and losses. To date, we have not
utilized derivatives to hedge our foreign exchange risk as we believe the risk to be immaterial to our results of operations. In future periods, we may hedge certain significant transactions denominated in currencies other than the U.S. dollar as we
expand our international operations.
Provision (Benefit) for Income Taxes
We are subject to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax
rates different from those in the United States. Our effective tax rates will vary depending on the relative proportion of foreign to U.S. income, the absorption of foreign tax credits, changes in corporate structure, changes in the valuation of our
deferred tax assets and liabilities and changes in tax laws and interpretations. We plan to regularly assess the likelihood of outcomes that could result from the examination of our tax returns by the U.S. Internal Revenue Service, or IRS, and other
tax authorities to determine the adequacy of our income tax reserves and expense. Should actual events or results differ from our then-current expectations, charges or credits to our provision for income taxes may become necessary. Any such
adjustments could have a significant effect on our results of operations.
In the fourth quarter of 2015, we began the process of restructuring
our international operations and, as a result, we expect that our future effective tax rates may be lower than our historical rate; however, the extent to which we realized the benefits of such reduction in the fourth quarter of 2015 was immaterial.
Results of Operations
The following table sets
forth our consolidated results of operations for the periods shown:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
(in thousands)
|
|
|
Consolidated Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
77,652
|
|
|
$
|
146,234
|
|
|
$
|
239,056
|
|
|
Cost of revenue(1)
|
|
|
47,983
|
|
|
|
93,558
|
|
|
|
145,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
29,669
|
|
|
|
52,676
|
|
|
|
93,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development(1)
|
|
|
24,248
|
|
|
|
28,471
|
|
|
|
38,645
|
|
|
Sales, general and administrative(1)
|
|
|
5,099
|
|
|
|
6,615
|
|
|
|
13,124
|
|
|
Loss on disposal of property and equipment
|
|
|
745
|
|
|
|
108
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
30,092
|
|
|
|
35,194
|
|
|
|
51,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(423
|
)
|
|
|
17,482
|
|
|
|
41,937
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(516
|
)
|
|
|
(390
|
)
|
|
|
(135
|
)
|
|
Change in fair value of preferred stock warrant liability
|
|
|
(94
|
)
|
|
|
(483
|
)
|
|
|
(2,154
|
)
|
|
Other (expense) income
|
|
|
(160
|
)
|
|
|
(156
|
)
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
|
(770
|
)
|
|
|
(1,029
|
)
|
|
|
(2,132
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(1,193
|
)
|
|
|
16,453
|
|
|
|
39,805
|
|
|
Provision (benefit) for income taxes
|
|
|
—
|
|
|
|
2,933
|
|
|
|
(715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(1,193
|
)
|
|
$
|
13,520
|
|
|
$
|
40,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
57
|
(1)
|
Stock-based compensation included in the consolidated statements of operations data was as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
(in thousands)
|
|
|
Cost of revenue
|
|
$
|
25
|
|
|
$
|
17
|
|
|
$
|
75
|
|
|
Research and development
|
|
|
960
|
|
|
|
258
|
|
|
|
561
|
|
|
Sales, general and administrative
|
|
|
519
|
|
|
|
132
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
|
|
$
|
1,504
|
|
|
$
|
407
|
|
|
$
|
825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
Revenue
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Cost of revenue
|
|
|
62
|
|
|
|
64
|
|
|
|
61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
38
|
|
|
|
36
|
|
|
|
39
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
31
|
|
|
|
19
|
|
|
|
16
|
|
|
Sales, general and administrative
|
|
|
7
|
|
|
|
5
|
|
|
|
5
|
|
|
Loss on disposal of property and equipment
|
|
|
1
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
39
|
|
|
|
24
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(1
|
)
|
|
|
12
|
|
|
|
18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(2
|
)
|
|
|
11
|
|
|
|
17
|
|
|
Provision (benefit) for income taxes
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(2
|
%)
|
|
|
9
|
%
|
|
|
17
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31, 2014 Compared to Year Ended December 31, 2015
Revenue
Revenue and the related changes during the
year ended December 31, 2014 and 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Change in
|
|
|
|
|
2014
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
Revenue
|
|
$
|
146,234
|
|
|
$
|
239,056
|
|
|
$
|
92,822
|
|
|
|
63
|
%
|
Revenue increased by $92.8 million, or 63%, from $146.2 million in 2014 to $239.1 million in 2015. The increase
was primarily due to $92.4 million and $11.0 million of revenue attributable to new product introductions within our 100 Gbps and 400 Gbps product families, respectively. This increase was partially offset by a $6.4 million decrease in sales of
existing products in our 100 Gbps product family, as customers migrated to new product family offerings, and a $4.2 million decrease in revenue from sales of products in our 40 Gbps product family, which is approaching the end of its volume life
cycle.
58
Our product sales based on the geographic region of our customers’ delivery location are as
follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
2014
|
|
|
As a %
of Total
Revenue
|
|
|
Year Ended
December 31,
2015
|
|
|
As a %
of Total
Revenue
|
|
|
Change in
|
|
|
|
|
|
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
Americas
|
|
$
|
32,109
|
|
|
|
22
|
%
|
|
$
|
46,624
|
|
|
|
20
|
%
|
|
$
|
14,515
|
|
|
|
45
|
%
|
|
EMEA
|
|
|
60,101
|
|
|
|
41
|
%
|
|
|
103,150
|
|
|
|
43
|
%
|
|
|
43,049
|
|
|
|
72
|
%
|
|
APAC
|
|
|
54,024
|
|
|
|
37
|
%
|
|
|
89,282
|
|
|
|
37
|
%
|
|
|
35,258
|
|
|
|
65
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
146,234
|
|
|
|
100
|
%
|
|
$
|
239,056
|
|
|
|
100
|
%
|
|
$
|
92,822
|
|
|
|
63
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
Revenue from product sales to customers with delivery locations in the Americas increased by $14.5 million, or 45%, from $32.1 million in 2014 to $46.6
million in 2015. The increase was primarily due to $22.5 million and $2.9 million of revenue attributable to new product introductions within our 100 Gbps and 400 Gbps product families, respectively. This increase was partially offset by a $10.9
million decrease in sales of existing products in our 100 Gbps product family, as customers migrated to new product family offerings.
Europe,
the Middle East and Africa
Revenue from product sales to customers with delivery locations in Europe, the Middle East and Africa, or EMEA,
increased by $43.0 million, or 72%, from $60.1 million in 2014 to $103.2 million in 2015. The increase was primarily due to a $24.7 million increase in sales for existing products within our 100 Gbps product family and $21.7 million and $0.8 million
of revenue attributable to new product introductions within our 100 Gbps and 400 Gbps product families, respectively. This increase was partially offset by a $4.2 million decrease in sales of products in our 40 Gbps product family, which is
approaching the end of its volume life cycle.
Asia Pacific
Revenue from product sales to customers with delivery locations in the Asia Pacific region, or APAC, increased by $35.3 million, or 65%, from $54.0
million in 2014 to $89.3 million in 2015. The increase was primarily due to $48.2 million and $7.3 million of revenue attributable to new product introductions within our 100 Gbps and 400 Gbps product families, respectively. This increase was
partially offset by a $20.2 million decrease in sales of existing products in our 100 Gbps product family, as customers migrated to new product family offerings.
Cost of Revenue and Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Change in
|
|
|
|
|
2014
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Cost of revenue
|
|
$
|
93,558
|
|
|
$
|
145,350
|
|
|
$
|
51,792
|
|
|
|
55
|
%
|
|
Gross profit percentage
|
|
|
36.0
|
%
|
|
|
39.2
|
%
|
|
|
|
|
|
|
|
|
Cost of revenue increased $51.8 million, or 55%, from $93.6 million in the year ended December 31, 2014 to
$145.4 million in the year ended December 31, 2015. The increase was due to the increased volume of products sold from our 100 Gbps product family and the introduction of our 400 Gbps family, partially offset by a volume decline in our 40 Gbps
product family, which is approaching the end of its volume life cycle.
Our gross profit percentage increased to 39.2% in the year ended
December 31, 2015 compared to 36.0% in the year ended December 31, 2014. The increase was due to the favorable effects of product mix within our 100 Gbps product family and the introduction of products in our 400 Gbps product family.
59
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Change in
|
|
|
|
|
2014
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Research and development
|
|
$
|
28,471
|
|
|
$
|
38,645
|
|
|
$
|
10,174
|
|
|
|
36
|
%
|
Research and development expense increased $10.2 million, or 36%, from $28.5 million in the year ended
December 31, 2014 to $38.7 million in the year ended December 31, 2015, due to a $3.7 million increase in personnel-related and other costs as well as a $3.0 million increase in outsourced development costs, a $1.9 million increase in
depreciation expense and a $1.6 million increase in prototype development costs, each to support our new product development initiatives.
Sales, General and
Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Change in
|
|
|
|
|
2014
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Sales, general and administrative
|
|
$
|
6,615
|
|
|
$
|
13,124
|
|
|
$
|
6,509
|
|
|
|
98
|
%
|
Sales, general and administrative expenses increased $6.5 million, or 98%, from $6.6 million in the year ended
December 31, 2014 to $13.1 million in the year ended December 31, 2015, due to a $3.8 million increase in personnel-related and other costs, and a $2.7 million increase in professional services expense, primarily driven by the
activities associated with preparing to be a public company.
Other Expense, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Change in
|
|
|
|
|
2014
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Total other expense, net
|
|
$
|
(1,029
|
)
|
|
$
|
(2,132
|
)
|
|
$
|
(1,103
|
)
|
|
|
107
|
%
|
Total other expense, net, increased by $1.1 million in the year ended December 31, 2015 compared to the
year ended December 31, 2014. During the year ended December 31, 2015, the expense associated with the revaluation of our preferred stock warrant liability increased $1.7 million. This increase in expense was partially offset by a $0.3
million gain on foreign exchange transactions and a $0.3 million decrease in interest expense as a result of our full repayment of our working capital line of credit in October 2014 and our term loan in May 2015.
Provision (Benefit) for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
Change in
|
|
|
|
|
2014
|
|
|
2015
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
|
|
|
Provision (benefit) for income taxes
|
|
$
|
2,933
|
|
|
$
|
(715
|
)
|
|
$
|
(3,648
|
)
|
|
|
(124
|
)%
|
|
Effective tax rate
|
|
|
18
|
%
|
|
|
(2
|
)%
|
|
|
|
|
|
|
|
|
Benefit for income taxes for the year ended December 31, 2015 was $(0.7) million compared to a provision
of $2.9 million for the year ended December 31, 2014. The decrease in the provision for income taxes primarily results from the release of $9.9 million of the valuation allowance against our U.S. deferred tax assets, primarily related to net
operating loss and tax credit carryforwards.
Refer to our discussion in “—Critical Accounting Policies and Significant Judgments and
Estimates” for additional information regarding the release of the valuation allowance.
60
Year Ended December 31, 2013 Compared to Year Ended December 31, 2014
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
Change in
|
|
|
|
|
2013
|
|
|
2014
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
Revenue
|
|
$
|
77,652
|
|
|
$
|
146,234
|
|
|
$
|
68,582
|
|
|
|
88
|
%
|
Revenue increased by $68.6 million, or 88%, from $77.7 million in 2013 to $146.2 million in 2014. The increase was
primarily due to $64.4 million of revenue attributable to increased sales volumes for our existing products within our 100 Gbps product family, $9.2 million of revenue attributable to the introduction of a new product in our 100 Gbps product family
and $1.8 million of revenue attributable to early sales of products within our 400 Gbps product family. This increase was partially offset by a $6.8 million decrease in sales of products in our 40 Gbps product family, which is approaching the end of
its volume life cycle.
Our product sales based on the geographic region of our customers’ delivery locations are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
2013
|
|
|
As a %
of
Total
Revenue
|
|
|
Year Ended
December 31,
2014
|
|
|
As a %
of
Total
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
Americas
|
|
$
|
13,945
|
|
|
|
18
|
%
|
|
$
|
32,109
|
|
|
|
22
|
%
|
|
$
|
18,164
|
|
|
|
130
|
%
|
|
EMEA
|
|
|
37,866
|
|
|
|
49
|
%
|
|
|
60,101
|
|
|
|
41
|
%
|
|
|
22,235
|
|
|
|
59
|
%
|
|
APAC
|
|
|
25,841
|
|
|
|
33
|
%
|
|
|
54,024
|
|
|
|
37
|
%
|
|
|
28,183
|
|
|
|
109
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
77,652
|
|
|
|
100
|
%
|
|
$
|
146,234
|
|
|
|
100
|
%
|
|
$
|
68,582
|
|
|
|
88
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Americas
Revenue from product sales to customers with delivery locations in the Americas increased by $18.2 million, or 130%, from $13.9 million in 2013 to $32.1
million in 2014. The increase was primarily due to a $13.7 million increase in sales for existing products within our 100 Gbps product family and $4.5 million of revenue attributable to a new product introduction within our 100 Gbps product family.
Europe, the Middle East and Africa
Revenue from product sales to customers with delivery locations in EMEA increased by $22.2 million, or 59%, from $37.9 million in 2013 to $60.1 million
in 2014. The increase was primarily due to $24.1 million of revenue attributable to increased sales volumes for existing products within our 100 Gbps product family, $3.1 million of revenue attributable to the introduction of a new product in our
100 Gbps product family and $1.8 million of revenue attributable to early sales of products within our 400 Gbps product family. This increase was partially offset by a $6.8 million decrease in sales of products in our 40 Gbps product family, which
is approaching the end of its volume life cycle.
Asia Pacific
Revenue from product sales to customers with delivery locations in APAC increased by $28.2 million, or 109% from $25.8 million in 2013 to $54.0 million
in 2014. The increase was primarily due to a $26.6 million increase in sales for existing products within our 100 Gbps product family and $1.6 million of revenue attributable to a new product introduction within our 100 Gbps product family.
61
Cost of Revenue and Gross Profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
Change in
|
|
|
|
|
2013
|
|
|
2014
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
Cost of revenue
|
|
$
|
47,983
|
|
|
$
|
93,558
|
|
|
$
|
45,575
|
|
|
|
95
|
%
|
|
Gross profit percentage
|
|
|
38.2
|
%
|
|
|
36.0
|
%
|
|
|
|
|
|
|
|
|
Cost of revenue increased $45.6 million, or 95%, from $48.0 million in 2013 to $93.6 million in 2014. The increase was
due to an increased volume of sales of products in our 100 Gbps product family, offset by a reduction in the volume of products in our 40 Gbps product family, which began approaching the end of its volume product life cycle in 2014.
Our gross profit percentage decreased to 36.0% in 2014 as compared to 38.2% in 2013. The decrease was due to the decline in the volume and unit sales
price for products in our 40 Gbps product family and non-recurring costs associated with the end of its volume product life cycle.
Research and Development
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
Change in
|
|
|
|
|
2013
|
|
|
2014
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
Research and development
|
|
$
|
24,248
|
|
|
$
|
28,471
|
|
|
$
|
4,223
|
|
|
|
17
|
%
|
Research and development expense increased $4.2 million, or 17%, in 2014 as compared to 2013, due to a $2.8 million
increase in personnel-related costs associated with support for our new product development initiatives and a $1.4 million increase in outsourced development costs.
Sales, General and Administrative
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
Change in
|
|
|
|
|
2013
|
|
|
2014
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
Sales, general and administrative
|
|
$
|
5,099
|
|
|
$
|
6,615
|
|
|
$
|
1,516
|
|
|
|
30
|
%
|
Sales, general and administrative expenses increased $1.5 million, or 30%, in 2014 as compared to 2013, due to a $1.3
million increase in personnel-related costs and other costs to support our growth.
Other Expense, Net
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
Change in
|
|
|
|
|
2013
|
|
|
2014
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
Total other expense, net
|
|
$
|
(770
|
)
|
|
$
|
(1,029
|
)
|
|
$
|
(259
|
)
|
|
|
34
|
%
|
Total other expense, net, increased by $0.3 million in 2014 as compared to 2013. During 2014, loss on the change in fair
value of our redeemable convertible preferred stock warrant liability increased by $0.4 million, as compared to 2013. This increase was partially offset by a $0.1 million decrease in interest expense as a result of our full repayment of our working
capital line of credit in October 2014.
62
Provision for Income Taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
Change in
|
|
|
|
|
2013
|
|
|
2014
|
|
|
$
|
|
|
%
|
|
|
|
|
(dollars in thousands)
|
|
|
Provision for income taxes
|
|
$
|
—
|
|
|
$
|
2,933
|
|
|
$
|
2,933
|
|
|
|
—
|
|
|
Effective tax rate
|
|
|
—
|
|
|
|
18
|
%
|
|
|
|
|
|
|
|
|
The provision for income taxes for the year ended December 31, 2014 was $3.0 million. There was no provision for
income taxes during the year ended December 31, 2013 as a valuation allowance was provided against the net deferred tax benefit attributed to the operating loss. During the year ended December 31, 2014, our effective tax rate was 18%, as
compared to the federal statutory rate of 35%. The difference between the federal statutory rate and our effective tax rate was primarily attributable to the utilization of our net operating loss carryforwards, which were limited by Internal Revenue
Code Section 382.
Quarterly Results of Operations
The following table sets forth our unaudited quarterly consolidated statement of operations data for each three-month period in the years ended December
31, 2014 and 2015. In management’s opinion, the data has been prepared on the same basis as the audited consolidated financial statements included in this prospectus and reflect all necessary adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of this data. You should read this information together with our consolidated financial statements and the related notes appearing elsewhere in this prospectus. Our operating results may fluctuate due
to a variety of factors. The results of historical periods are not necessarily indicative of the results of operations for a full year or any future period.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2014
|
|
|
June 30,
2014
|
|
|
September 30,
2014
|
|
|
December 31,
2014
|
|
|
March 31,
2015
|
|
|
June 30,
2015
|
|
|
September 30,
2015
|
|
|
December 31,
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
27,291
|
|
|
$
|
31,151
|
|
|
$
|
46,780
|
|
|
$
|
41,012
|
|
|
$
|
47,244
|
|
|
$
|
57,846
|
|
|
$
|
65,419
|
|
|
$
|
68,547
|
|
|
Cost of revenue
|
|
|
18,538
|
|
|
|
20,307
|
|
|
|
28,029
|
|
|
|
26,684
|
|
|
|
30,640
|
|
|
|
37,441
|
|
|
|
40,209
|
|
|
|
37,060
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
8,753
|
|
|
|
10,844
|
|
|
|
18,751
|
|
|
|
14,328
|
|
|
|
16,604
|
|
|
|
20,405
|
|
|
|
25,210
|
|
|
|
31,487
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
6,675
|
|
|
|
5,668
|
|
|
|
7,275
|
|
|
|
8,853
|
|
|
|
7,903
|
|
|
|
8,820
|
|
|
|
9,604
|
|
|
|
12,318
|
|
|
Selling, general and administrative
|
|
|
1,397
|
|
|
|
1,501
|
|
|
|
1,642
|
|
|
|
2,075
|
|
|
|
2,123
|
|
|
|
2,932
|
|
|
|
3,005
|
|
|
|
5,064
|
|
|
Loss on disposal of property and equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
108
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
8,072
|
|
|
|
7,169
|
|
|
|
8,917
|
|
|
|
11,036
|
|
|
|
10,026
|
|
|
|
11,752
|
|
|
|
12,609
|
|
|
|
17,382
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
681
|
|
|
|
3,675
|
|
|
|
9,834
|
|
|
|
3,292
|
|
|
|
6,578
|
|
|
|
8,653
|
|
|
|
12,601
|
|
|
|
14,105
|
|
|
Other (expense) income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest (expense) income:
|
|
|
(87
|
)
|
|
|
(109
|
)
|
|
|
(117
|
)
|
|
|
(77
|
)
|
|
|
(48
|
)
|
|
|
(84
|
)
|
|
|
(6
|
)
|
|
|
3
|
|
|
Change in fair value of warrant liability
|
|
|
(158
|
)
|
|
|
(88
|
)
|
|
|
(79
|
)
|
|
|
(158
|
)
|
|
|
(382
|
)
|
|
|
(1,061
|
)
|
|
|
(370
|
)
|
|
|
(341
|
)
|
|
Other (expense) income
|
|
|
(19
|
)
|
|
|
(3
|
)
|
|
|
(191
|
)
|
|
|
57
|
|
|
|
252
|
|
|
|
(85
|
)
|
|
|
(32
|
)
|
|
|
22
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
|
(264
|
)
|
|
|
(200
|
)
|
|
|
(387
|
)
|
|
|
(178
|
)
|
|
|
(178
|
)
|
|
|
(1,230
|
)
|
|
|
(408
|
)
|
|
|
(316
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
417
|
|
|
|
3,475
|
|
|
|
9,447
|
|
|
|
3,114
|
|
|
|
6,400
|
|
|
|
7,423
|
|
|
|
12,193
|
|
|
|
13,789
|
|
|
Provision (benefit) for income taxes
|
|
|
75
|
|
|
|
623
|
|
|
|
1,676
|
|
|
|
559
|
|
|
|
2,063
|
|
|
|
2,716
|
|
|
|
3,354
|
|
|
|
(8,848
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
342
|
|
|
$
|
2,852
|
|
|
$
|
7,771
|
|
|
$
|
2,555
|
|
|
$
|
4,337
|
|
|
$
|
4,707
|
|
|
$
|
8,839
|
|
|
$
|
22,637
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
63
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
2014
|
|
|
June 30,
2014
|
|
|
September 30,
2014
|
|
|
December 31,
2014
|
|
|
March 31,
2015
|
|
|
June 30,
2015
|
|
|
September 30,
2015
|
|
|
December 31,
2015
|
|
|
Revenue
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
|
100
|
%
|
|
Cost of revenue
|
|
|
68
|
%
|
|
|
65
|
%
|
|
|
60
|
%
|
|
|
65
|
%
|
|
|
65
|
%
|
|
|
65
|
%
|
|
|
61
|
%
|
|
|
54
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
32
|
%
|
|
|
35
|
%
|
|
|
40
|
%
|
|
|
35
|
%
|
|
|
35
|
%
|
|
|
35
|
%
|
|
|
39
|
%
|
|
|
46
|
%
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
25
|
%
|
|
|
18
|
%
|
|
|
16
|
%
|
|
|
22
|
%
|
|
|
17
|
%
|
|
|
15
|
%
|
|
|
15
|
%
|
|
|
18
|
%
|
|
Selling, general and administrative
|
|
|
5
|
%
|
|
|
5
|
%
|
|
|
3
|
%
|
|
|
5
|
%
|
|
|
4
|
%
|
|
|
5
|
%
|
|
|
4
|
%
|
|
|
7
|
%
|
|
Loss on disposal of property and equipment
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
30
|
%
|
|
|
23
|
%
|
|
|
19
|
%
|
|
|
27
|
%
|
|
|
21
|
%
|
|
|
20
|
%
|
|
|
19
|
%
|
|
|
25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations
|
|
|
2
|
%
|
|
|
12
|
%
|
|
|
21
|
%
|
|
|
8
|
%
|
|
|
14
|
%
|
|
|
15
|
%
|
|
|
20
|
%
|
|
|
21
|
%
|
|
Total other expense, net
|
|
|
(1
|
%)
|
|
|
(1
|
%)
|
|
|
(1
|
%)
|
|
|
(1
|
%)
|
|
|
—
|
|
|
|
(2
|
%)
|
|
|
(1
|
%)
|
|
|
(1
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
1
|
%
|
|
|
11
|
%
|
|
|
20
|
%
|
|
|
7
|
%
|
|
|
14
|
%
|
|
|
13
|
%
|
|
|
19
|
%
|
|
|
20
|
%
|
|
Provision (benefit) for income taxes
|
|
|
—
|
|
|
|
2
|
%
|
|
|
3
|
%
|
|
|
1
|
%
|
|
|
5
|
%
|
|
|
5
|
%
|
|
|
5
|
%
|
|
|
(13
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
|
|
|
1
|
%
|
|
|
9
|
%
|
|
|
17
|
%
|
|
|
6
|
%
|
|
|
9
|
%
|
|
|
8
|
%
|
|
|
14
|
%
|
|
|
33
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our revenue has generally increased over the periods presented due to increased demand for products in our 100
Gbps product family, as well as the introduction of new products in our 400 Gbps product family. In 2014, we experienced a decline in revenue in the fourth quarter compared to the third quarter due to our customers’ ability to delay or
reschedule shipments under the terms of their contracts with us, resulting in $4.0 million of anticipated purchases by two customers being delayed to the first quarter of 2015. Our gross profit percentage is primarily driven by product mix
within our families of products and trends in the average per unit selling price and cost of our products over their respective product life cycles, including quarterly fluctuations due to contract pricing arrangements. Our gross profit percentage
increased to 46% during the fourth quarter of 2015, compared to 35% during the fourth quarter of 2014. The increase was due to the favorable effects of product mix within our 100 Gbps product family and the introduction of products in our
400 Gbps product family.
Our operating expenses have generally increased over the periods presented, primarily related to the development of
new products, as well as increases in salary and personnel costs resulting from increases in functional headcount to support the growth of our business. The increase in research and development costs was primarily attributable to increased personnel
added throughout each of the quarters presented, as well as the timing of outsourced development costs in the fourth quarter of each of 2014 and 2015. Sales, general and administrative expenses have increased over the periods presented primarily due
to increases in headcount to support the growth of our business and infrastructure costs in preparation for becoming a public company.
Liquidity and
Capital Resources
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
(in thousands)
|
|
2014
|
|
|
2015
|
|
|
Cash and cash equivalents
|
|
$
|
21,128
|
|
|
$
|
27,610
|
|
|
Working capital
|
|
|
31,710
|
|
|
|
55,147
|
|
|
Net cash provided by operating activities
|
|
|
13,397
|
|
|
|
22,450
|
|
|
Net cash used in investing activities
|
|
|
(6,478
|
)
|
|
|
(12,116
|
)
|
|
Net cash used in financing activities
|
|
|
(6,020
|
)
|
|
|
(3,847
|
)
|
Since our inception, we have funded our operations through issuances of shares of our redeemable convertible
preferred stock, which has provided us with aggregate net proceeds of $51.9 million, cash collections from customers and short- and long-term borrowings.
As of December 31, 2015, we had cash and cash equivalents totaling $27.6 million and accounts receivable of $41.3 million. We maintain a $15.0
million working capital line of credit under which no amounts were outstanding as of December 31, 2015.
We believe our existing cash balances,
anticipated cash flow from future operations and liquidity available from our line of credit will be sufficient to meet our working capital and capital expenditure needs for at least the next 12 months and the foreseeable future. Our future capital
requirements may
64
vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of spending on research and development efforts and other
business initiatives, purchases of capital equipment to support our growth, the expansion of sales and marketing activities, any expansion of our business through acquisitions of or investments in complementary products, technologies or businesses,
the use of working capital to purchase additional inventory, the timing of new product introductions, market acceptance of our products and overall economic conditions. To the extent that current and anticipated future sources of liquidity are
insufficient to fund our future business activities and requirements, we may be required to seek additional equity or debt financing. In the event additional financing is required from outside sources, we may not be able to raise it on terms
acceptable to us or at all.
Working Capital Facility
We maintain a working capital line of credit with Silicon Valley Bank, or SVB, which provides us with access to up to $15.0 million of financing in the
form of revolving loans. The working capital line of credit expires in June 2016. In connection with the working capital line of credit, we have issued to SVB warrants to purchase up to 135,000 shares of our Series B preferred stock and 35,000
shares of our Series C preferred stock at exercise prices of $1.43 and $2.67, respectively.
As of December 31, 2015, we were in compliance with all
the covenants in the working capital line of credit.
Operating Activities
Net cash provided by (used in) operating activities consists primarily of net income (loss) adjusted for certain non-cash items, including depreciation
expense, stock-based compensation expense, loss on the change in fair value of our preferred stock warrant liability, and other non-cash charges, net, as well as the effect of changes in working capital.
Net cash provided by operating activities was $22.5 million in 2015 as compared to $13.4 million in 2014. The increase was primarily due to a $27.0
million increase in net income, partially offset by a $7.3 million decrease in non-cash adjustments primarily consisting of depreciation expense, the change in fair value of our preferred stock warrant liability and the partial release of the
valuation allowance, and a $10.7 million decrease in cash related to changes in operating assets and liabilities. Changes in cash flows related to operating assets and liabilities primarily consisted of a $17.2 million decrease in cash due to timing
of accounts receivable collections in 2015 and a $14.1 million decrease in cash due to an increase in inventory to fulfill sales orders during the fourth quarter of 2015 and the first quarter of 2016, partially offset by a $16.7 million increase in
cash due to the timing of payments associated with our accounts payable and accrued liabilities, an increase of $2.7 million in deferred revenue, a $0.8 million increase in prepaid expense and other assets and a $0.4 million increase in other
long-term liabilities.
Net cash provided by operating activities was $13.4 million in 2014, as compared to net cash used in operating
activities of $1.1 million in 2013. The $14.5 million increase was primarily due to a $14.7 million increase in net income and a $1.1 million increase in cash related to changes in operating assets and liabilities, partially offset by a $1.3 million
decrease in non-cash expense items, primarily consisting of stock-based compensation expense and loss on the disposal of property and equipment. Changes in cash flows related to operating assets and liabilities primarily consisted of a $12.4 million
increase in cash related to the timing of inventory purchases and a $1.5 million increase in deferred revenue, partially offset by a $7.5 million decrease in cash due to the timing of payments associated with our accounts payable and accrued
liabilities, a $3.4 million decrease in cash due to an increase in accounts receivable, and a $1.9 million decrease in prepaid expenses and other assets.
65
Investing Activities
Our investing activities have consisted primarily of purchases of lab and computer equipment and software to support the development of new products and
increase our manufacturing capacity to meet customer demand for existing products. In addition, our investing activities include expansion of, and improvements to, our leased facilities. As our business expands, we expect that we will continue to
invest in these areas.
Net cash used in investing activities in 2015 was $12.1 million, as compared to $6.5 million in 2014. The increase
was primarily due to increased purchases of lab equipment to support the development and manufacturing phases of our product life cycles.
Net
cash used in investing activities in 2014 was $6.5 million, as compared to $2.9 million in 2013. The increase was primarily due to increased purchases of lab equipment and computer software to support the phases of our product life cycle and the
expansion of our facilities in Maynard, Massachusetts and Hazlet, New Jersey.
Financing Activities
Our financing activities have consisted primarily of issuances of redeemable convertible preferred stock and short- and long-term borrowings to fund our
operations.
Net cash used in financing activities during 2015 was $3.8 million, as compared to $6.0 million during 2014. The cash used in
2015 primarily consisted of $2.2 million for the advanced repayment of principal on our long-term debt obligation and $1.8 million for the payment of IPO costs, partially offset by $0.2 million in proceeds received from the exercise of stock
options. During 2014, cash flows used in financing activities consisted of $5.3 million of repayments on our working capital line of credit and $0.8 million of repayment of principal on our long-term debt obligation.
Net cash used in financing activities in 2014 was $6.0 million, as compared to net cash provided by financing activities of $19.9 million in 2013. The
net cash used in financing activities in 2014 primarily consisted of $5.3 million of repayment on our line of credit and $0.8 million of repayment on our long-term debt obligation. These uses of cash were partially offset by $0.1 million of proceeds
from employee stock option exercises. Net cash provided by financing activities in 2013 primarily consisted of $21.8 million from the issuance and sale of preferred stock and $0.1 million of proceeds from employee stock option exercises. These cash
inflows were partially offset by $2.0 million used to repurchase shares of common stock and $0.1 million of repayment on our long-term debt obligation.
Contractual Obligations and Commitments
Our principal
commitments consist of operating lease payments for our facilities and purchase obligations. The following table summarizes these contractual obligations at December 31, 2015. Future events could cause actual payments to differ from these
estimates.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments due by period
|
|
|
|
|
Total
|
|
|
Less
than
1 Year
|
|
|
1 to 3
Years
|
|
|
3 to 5
Years
|
|
|
More
than
5 Years
|
|
|
|
|
(in thousands)
|
|
|
Operating leases(1)
|
|
$
|
2,261
|
|
|
$
|
1,050
|
|
|
$
|
1,192
|
|
|
$
|
19
|
|
|
$
|
—
|
|
|
Purchase obligations(2)
|
|
|
151,705
|
|
|
|
151,705
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Unrecognized tax benefits(3)
|
|
|
396
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total(4)
|
|
$
|
154,362
|
|
|
$
|
152,755
|
|
|
$
|
1,192
|
|
|
$
|
19
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
66
|
(1)
|
We lease our office facilities in Maynard, Massachusetts and Hazlet, New Jersey under non-cancelable operating leases that expire in January 2019, with respect to the Massachusetts facility, and June 2018 and July 2018,
with respect to various floors of the New Jersey facility. Rent expense for non-cancelable operating leases with free rental periods or schedule rent increases is recognized on a straight-line basis over the terms of the leases.
|
In July 2015, we entered into an operating lease for office space in Mountain View, California, which expires in July 2018, renewable for an additional
one-year term. Annual rent due is approximately $69,000.
During the years ended December 31, 2013, 2014 and 2015, rent expense incurred under
these agreements amounted to $441,000, $709,000 and $889,000, respectively.
Future minimum lease payments due under these noncancelable lease
agreements as of December 31, 2015, are as follows (in thousands):
|
|
|
|
|
|
|
Year ending December 31,
|
|
Amounts
|
|
|
2016
|
|
$
|
1,050
|
|
|
2017
|
|
|
751
|
|
|
2018
|
|
|
441
|
|
|
2019
|
|
|
19
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,261
|
|
|
|
|
|
|
|
|
(2)
|
Our purchase obligations primarily consist of outstanding purchase orders with our contract manufacturers for inventory and other third parties for the manufacturing of our wafers. Our relationships with these
vendors typically allow for the cancellation of outstanding purchase orders, but require payments of all expenses incurred through the date of cancellation. Other obligations include future non-inventory purchases and commitments related to future
fixed asset purchases.
|
|
(3)
|
As of December 31, 2015, we had $396,000 of liabilities for uncertain tax benefits. We are not able to provide reasonably reliable estimates of future payments relating to these obligations.
|
|
(4)
|
We incorporate technology into our products that is licensed from third parties. We have not committed to any future minimum obligations under the terms of the technology licensing agreements, and therefore no amounts
have been included in the contractual commitments table. We are required to pay royalties to the licensors of $15 to $17 per unit sold within our new 400 Gbps product family and for our newest product within the 100 Gbps product family. In
addition, we pay royalties of $150 per unit sold for our older products within the 100 Gbps and 40 Gbps product families. Our 40 Gbps product family is approaching the end of its volume life cycle. As the composition of product sales continues
to become increasingly weighted toward newer products, we anticipate that our royalty expense will decrease in absolute dollars as compared to the years ended December 31, 2013, 2014 and 2015 as the per unit cost of royalties is less for our newer
products. We do not anticipate royalty expense will have a material impact on our results of operations.
|
Off-Balance Sheet Arrangements
As of December 31, 2015, we did not have any off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of Regulation S-K,
such as the use of unconsolidated subsidiaries, structured finance, special purpose entities or variable interest entities.
67
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of financial condition and results of operations is based on our consolidated financial statements which
have been prepared in accordance with accounting principles generally accepted in the United States of America. In preparing our consolidated financial statements, we make estimates, assumptions and judgments that can have a significant effect on
our reported revenue, results of operations and net income or loss, as well as on the value of certain assets and liabilities on our balance sheet during and as of the reporting periods. These estimates, assumptions and judgments are necessary
because future events and their effects on our results and the value of our assets cannot be determined with certainty, and are made based on our historical experience and on other assumptions that we believe to be reasonable under the
circumstances. These estimates may change as new events occur or additional information is obtained, and we may periodically be faced with uncertainties, the outcomes of which are not within our control and may not be known for a prolonged period of
time. As the use of estimates is inherent in the financial reporting process, actual results could differ from those estimates.
Revenue Recognition
Our products are fully functional at the time of shipment and do not require production, modification or customization. We recognize revenue
from product sales when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable and collection is reasonably assured. Our fee is considered fixed or determinable at the execution of an agreement, based
on specific products and quantities to be delivered at specified prices, which is evidenced by a customer purchase order or other persuasive evidence of an arrangement. Our agreements with our customers do not include rights of return. Product
revenue is recognized upon shipment of product to customers except for instances where title and risk of loss pass to the customer upon delivery or acceptance, where revenue is recognized upon the occurrence of delivery or acceptance, as applicable.
A limited number of revenue arrangements with our customers include more than one element and require the application of ASC 605-25,
Revenue
Recognition—Multiple Element Arrangements
. Arrangement consideration is allocated to each element with standalone value based on the relative selling prices of all of the elements in the arrangement using the fair value hierarchy. We
determine the relative selling price of elements based on prices charged for standalone products, when sufficiently concentrated, and third-party evidence of similar elements, or, in the absence of these sources of evidence, based on
management’s best estimate of selling price. Revenue recognized from multiple-element arrangements accounted for less than 2% of our total revenue during the years ended December 31, 2013, 2014 and 2015.
Inventories
Inventories consist of finished goods and
component parts, which are purchased from contract manufacturers and other suppliers. Inventories are stated at the lower of cost or market on a first-in, first-out basis. Our assessment of market value requires the use of estimates regarding the
net realizable value of our inventory balances, including an assessment of excess or obsolete inventories. We determine excess and obsolete inventories based on an estimate of the future demand for our products within a specified time horizon,
generally 12 months. The estimates used for future demand are also used for near-term capacity planning and inventory purchases, and are consistent with revenue forecast assumptions. If our demand forecast is greater than actual demand, we may be
required to record an excess inventory charge reflected in cost of goods sold, which would decrease gross profit. Any write-downs taken establish a new cost basis for the underlying inventory and cannot be reversed if there are subsequent increases
in our demand forecast.
68
Income Taxes
We utilize the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on
the cumulative difference between the financial statement carrying amounts and tax basis of assets and liabilities using enacted tax rates in effect for years in which temporary differences are expected to reverse. We provide a valuation allowance
when it is not more likely than not that deferred tax assets will be realized. We recognize the benefit of an uncertain tax position that has been taken or that we expect to take on income tax returns if such tax position is more likely than not to
be sustained.
We follow the authoritative guidance regarding accounting for uncertainty in income taxes, which prescribes a recognition threshold
and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. These unrecognized tax benefits relate primarily to research tax credits calculated and claimed on
federal and state income tax returns. We apply a variety of methodologies in making these estimates, including advice and studies performed by independent subject matter experts, evaluation of public actions taken by the IRS and other taxing
authorities, as well as our own industry experience. We provide estimates for unrecognized tax benefits which may be subject to material adjustments until matters are resolved with taxing authorities or statutes expire. If our estimates are not
representative of actual outcomes, our results of operations can be materially affected.
A valuation allowance is provided if, based on the weight
of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized. Our assessment included a review of all available evidence, both positive and negative, as well as objective and subjective. Based on
the weight of that evidence, we determined that a valuation allowance is only required against a portion of our deferred tax assets which consist of tax attributes we expect to expire prior to full utilization. Our assessment recognizes that future
realization of the tax benefit of an existing deductible temporary difference or carryforward ultimately depends on the existence of sufficient taxable income of the appropriate character within the carryforward period available under applicable tax
laws. Four possible sources of taxable income may be available under applicable tax laws to realize a tax benefit for deductible temporary differences and carryforwards:
|
|
•
|
|
future reversal of existing taxable temporary differences;
|
|
|
•
|
|
future taxable income exclusive of reversing temporary differences and carryforwards;
|
|
|
•
|
|
taxable income in carryback years if permitted under tax law; and
|
|
|
•
|
|
tax planning strategies that would be implemented.
|
The more objective the evidence, the more robust the
basis is likely to be for a decision as to the need for and the amount of any valuation allowance. Two sources of income, future reversals of existing taxable temporary differences and taxable income in prior carryback years, involve objective
assessments on which to base a valuation allowance decision. However, the other income sources (e.g., tax planning strategies and especially future taxable income) involve subjective assessments. Assessing subjective income sources involves a review
of our capability and willingness to implement certain tax planning strategies that will generate future taxable income and an assessment of our experience in forecasting future taxable income. In addition to assessing positive and negative evidence
for the need for a valuation allowance related to these four potential sources of income, we also weighed the objectively verifiable positive and negative sources.
Under ASC 740-10,
Income Taxes
, examples of positive evidence that might support a conclusion that a valuation allowance is not needed, despite
negative evidence, include:
|
|
•
|
|
strong earnings history;
|
|
|
•
|
|
unrealized appreciation in assets over their tax basis; and
|
69
|
|
•
|
|
existing contracts or a firm sales backlog of profitable orders that management expects will produce more than enough future taxable income to utilize the deferred tax asset.
|
At December 31, 2015, we are in a significant cumulative three year book income position in the U.S. in excess of $50 million with projections of strong
future profitability. We have generated taxable profits in all years beginning in 2013. Our prior losses for tax purposes occurred as we were in our early stages of development. We expect to continue to generate taxable profits in subsequent years.
ASC 740-10 requires positive evidence of sufficient quality and quantity to offset such negative evidence in order to support a conclusion that a
valuation allowance is not needed. Negative evidence includes, among other factors:
|
|
•
|
|
cumulative losses incurred in recent years;
|
|
|
•
|
|
history of potential tax attributes expiring unused;
|
|
|
•
|
|
losses expected in the next few years even if the company is currently profitable;
|
|
|
•
|
|
carryback or carryforward periods that are so brief that they would limit the realization of tax benefits; and
|
|
|
•
|
|
uncertainties that, if resolved unfavorably, would adversely affect future operations and profits.
|
We
have not had any history of expiring tax attributes other than Massachusetts net operating losses, which had a five-year carryforward period for losses generated prior to January 1, 2010. We have had cumulative losses in the United States for
all years prior to 2014. 2014 was the first year in which we had cumulative profits, totaling $8.5 million, over a three-year period. In assessing this negative evidence, we also considered our expected future results, including the impact of
the reorganization of our corporate structure.
After weighing the factors and performing the analysis outlined above, we determined at
December 31, 2015 that we would release the valuation allowance against $9.9 million of our U.S. net deferred tax assets. We have a small portion of federal net operating losses and federal research credits that we expect to expire
unutilized based on limitations imposed on their utilization. We have also accumulated state research tax credits in a jurisdiction in which we do not anticipate generating tax expense to utilize these credits in future years. We have retained a
valuation allowance against these portions of our tax attributes. At December 31, 2015, we have net deferred tax assets, prior to valuation allowance, of $11.8 million. We have recorded a valuation allowance of $0.6 million against
the aforementioned tax attributes, reducing the net deferred tax assets reported to $11.2 million.
As of each reporting date, our management
considers new evidence, both positive and negative, that could impact its view with regard to future realization of deferred tax assets. If we determine that our assessments on all or a portion of the deferred tax assets will change in a future
period, we will record material adjustments to the provision for income taxes in that period.
We recorded a valuation allowance against all of our
deferred tax assets as of December 31, 2013 and 2014 of approximately $12.9 million and $10.5 million, respectively. For the year ending December 31, 2015, management determined that sufficient positive evidence exists to conclude that it
is more likely than not that deferred taxes of $11.2 million are realizable, and therefore, reduced the valuation allowance accordingly. Our valuation allowance as of December 31, 2015 was reduced to $0.6 million.
Stock-Based Compensation
We recognize compensation
expense for equity awards based on the fair value of the award and on a straight-line basis over the vesting period of the award based on the estimated portion of the award that is expected to vest.
70
Inherent in the valuation and recording of stock-based compensation, there are several estimates that we
make, including in regard to valuation and expense that will be incurred. We apply estimated forfeiture rates to the awards based on analyses of historical data, including termination patterns, employee position and other factors. This is done to
record the expense we expect to actually incur for employees that provide the required service time.
We use the Black-Scholes option pricing model
to measure the fair value of our option awards when they are granted. We estimate the value of common stock at the grant date with the help of an independent third-party service provider. See “Valuation of Common Stock” below for further
discussion of the valuation process. We use the daily historical volatility of companies we consider to be our peers. To determine our peer companies, we used the following criteria: optical telecommunications companies; similar histories and
relatively comparable financial leverage; sufficient public company trading history; and in similar businesses and geographical markets. We used the peers’ stock price volatility over the expected term of our granted options to calculate the
expected volatility. The expected term of employee option awards is determined using the average midpoint between vesting and the contractual term for outstanding awards, or “the simplified method,” because we do not yet have a sufficient
history of option exercises. We determine the risk-free interest rate on the grant date of the award based on the rate of U.S. Treasury securities with maturities approximately equal to the estimated expected term of the awards. We have not paid
dividends and do not anticipate paying a cash dividend in the foreseeable future and, accordingly, use an expected dividend yield of zero.
The
following table summarizes the assumptions, other than fair value of our common stock, relating to our stock options granted in the years ended December 31, 2013, 2014 and 2015:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
2014
|
|
2015
|
|
Risk-free interest rate
|
|
1.1% - 2.2%
|
|
1.8% - 2.2%
|
|
1.6% -1.9%
|
|
Expected dividend yield
|
|
None
|
|
None
|
|
None
|
|
Expected volatility
|
|
69.1% - 73.2%
|
|
71.1% - 71.3%
|
|
59.4% - 70.8%
|
|
Expected term (in years)
|
|
6.5
|
|
6.5
|
|
6.3 - 6.5
|
In addition to the assumptions used in the Black-Scholes option-pricing model, we must also estimate a forfeiture
rate to calculate the stock-based compensation expense for our awards. Our forfeiture rate is based on an analysis of our actual forfeitures. We will continue to evaluate the appropriateness of the forfeiture rate based on actual forfeiture
experience, analysis of employee turnover and other factors. Changes in the estimated forfeiture rate can have a significant effect on our stock-based compensation expense as the cumulative effect of adjusting the rate is recognized in the period
the forfeiture estimate is changed. If a revised forfeiture rate is higher than the previously estimated forfeiture rate, an adjustment is made that will result in a decrease to the stock-based compensation expense recognized in our financial
statements. If a revised forfeiture rate is lower than the previously estimated forfeiture rate, an adjustment is made that will result in an increase to the share based compensation expense recognized in our financial statements.
We will continue to use judgment in evaluating the expected volatility, expected term and forfeiture rate utilized in our stock-based compensation
expense calculations on a prospective basis. As we continue to accumulate additional data related to our common stock, we may refine our estimates of expected volatility, expected term and forfeiture rates, which could materially affect our future
stock-based compensation expense.
During the year ended December 31, 2015, we granted 1,063,846 RSUs to certain directors and executives. Our
stock-based compensation expense for RSUs is estimated at the grant date based on the fair value of our common stock. The RSUs vest upon the satisfaction of both a service condition and a performance condition. The service condition for a majority
of the RSUs is satisfied over a period
71
of four years. The performance condition will be satisfied on the earlier of a sale of our company and the date of our initial public offering, in either case, prior to the seventh anniversary of
the grant date.
As of December 31, 2015, we had recognized no stock-based compensation expense for RSUs because a qualifying event for the
awards’ vesting was not probable. In the quarter in which this offering is completed, we will begin recording stock-based compensation expense based on the grant-date fair value of the RSUs using the accelerated attribution method, net of
estimated forfeiture. The following table summarizes, on an unaudited pro forma basis, the stock-based compensation expense related to the RSUs that we would incur during the quarter in which this offering is completed, assuming this offering was
completed on December 31, 2015:
|
|
|
|
|
|
|
As of December 31, 2015
|
|
From Award Issue Date to December 31,
2015
|
|
Vested RSUs
Outstanding(1)
|
|
Unvested RSUs
Outstanding(2)
|
|
Pro Forma Stock-Based Compensation Expense
|
|
|
|
(in thousands)
|
|
3,570
|
|
1,060,276
|
|
$2,569
|
|
(1)
|
For purposes of this table, “vested” RSUs represent the shares underlying RSUs for which the service condition had been satisfied as of December 31, 2015.
|
|
(2)
|
For purposes of this table, “unvested” RSUs represent the shares underlying RSUs for which the service condition had not been satisfied as of December 31, 2015.
|
We estimate that the remaining unrecognized stock-based compensation expense relating to the RSUs would be approximately $10.4 million, after giving
effect to estimated forfeitures and would be recognized over a weighted-average period of approximately 3.65 years if this offering was completed on December 31, 2015.
The following table estimates future stock-based compensation expense related to all outstanding equity awards, inclusive of the pro forma impact of
RSUs discussed above, net of estimated forfeitures. The table does not take into account any stock-based compensation expense related to future awards that may be granted to employees, directors, or other service providers.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2016
|
|
|
2017
|
|
|
2018
|
|
|
2019
|
|
|
Total
|
|
|
|
|
(in thousands)
|
|
|
Performance Awards
|
|
$
|
8,853
|
|
|
$
|
2,638
|
|
|
$
|
1,207
|
|
|
$
|
259
|
|
|
$
|
12,957
|
|
|
Stock-based awards with only service conditions
|
|
|
1,112
|
|
|
|
1,071
|
|
|
|
935
|
|
|
|
439
|
|
|
|
3,557
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
9,965
|
|
|
$
|
3,709
|
|
|
$
|
2,142
|
|
|
$
|
698
|
|
|
$
|
16,514
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Valuation of Common Stock
Given the absence of an active market for our common stock prior to our initial public offering, our board of directors was required to estimate the fair
value of our common stock at the time of each option grant based upon several factors, including its consideration of input from management and third-party valuations.
The exercise price for all stock options granted was at the estimated fair value of the underlying common stock, as estimated on the date of grant by
our board of directors in accordance with the guidelines outlined in the American Institute of Certified Public Accountants,
Valuation of Privately-Held-Company Equity Securities Issued as Compensation
. Each fair value estimate was based on a
variety of factors, which included the following:
|
|
•
|
|
our historical operating and financial performance;
|
|
|
•
|
|
the market performance of comparable publicly traded companies within our industry;
|
|
|
•
|
|
the identification and analysis of mergers and acquisitions of comparable companies;
|
|
|
•
|
|
the prices, rights, preferences and privileges of our preferred stock relative to the common stock;
|
72
|
|
•
|
|
the likelihood of achieving a liquidity event such as an initial public offering or sale given prevailing market conditions and the nature and history of our business;
|
|
|
•
|
|
any adjustments necessary to recognize a lack of marketability for our common stock; and
|
|
|
•
|
|
U.S. and global economic market conditions.
|
There are significant judgments and estimates inherent in
the determination of the fair value of our common stock. These judgments and estimates include assumptions regarding our future operating performance, the timing of a potential IPO or other liquidity event and the determination of the appropriate
valuation method at each valuation date. If we had made different assumptions, our stock-based compensation expense, net income (loss) and net income (loss) per share attributable to common stockholders could have been significantly different.
Once a public trading market for our common stock has been established in connection with the closing 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 stock-based awards, as the fair value of our common stock will be its trading price in the public market.
The following table summarizes by grant date the number of shares of common stock subject to stock options granted from January 1, 2014 through the
date of this prospectus, as well as the associated per share exercise price and the estimated fair value per share of our common stock on the grant date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Grant Date
|
|
Options
or RSUs
|
|
Number of
Awards
Granted
|
|
|
Exercise
Price
|
|
|
Grant Date
Fair Value
|
|
|
Aggregate
Award
Fair Value
|
|
|
March 21, 2014
|
|
Options
|
|
|
285,500
|
|
|
$
|
2.09
|
|
|
$
|
1.38
|
|
|
$
|
393,990
|
|
|
May 21, 2014
|
|
Options
|
|
|
16,000
|
|
|
$
|
2.09
|
|
|
$
|
1.38
|
|
|
$
|
22,080
|
|
|
November 27, 2014
|
|
Options
|
|
|
164,500
|
|
|
$
|
3.13
|
|
|
$
|
2.05
|
|
|
$
|
337,225
|
|
|
December 18, 2014
|
|
Options
|
|
|
84,500
|
|
|
$
|
3.49
|
|
|
$
|
2.30
|
|
|
$
|
194,350
|
|
|
February 26, 2015
|
|
Options
|
|
|
23,000
|
|
|
$
|
4.18
|
|
|
$
|
2.74
|
|
|
$
|
63,020
|
|
|
March 28, 2015
|
|
Options
|
|
|
319,900
|
|
|
$
|
4.18
|
|
|
$
|
2.72
|
|
|
$
|
870,128
|
|
|
April 29, 2015
|
|
Options
|
|
|
57,500
|
|
|
$
|
5.37
|
|
|
$
|
3.21
|
|
|
$
|
184,575
|
|
|
April 29, 2015
|
|
RSUs
|
|
|
73,000
|
|
|
|
n/a
|
|
|
$
|
5.37
|
|
|
$
|
392,010
|
|
|
July 23, 2015
|
|
Options
|
|
|
153,000
|
|
|
$
|
10.14
|
|
|
$
|
5.91
|
|
|
$
|
904,230
|
|
|
July 23, 2015
|
|
RSUs
|
|
|
146,000
|
|
|
|
n/a
|
|
|
$
|
10.14
|
|
|
$
|
1,480,440
|
|
|
October 21, 2015
|
|
Options
|
|
|
81,500
|
|
|
$
|
12.97
|
|
|
$
|
7.33
|
|
|
$
|
597,395
|
|
|
October 21, 2015
|
|
RSUs
|
|
|
689,596
|
|
|
|
n/a
|
|
|
$
|
12.97
|
|
|
$
|
8,944,060
|
|
|
December 16, 2015
|
|
Options
|
|
|
50,000
|
|
|
$
|
13.65
|
|
|
$
|
7.78
|
|
|
$
|
389,000
|
|
|
December 16, 2015
|
|
RSUs
|
|
|
605,250
|
1
|
|
|
n/a
|
|
|
$
|
13.65
|
|
|
$
|
8,261,663
|
|
|
1.
|
Includes 450,000 RSUs awarded under our 2016 Stock Incentive Plan on December 16, 2015, which RSUs are contingent upon the closing of this offering.
|
The fair value of our common stock was estimated or reconciled using the market approach. Under the market approach, the enterprise value is estimated
by performing a guideline public company, or GPC analysis, and a guideline transaction, or GT analysis.
The GPC analysis is based upon the premise
that indications of value for a given entity can be estimated based upon the observed valuation multiples of comparable public companies, the equity of which is freely-traded by investors in the public securities markets. The first step in this
analysis involves the selection of a peer group of companies from which it is believed relevant data can be obtained. The second step involves the calculation of the relevant valuation multiple or multiples for
73
each company in the peer group. The final step involves the selection and application of the appropriate multiples to the relevant financial metrics of our company. Depending upon the nature of
the multiple, the resulting value indication may then be adjusted for non-operational assets, liabilities and interest bearing debt to conclude the equity value of our company.
The GT analysis is based upon the premise that indications of value for a given entity can be estimated based upon the valuation multiples implied by
transactions involving companies that are comparable to the subject company. The first step in this analysis involves the identification of transactions from which it is believed relevant data can be obtained. The second step involves the
calculation of the relevant valuation multiple or multiples for each transaction in the comparable group. The final step involves the selection and application of the appropriate multiples to the relevant financial metrics of our company. Depending
upon the nature of the multiple, the resulting value indication may then be adjusted for non-operational assets, liabilities and interest bearing debt to conclude the equity value.
Once the equity value is estimated it is then allocated among the various classes of securities to arrive at the fair value of the common stock. These
allocations were prepared using a hybrid of the option-pricing method, or OPM, and the probability-weighted expected return method, or PWERM.
OPM
. 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 exceed the
value of the liquidation preferences at the time of a liquidity event, such as a strategic sale or merger. The common stock is modeled as a call option on the underlying equity value at a predetermined exercise price. In the model, the exercise
price is based on a comparison with the total equity value rather than, as in the case of a regular call option, a comparison with a per share stock price. Thus, common stock is considered to be a call option with a claim on the enterprise at an
exercise price equal to the remaining value immediately after the preferred stock liquidation preference is paid.
The OPM uses the Black-Scholes
option-pricing model to price the call options. This model defines the fair values of securities as functions of the current fair value of a company and uses assumptions such as the anticipated timing of a potential liquidity event and the estimated
volatility of the equity securities.
PWERM
. Under the PWERM methodology, the fair value of common stock is estimated
based upon an analysis of future values for a 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 the
value for the common stock. A discount for lack of marketability is then applied to the common stock to account for the lack of access to an active public market.
Hybrid Method
. The hybrid method is a PWERM where the equity value in one of the scenarios is calculated using an OPM. In
the hybrid method used in our third-party valuations, two types of future-event scenarios were considered: an IPO and a remaining private scenario. The enterprise value for the IPO scenario was determined using a market approach. The enterprise
value for the remaining private scenario was determined using the GPC and the GT analysis. In this remaining private scenario, the OPM approach was utilized to determine the fair value of the common stock. The relative probability of each type of
future-event scenario was determined by our board of directors based on an analysis of market conditions at the time, including then-current IPO valuations of similar situation companies, and expectations as to the timing and likely prospects of the
future-event scenarios.
74
Recent Accounting Pronouncements
Refer to the “Summary of Significant Accounting Policies” footnote within our consolidated financial statements for analysis of recent
accounting pronouncements that are applicable to our business.
Quantitative and Qualitative Disclosures about Market Risks
Market risk is the risk of loss to future earnings, values or future cash flows that may result from changes in the price of a financial instrument. The
value of a financial instrument may change as a result of changes in interest rates, exchange rates, commodity prices, equity prices and other market changes. We are exposed to market risk related to changes in foreign currency exchange rates. We do
not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we may enter into exchange rate hedging arrangements to manage the risks described below.
Foreign Currency Exchange Risk
Our operations
outside of the United States incur a portion of their operating expenses in foreign currencies, principally the Danish Krone, but these expenses are de minimis compared to our overall expenses. To date, the majority of our product sales and
inventory purchases have been denominated in U.S. dollars. However, we have contracts for our outsourced development that are not denominated in U.S. dollars and that represent significant spending within the research and development area of our
business. The functional currency of all of our entities is the U.S. dollar. However, we believe that exposure to foreign currency fluctuation from operating expenses is material as the related costs do constitute a significant portion of our total
expenses. During the years ended December 31, 2013, 2014 and 2015, the total amount of our outsourced development contracts denominated in U.S. dollars was $4.6 million, $6.5 million and $9.6 million respectively. During the years ended
December 31, 2013, 2014 and 2015, the total amount of our outsourced development contracts denominated in Euros was
€
3.5 million,
€
4.8
million and
€
8.5 million respectively. During the years ended December 31, 2013 and 2014, we incurred foreign currency transaction losses of $63,000 and $156,000, respectively. During
the year ended December 31, 2015, we recorded foreign currency transaction gains of $157,000. These foreign currency transaction gains and losses have been recorded as a component of “other expense” in our consolidated statements of
operations. We believe that a 5% change in the exchange rate between the U.S. dollar and Euro would not materially impact our operating results or financial position. To date, we have not entered into any foreign currency exchange contracts. In
future periods, we may hedge certain significant transactions denominated in currencies other than the U.S. dollar as we expand our international operations.
Interest Rate Sensitivity
Our cash and cash
equivalents as of December 31, 2015 consisted of cash maintained in money market funds and FDIC-insured operating accounts. Our primary exposure to market risk for our cash and cash equivalents is interest income sensitivity, which is affected
by changes in the general level of U.S. interest rates. However, we do not believe a sudden change in the interest rates would have a material impact on our financial condition or results of operations.
We have a working capital line of credit, under which no amount was outstanding as of December 31, 2015. The interest rate associated with the
working capital line of credit is the prime lending rate plus 1.5%. A 10% increase or decrease in interest rates would not result in a material change in our obligations under the line of credit, even at the borrowing limit.
Inflation Risk
We do not believe that inflation has
had a material effect on our business. However, if global demand for the base materials utilized in our suppliers’ components were to significantly increase for
75
the components we purchase from our suppliers to manufacture our products, our costs could become subject to significant inflationary pressures, and 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, operating results and financial condition.
Emerging Growth Company
Status
Section 107 of the JOBS Act provides that an “emerging growth company” can take advantage of the extended transition
period afforded by the JOBS Act for the implementation of new or revised accounting standards. However, we are choosing to “opt out” of such extended transition period, and as a result, we will comply with new or revised accounting
standards on the relevant dates on which adoption of such standards is required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to not take advantage of the extended transition period for complying with
new or revised accounting standards is irrevocable.
76
BUSINESS
Overview
Our mission is to deliver high-speed coherent
optical interconnect products that transform communications networks, relied upon by cloud infrastructure operators and content and communication service providers, through improvements in performance and capacity and a reduction in associated
costs. By converting optical interconnect technology to a silicon-based technology, a process we refer to as the siliconization of optical interconnect, we believe we are leading a disruption that is analogous to the computing industry’s
integration of multiple functions into a microprocessor. Our products include a series of low-power coherent DSP ASICs and silicon PICs, which we have integrated into families of optical interconnect modules with transmission speeds ranging from 40
to 400 Gbps for use in long-haul, metro and inter-data center markets. We are also developing optical interconnect modules that will enable transmission speeds of one terabit (1,000 gigabits) per second and more. Our modules perform a majority of
the digital signal processing and optical functions in optical interconnects and offer low power consumption, high density and high speeds at attractive price points. Through the use of standard interfaces, our modules can be easily integrated with
customers’ network equipment. The advanced software in our modules enables increased configurability and automation, provides insight into network and connection point characteristics and helps identify network performance problems, all of
which increase flexibility and reduce operating costs.
Our modules are rooted in our low-power coherent DSP ASICs and silicon PICs, which we
have specifically developed for our target markets. Our coherent DSP ASICs are manufactured using complementary metal oxide semiconductor, or CMOS, and our silicon PICs are manufactured using a CMOS-compatible process. CMOS is a widely-used and
cost-effective semiconductor process technology. Using CMOS to siliconize optical interconnect technology enables us to continue to integrate increasing functionality into our products, benefit from higher yields and reliability associated with CMOS
and capitalize on regular improvements in CMOS performance, density and cost. Our use of CMOS also enables us to use outsourced foundry services rather than requiring custom fabrication to manufacture our products. In addition, our use of CMOS and
CMOS-compatible processes enables us to take advantage of the technology, manufacturing and integration improvements driven by other computer and communications markets that rely on CMOS.
Our engineering and management teams have extensive experience in optical systems and networking, digital signal processing, large-scale ASIC design and
verification, silicon photonic integration, system software development, hardware design and high-speed electronics design. This broad expertise in a range of advanced technologies, methodologies and processes enhances our innovation, design
and development capabilities and has enabled us to develop and introduce nine optical interconnect modules, five coherent DSP ASICs and two silicon PICs since 2009. In the course of our product development cycles, we continuously engage with our
customers as they design their current and next-generation network equipment, which provides us with deep insights into the current and future market needs.
We sell our products through a direct sales force to leading network equipment manufacturers. The number of customers who have purchased and
deployed our products has increased from eight in 2011 to more than 25 during 2015. We have experienced rapid revenue growth over the last several years. Our revenue for 2015 was $239.1 million, a 63.5% increase from $146.2 million of
revenue in 2014. In 2015, we generated net income of $40.5 million and our adjusted EBITDA was $47.5 million, compared to net income of $13.5 million and adjusted EBITDA of $20.4 million in 2014. See “Selected Consolidated Financial
Data—Non-GAAP Financial Measures” for more information regarding our use of adjusted EBITDA and other non-GAAP financial measures and a reconciliation of adjusted EBITDA to net income.
77
Industry Background
Growing Demand for Bandwidth and Network Capacity
Global internet protocol, or IP, traffic is projected to nearly triple from 2.0 exabytes per day in 2014 to 5.5 exabytes per day in 2019, representing a
23% compound annual growth rate, or CAGR, according to Cisco’s Visual Networking Index Report dated May 2015, or the VNI Report. This rapid growth in IP traffic is the result of several factors, including:
|
|
•
|
|
Increased data and video consumption.
Over the last decade, the proliferation of new technologies, applications, Web 2.0-based services and Internet-connected devices has led to
increasing levels of Internet traffic and congestion and the need for greater bandwidth. Video traffic, in particular, is growing rapidly, and placing significant strains on network capacity. The VNI Report estimates that video traffic will
represent 80% of all global IP traffic in 2019, reaching 134.8 exabytes per month, up from 40.2 exabytes per month in 2014.
|
|
|
•
|
|
Growth in mobile and 4G/LTE communications.
The increasing demand for data- and video-intensive content and applications on mobile devices is driving significant growth in mobile
data and video traffic and has led to the proliferation of advanced wireless communication technologies, such as 4G/LTE, which depend on wired networks to function. According to the VNI Report, global mobile data traffic grew 69% in 2014 from the
prior year and is expected to increase nearly ten-fold from 2014 to 2019, a 57% compound annual growth rate.
|
|
|
•
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Proliferation of cloud services.
Enterprises are increasingly adopting cloud services to reduce IT costs and enable more flexible operating models. Consumers are increasingly relying
on cloud services to satisfy video, audio and photo storage and sharing needs. Together, these factors are driving increased Internet traffic as cloud services are accessed and used. Daily global cloud traffic is expected to quadruple from 5.8
exabytes in 2014 to 23.6 exabytes in 2019, according to the Cisco Global Cloud Index, dated October 2015. Forrester Research, in its report titled The Public Cloud Market is Now in Hypergrowth, released in April 2014, forecasts that the public
cloud market will exceed $191 billion by 2020, compared to less than $58 billion in 2013.
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|
|
•
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|
Changing traffic patterns.
Content service providers and data center operators are increasingly building their own networks of connected data centers to handle increasing amounts of
data. The architectures of these connected data centers dramatically increase the amount of data being transmitted within these data center networks. For example, Facebook found that a single 1 kB data inquiry generated 930 kB of traffic within its
private data center network as reported in Facebook’s Data Center Network Architecture, abstract from the proceedings of the IEEE Optical Interconnects Conference, published in May 2013.
|
|
|
•
|
|
Adoption of the “Internet of Things.”
Significant consumer, enterprise and governmental adoption of the “Internet of Things,” which refers to the global network
of Internet-connected devices embedded with electronics, software and sensors, is anticipated to strain network capacity further and increase demand for bandwidth. The VNI Report estimates that 24.4 billion devices and objects will be connected to
the Internet by 2019, compared to 14.2 billion in 2014.
|
Increasing Investment in Network Equipment
To satisfy the growth in demand for bandwidth, communications and content service providers and data center and cloud infrastructure operators, which we
refer to collectively as cloud and service providers, are investing in the capacity and performance of their network equipment. Network equipment can be broadly categorized as routing and switching networking equipment, which, among other things,
manages data routing functions, and optical equipment, which transports data over the fiber optic network.
78
Historically, data routing and switching capacities have increased at a faster pace than optical
transmission speeds supported by optical transport equipment. We believe this imbalance is causing investments in optical transport equipment to grow at a faster rate than overall investments in network equipment and is driving the need for faster
and more cost-effective optical equipment.
The table below outlines the principal types of networks and estimated annual spend on high-speed
optical network hardware related to the long-haul, metro and inter-data center markets:
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Estimated Spend
|
|
Network Type
|
|
Description
|
|
2014
|
|
Forecast for 2019
|
|
CAGR
|
|
Long-haul
|
|
Distances greater than 1,500 km, and subsea connections
|
|
$4.7 billion
|
|
$7.0 billion
|
|
8.6%
|
|
|
|
|
|
|
|
Metro
|
|
Distances less than 1,500 km connecting regions and cities
|
|
$6.4 billion
|
|
$11.8 billion
|
|
13.0%
|
|
|
|
|
|
|
|
Inter-data center
|
|
Various lengths connecting large data centers
|
|
$0.4 billion
|
|
$4.0 billion
|
|
58.4%
|
Long-haul networks, which require sophisticated and high-capacity transmission capabilities, were traditionally the
earliest adopters of high-speed optical technologies. Recently, changing traffic patterns have also driven metro network operators and cloud and service providers to demand new technologies that can increase the capacity of their networks more
rapidly. Even more recently, cloud infrastructure operators and content service providers have been building private networks of data centers, which are increasingly dependent on higher speed optical solutions to connect their data centers to each
other.
Importance of Optical Interconnect Technologies
Optical equipment that interfaces directly with fiber relies on optical interconnect technologies that take digital signals from network equipment,
perform signal processing to convert the digital signals to optical signals for transmission over the fiber network, and then perform the reverse functions on the receive side. These technologies also incorporate advanced signal processing that can
monitor, manage and reduce errors and distortion in the fiber connection between the transmit and receive sides. Advanced optical interconnect technologies can enhance network performance by improving the capabilities and increasing the capacities
of optical equipment and routers and switches, while also reducing operating costs.
The key characteristics of advanced optical interconnect
technologies that dictate performance and capacity include:
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•
|
|
Speed.
Speed refers to the rate at which information can be transmitted over an optical channel and is measured in Gbps.
|
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•
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|
Density.
Density refers to the physical footprint of the optical interconnect technology. Density is primarily a function of the size and power consumption of the technology.
|
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|
•
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|
Robustness
. Robustness refers to the ability of an optical interconnect technology to compensate for the distortion that accumulates through the fiber network and prevent and correct
errors introduced by the network.
|
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|
•
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|
Power Consumption.
Power consumption refers to the amount of electricity an optical interconnect technology consumes. Lower power consumption permits improved density and product
reliability, and results in lower operating expense for electricity and cooling.
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79
|
|
•
|
|
Automation.
Automation refers to the ability of an optical interconnect technology to handle network tasks that historically were required to be performed manually, such as
activation and channel provisioning.
|
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•
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|
Manageability
.
Manageability refers to the ability of an optical interconnect technology to monitor network performance, detect and address network issues easily and
efficiently, which helps increase reliability and reduce ongoing maintenance and operational needs.
|
As they build their network
service offerings, cloud and service providers and the network equipment manufacturers weigh these characteristics differently based on the particular demands and challenges they face. For example, cloud or service providers operating long-haul
networks that transmit large amounts of data between Boston and San Francisco have relatively few connection points in their networks and may be more sensitive to speed and manageability of the optical interconnect and less focused on power
consumption. In contrast, metro network operators or cloud or service providers operating inter-city or intra-city networks may face space and power constraints, as well as constantly changing workload needs, and be most focused on density, power
consumption and automation.
Improvements in these characteristics can lead to reductions in development costs for network equipment manufacturers,
who might otherwise need to develop their own optical interconnect technologies. In addition, improvements in these characteristics can lead to reductions in acquisition and development costs for network equipment manufacturers who incorporate
third-party optical interconnect technologies into their equipment, which in turn can reduce capital costs for cloud and service providers. Further, improvements in power consumption, automation and manageability can result in reduced operating
costs for cloud and service providers.
Advent of Coherent Interconnect Technologies
Traditional techniques for transmitting information via light signals over a fiber optic network used simple “on/off” manipulation, or
modulation, of the light signal. These traditional techniques are adequate for transmission speeds up to 10 Gbps, as separate optical equipment can be used to monitor the fiber connection and to compensate for the degradation of the light signals
when they travel through the fiber. At transmission speeds in excess of 10 Gbps, however, it becomes increasingly difficult to compensate for the degradation of light signals using traditional techniques. In addition, these traditional techniques
require cumbersome and expensive equipment and do not meet network operators’ demands for high-quality signals. In the mid-2000s, advanced modulation techniques enabled by coherent communications techniques and digital signal processing were
introduced to increase transmission speeds above 10 Gbps. However, these advanced modulation techniques required significant changes in the underlying optical interconnect technologies and architecture.
Coherent communications is a more complex method of transmitting and receiving information via optical signals. Coherent technologies enable greater
utilization of complex formats that manipulate both a signal’s amplitude and its phase to yield a higher data transmission rate with better resilience to signal degradation. Coherent communications enables powerful digital signal processing to
counter digitally the effects of signal degradation that were previously managed through an array of discrete components and costly techniques, such as optical dispersion compensation. By taking advantage of coherent communications technologies,
some cloud and service providers are able to operate networks at transmission speeds of up to 400 Gbps today and are increasingly planning to adopt technologies that enable up to 1,000 Gbps transmission speeds. These providers require advanced
coherent interconnect solutions.
80
The Shortcomings of Existing Coherent Interconnect Solutions
Digital signal processing in coherent interconnect technologies takes place in an application-specific integrated circuit known as a coherent DSP
ASIC. Building a coherent DSP ASIC is a multi-disciplinary undertaking requiring advanced knowledge of several complex technologies, such as optical systems, transmission, communications theory, digital signal processing algorithms and mixed
signal design, and the development and verification of complex communications ASICs. Given the breadth of expertise and the significant costs required to develop coherent DSP ASICs, few independent vendors provide commercially available
coherent DSP ASICs and a limited number of network equipment manufacturers are capable of producing next generation coherent DSP ASICs. Although these DSP ASICs provide basic transmit, receive, monitoring and compensation functionality required for
an advanced coherent interconnect, they generally are not able to simultaneously achieve the low power, density, speed and transmission distance requirements of cloud and service providers.
To complete an interconnect solution, the coherent DSP ASIC must be used in conjunction with a number of photonic functions, such as modulation and
transmission/reception. These functions have traditionally been performed by several discrete, bulky, expensive components that must be purchased by a network equipment manufacturer and designed into custom interface circuit boards before
deployment. This approach requires significant time and engineering resources of network equipment manufacturers and often inhibits overall improvements in density, reliability and cost-efficiency. Some vendors have attempted to simplify this
process by integrating a number of these photonic functions into optical modules. This approach, however, often results in performance limitations with respect to key characteristics, such as speed and density.
The development of a photonic integrated circuit, or PIC, enables dramatic improvements in size and cost by tightly integrating multiple photonic
functions into a small integrated circuit. However, PICs are not widely available in the market today and the few that have been developed for commercial sale typically rely on expensive non-silicon approaches, such as indium phosphide, that
generally require special packaging and temperature stabilization, often require custom foundries to manufacture and are less able to benefit from the cost and yield improvements that are possible from the use of silicon. In addition, the use of
these PICs to date has generally been limited to custom systems that typically require a different transport architecture than is widely deployed today.
None of these traditional approaches permits the complete integration of the coherent DSP ASIC and photonic components in a cost-effective manner that
meets the needs of network equipment manufacturers. As a result, network equipment manufacturers are increasingly seeking to replace traditional products with simple, open and complete coherent interconnect solutions that perform both digital signal
processing and photonic functions.
Our Solution—The Siliconization of Optical Interconnect Technology
We have developed families of high-speed coherent interconnect products that reduce the complexity and cost of optical interconnect technology, while
simultaneously improving network performance and accelerating the pace of innovation in the optical networking industry. We build these advanced optical interconnect products using silicon, a process we refer to as the siliconization of optical
interconnect. The siliconization of optical interconnect allows us to integrate previously disparate optical functions into a single solution, leading to significant improvements in density and cost and allowing us to benefit from ongoing advances
in CMOS. Our optical interconnect solution includes sophisticated modules that perform a majority of the digital signal processing and optical functions required to process network traffic at transmission speeds of 100 Gbps and above in long-haul,
metro and inter-data center networks. These modules meet the needs of cloud and service providers for optical interconnect products in a simple, open, high-performance form factor that can be easily integrated in a cost-effective manner with
existing network equipment.
81
Our optical interconnect products are powered by our internally developed and purpose-built coherent DSP
ASICs and silicon PICs. Our coherent DSP ASICs and silicon PICs are engineered to work together, and each integrates numerous signal processing and optical functions that together deliver a complete, cost-effective high-speed coherent optical
interconnect solution in a small footprint that requires low power and provides significant automation and management capabilities. We believe that our highly integrated optical interconnect modules, which are based on our coherent DSP ASIC and
silicon PIC, were, at the time of market introduction, the industry’s first interconnect modules to deliver transmission speeds of 100 Gbps and higher. Prior to the introduction of our highly integrated optical interconnect modules, we believe
that these transmission speeds were not possible in modules in an industry standard form factor without sacrificing signal quality or other performance characteristics. For example, our 100 Gbps CFP modules, which are based on the
industry-standard CFP form factor, enable cloud and service providers to easily upgrade their existing metro and inter-data center networks to 100 Gbps using their existing, deployed equipment chassis or newly designed network equipment with
CFP slot capabilities. Furthermore, by providing an integrated solution that incorporates digital signal processing and optical functionality required to process and transmit data through a high-speed optical channel, our optical interconnect
products reduce the resource requirements of the network equipment manufacturers necessary to build and service equipment with high-speed optical interconnect functionality.
We believe we are the first independent vendor to introduce at commercial scale both a coherent DSP ASIC and a silicon PIC integrated into an optical
interconnect module. By designing our silicon PIC in a CMOS-compatible process, which is widely used in the semiconductor industry and generally does not require special packaging, we are able to reduce cost, increase reliability and take advantage
of the ongoing improvement of CMOS technology, as well as contract with foundries for the manufacture of many of our products. Our silicon PIC incorporates several key optics functions, including modulation and transmission/reception functions, and
supports transmission distances for long-haul, metro and inter-data center applications. We believe that our silicon PIC was the first commercially available PIC to include all of these functions over a broad range of transmission distances and we
are not aware of any other commercially available silicon PICs with similar functionality. By building both our coherent DSP ASIC and our silicon PIC in CMOS-compatible processes, we can improve the performance and efficiency of the optical
interconnect and benefit from engineering synergies. We refer to this integration of advanced optical interconnect technologies onto CMOS as the siliconization of optical interconnect technology.
The advantages of our solution include:
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•
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|
Industry-leading speed, density and power consumption.
We believe that our coherent DSP ASICs, silicon PICs and 100 and 400 Gbps optical interconnect modules consume less power and
have higher density than comparable optical interconnect products. Our modules perform functions that have traditionally been provided by several discrete pieces of network equipment.
|
|
|
•
|
|
Breadth of integration.
By integrating many photonic functions into our silicon PIC and further integrating our silicon PIC in our modules, we enable simplified network equipment
designs and reduce the amount of development and optical engineering our customers would otherwise do internally, thereby freeing up their engineering resources to focus on other networking functions.
|
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•
|
|
Software intelligence.
Our products incorporate software intelligence that automates tasks, such as channel provisioning, and increases manageability through a high level of software
features, including increased monitoring and optimization.
|
|
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•
|
|
Cost-efficiency.
We are able to offer our products at attractive price points as a result of the scale and process benefits
of our CMOS platforms. In addition, the performance capabilities of
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82
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our products permit greater flexibility and can reduce both design cost for the network equipment manufacturer and network design and ongoing operational cost for the cloud or service provider.
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•
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|
Ease of deployment.
By leveraging industry-standard interfaces, our modules enable cloud and service providers to immediately increase the speed and capacity of their networks by
replacing their legacy 10 Gbps or 40 Gbps components with our 100 Gbps or 400 Gbps modules in their existing equipment. Our modules can also easily be deployed in next generation network equipment.
|
Our Competitive Strengths
We plan to maintain and extend our
competitive advantages through rapid innovation delivering industry-leading high-speed interconnect products to our customers by focusing on the following key areas:
|
|
•
|
|
Leading provider of high-speed integrated optical interconnect modules.
We believe we are the first independent vendor to introduce at commercial scale both a coherent DSP ASIC and a
silicon PIC integrated into an optical interconnect module capable of transmission speeds of 100 Gbps and above. Our modules solve many of the shortcomings of existing interconnect solutions and meet the majority of a cloud or service
provider’s interconnect needs in a standard and compact form factor that can be easily integrated with other network equipment. Our coherent DSP ASICs and silicon PICs enable us to offer advanced optical interconnect products with desirable
features such as high density, low power and high performance.
|
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•
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Track record of rapid innovation driven by advanced design methodologies.
We maximize the pace of innovation through a number of measures, including the creation of a continuously
expanding tool box of digital signal processing algorithms, ASIC implementations, CMOS-compatible optics subsystems and related intellectual property, which enable us to develop complex products at an increasing pace by reusing and expanding
existing solutions. Our development, verification and test infrastructure and methodologies involve extensive automation, which increase the speed and quality of our development. Our ability to innovate at a rapid pace enables us to offer products
purpose-built for different applications and based on the newest CMOS technology. These design and development capabilities have enabled us to introduce nine optical interconnect modules since 2009 for multiple markets, including long-haul, metro
and inter-data center. Using our innovation and development model, since 2009 we have introduced five coherent DSP ASICs, each of which was built using the newest CMOS technology available at the time of their market introduction, and two silicon
PICs, which we believe are the industry’s only commercially-available silicon PICs for coherent interconnect products.
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•
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Leveraging the strength of CMOS for photonics.
The density and cost of high-speed optical interconnect products have traditionally been determined by the photonic components.
Implementing the photonic components in CMOS, and using CMOS as the platform for the integration of multiple discrete photonics functions, enables us to significantly reduce the density and cost of our optical interconnect products compared to
traditional approaches, which typically rely on complex materials such as lithium niobate and indium phosphide that do not permit the same level of integration and do not benefit from the ongoing advances in CMOS technology driven by the entire
electronics industry.
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•
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Proprietary software framework enables simplified configuration and deployment.
We have made substantial investments in the
software components of our products, which we believe is key to increasing the performance and reducing the capital expenditures and operating expenses associated with high-speed networks. Our software framework also
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facilitates the integration of the many complex digital signal processing, ASIC, hardware and optical functions required in high-speed interconnect technologies and enables our customers to
integrate our products easily into their existing networks. Through the use of software, we are able to configure the same product to be deployed in various network types with different needs and requirements, without the need to modify or
reconfigure the network’s architecture, providing us with significant development and manufacturing efficiencies.
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•
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Customer collaboration provides deep understanding of market needs.
We collaborate closely with our customers, as well as directly with many cloud and service providers, and solicit
their input as they design their network equipment and as we design our next-generation products. This provides us with deep insights into the current and future needs of our customers and the market, which in turn enables us to develop and deliver
products that meet customer demands and anticipate market developments.
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•
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Strong management and engineering teams with significant industry expertise.
We have deliberately built our management and engineering teams, of which our founders remain a key part,
to include personnel with extensive experience in optical systems and networking, digital signal processing, large-scale ASIC design and verification, silicon photonic integration, system software development, hardware design and high-speed
electronics design. As of February 15, 2016, approximately 71% of our employees are engineers or have other technical backgrounds, and approximately 45% of our employees hold a Ph.D. or other advanced degree. Each element of our solution is
developed by experts in the relevant field. Our collaborative development culture encourages employees with diverse experiences and expertise to work together to create innovative solutions.
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Our Growth Strategy
Our goal is to become the leading
provider of high-speed interconnect technology that underpins the world’s data and communication networks. To grow our business and achieve our mission, we are pursuing the following strategies:
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Continue to innovate and extend our technology leadership.
Our coherent DSP ASICs and silicon PICs are at the heart of our products’ abilities to deliver cost-efficient high
performance. We intend to continue to invest in our technology to deliver innovative and high-performance products and to identify and solve challenging interconnect needs. We expect that our continued investments in research and development will
enable us to expand and enhance the capabilities of our CMOS-based products in order to continue to develop higher-capacity and higher-density software-enabled products. For example, we are currently developing optical interconnect modules that will
enable transmission speeds of one terabit per second and more. We also plan to continue to invest in silicon PIC innovation and its optimization with our coherent DSP ASICs in order to serve the growing demand for bandwidth.
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•
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Increase penetration within our existing customer base.
We focus heavily on the needs of our customers and frequently innovate in partnership with them to deliver cost-effective
products that meet their specific needs. As we continue to enhance and expand our product family, and as our existing customers seek to expand and improve their network equipment technology, we expect to generate additional revenue through sales of
existing and new products to these customers. At the same time, we design our latest-generation products to interoperate with prior-generation products so that our customers can continue to derive long-term value from their investments.
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•
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Continue to expand customer base.
We have increased the number of customers who purchase and use
our products in each of the last five years, and we believe there continues to be unmet need for high-speed, cost-efficient interconnect products among cloud and service providers. In 2015, we sold our optical interconnect
products to more than 25 customers. Historically, our sales have been primarily to network equipment manufacturers that do not have internally developed coherent DSP ASICs. More recently, we have had success in marketing and
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selling our products to network equipment manufacturers that have internally developed their own coherent DSP ASICs. We believe that the benefits of our solution, supported by the success of
existing customers as references, will drive more network equipment manufacturers to purchase their interconnect products from us. We plan to continue to acquire new customers through expanded sales and marketing and brand recognition efforts.
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Grow into adjacent markets.
We believe that growth in fiber optics-based communications is likely to accelerate, partly driven by the cost and density advantages of our CMOS
solution, and that this growth, together with expansion in other markets that depend on high-speed networking capabilities, such as intra-data center and network access markets, will result in demand for additional applications for our
products. By continuing to reduce the size, design complexity and power of the interconnect and the ease of integration into the equipment, we believe we can create opportunities to serve new types of customers that may seek to incorporate
high-speed optical interconnect technologies into their products, including companies that do not have sufficient optical engineering expertise to develop systems using current interconnect technologies.
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Selectively pursue strategic investments or acquisitions.
Although we expect to focus our growth strategy on expanding our market share organically, we may
pursue future investments or acquisitions that complement our existing business, represent a strategic fit and are consistent with our overall growth strategy.
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Our Products
Our families of optical interconnect technology
products consist of high-capability, scalable, cost-efficient optical interconnect modules that are rooted in our five coherent DSP ASIC and two silicon PIC components. Our products are built to meet the specific needs of various networks and
support transmission capacities between 40 Gbps and 400 Gbps per module. Our products incorporate our proprietary advanced system-in-a-module software, which, through a standardized interface, enables seamless installation, configuration and
operation and a high level of performance monitoring. We also selectively offer our coherent DSP ASIC and silicon PIC elements as standalone components.
We have developed and manufacture, sell and support the following high-speed coherent interconnect modules:
AC100-MSA Product Family
Our AC100-MSA product family
contains three modules that all support 100 Gbps transmission speeds in an industry-standard 5” x 7” form factor.
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AC100-G: Released in 2011, this module supports transmission distances of up to 4,000 km. This module is mainly used in the long-haul and metro markets. It is based on our Everest DSP ASIC. We believe it was the
industry’s first commercially available coherent 100 Gbps module and the first commercially available coherent interconnect to rely on advanced soft decision forward error correction for improved transmission reach.
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AC100-S: Released in 2012, this module supports transmission distances of up to 12,000 km through extended digital compensation of distortion and advanced modulation. This module is mainly used in subsea applications.
It is based on our Mauna Kea DSP ASIC. We believe it was the industry’s first commercially available coherent 100 Gbps module for subsea applications.
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AC100-C: Released in 2014, this module supports transmission distances of up to 4,000 km. This module provides similar functionality to the AC100-G and is based on our Everest DSP ASIC and our Acadia silicon PIC. It is
mainly used in the long-haul and metro markets. We believe it is the industry’s first commercially available coherent 100 Gbps module that uses a silicon PIC.
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AC100-CFP Product Family
Our AC100-CFP product family
contains two modules that support 100 Gbps transmission speeds in an industry-standard, pluggable CFP form factor.
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AC100-CFP-M: Released in 2014, this module supports transmission distances of up to 2,500 km. This module is mainly used in the metro and inter-data center markets. It is based on our Sky DSP ASIC and our Acadia silicon
PIC. We believe it was the industry’s first commercially available coherent 100 Gbps CFP module.
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•
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AC100-CFP-ZR: Released in 2014, this module supports coherent transmission over distances of up to 80 km at an ultra-low power consumption. It is based on our Sky DSP ASIC and our Acadia silicon PIC. This module is
mainly used in the metro and inter-data center markets.
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AC400 Flex Product Family
Our AC400 Flex product family contains three modules that support transmission capacities ranging from 100 Gbps to 400 Gbps per module. By changing the
configuration of these modules through software configuration, customers can use these modules to support the transmission speed and distance that is best suited to their needs.
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AC400-U: Released in 2015, this dual-core, flex-rate and flex-modulation module supports transmission capacities of 100, 200, 300 and 400 Gbps in an
industry-standard 5” x 7” form factor. This module is software configurable to optimize transmission speeds, fiber capacity,
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compensation for distortion and power consumption for multiple applications, including inter-data center, metro, long-haul and subsea applications spanning transmission distances up to 12,000 km
and greater. It is based on our Denali DSP ASIC and our silicon PIC. We believe it is the industry’s first commercially available dual-core coherent module, the first commercially available module to support multiple transmission speeds in a
single product and the first commercially available module to support transmission capacities of up to 400 Gbps.
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AC400-S: Released in 2015, this dual-core module provides similar functionality to our AC400-U module and incorporates enhanced-performance 100 Gbps configuration that allows for upgrades of subsea systems originally
equipped with 40 Gbps optical interconnect technology. It is based on our Denali DSP ASIC.
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AC400-UL: Released in 2015, this module supports a transmission speed of 100 Gbps for subsea applications in an industry-standard 5” x 7” form factor with a digital electrical interface compatible with our
AC100-MSA product family. It is based on our Denali DSP ASIC and our silicon PIC.
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AC040-MSA Product Family
Our AC040-MSA product family contains a single module that supports a 40 Gbps transmission speed in an industry standard 5” x 7” form factor.
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AC040-S: Released in 2013, this module supports transmission distances of 12,000 km or greater. It is mainly used in subsea applications. This product is approaching the end of its volume life cycle. It is based on our
K2 DSP ASIC.
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DSP ASICs
We have
developed and manufacture, sell and support the following five coherent DSP ASICs:
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Everest: Released in 2011, this DSP ASIC targets the metro and long-haul markets at transmission speeds of 100 Gbps and includes advanced soft decision forward error correction.
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•
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Mauna Kea: Released in 2012, this DSP ASIC targets subsea applications at transmission speeds of 100 Gbps and includes advanced soft decision forward error correction and digital compensation of fiber dispersion to
support transmission distances of up to 12,000 km.
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•
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K2: Released in 2013, this DSP ASIC targets subsea applications at transmission speeds of 40 Gbps and includes advanced soft decision forward error correction and digital compensation of fiber dispersion to support
transmission distances of 12,000 km or greater.
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Sky: Released in 2014, this DSP ASIC targets the inter-data center and metro markets, which are power-sensitive, at transmission speeds of 100 Gbps and includes ultra-low power soft decision forward error correction.
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Denali: Released in 2015, this dual core, flex-rate and flex-modulation coherent DSP ASIC is software configurable and supports inter-data center, metro, long-haul and subsea applications at transmission speeds of 100,
200, 300 and 400 Gbps. This DSP ASIC also includes high-performing soft decision forward error correction and digital compensation of fiber dispersion to support transmission distances of 12,000 km or greater.
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Silicon PICs
We have developed the following two
coherent silicon PICs:
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Acadia: Released in 2014 and currently being manufactured, sold and supported by us, this silicon PIC performs, in a single package, multiple coherent optical functions such as transmission and reception.
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Glacier: Released in sample form during the first quarter of 2016, this silicon PIC performs, in a single package, the same functions as our Acadia silicon PIC at a higher level of optical performance.
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Sales and Marketing
We market and
sell our products through our direct sales force consisting of sales personnel and centralized technical customer support. Our sales force also works closely with our product line management personnel to support strategic sales activities.
Our products typically have a long sales cycle, requiring discussions with prospective customers in order to better understand their network and system
level requirements and technology roadmaps. Our customers are predominantly network equipment manufacturers, and we have discussions with them regarding the requirements of their end customers, which provides our sales force with insight into how
our products will be deployed in the networks of these end customers. This sales process requires us to develop strong customer relationships. The period of time from our initial contact with a prospective or current customer to the receipt of an
actual purchase order is frequently a year or more.
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Prospective customers perform system and network level testing before equipment is deployed in a network carrying live traffic. Customers require us to perform extensive verification testing and
qualification based on industry standards. This phase of our sales cycle can take several months and purchase arrangements may not be entered into until after this phase is completed.
We invest time and resources to meet with leading carriers and cloud service providers to understand network system performance issues. These efforts
provide us with a deep understanding of the challenges faced by carriers and cloud service providers which, in turn, enables us to focus our future product and technology development efforts to address those challenges. For example, understanding
that several of our customers are planning to adopt technologies that enable up to one terabit per second transmission speeds, we are currently developing products to satisfy these requirements.
Our in-house sales personnel also assist customers with forecasts, orders, delivery requirements, warranty returns and other administrative functions.
Our technical support engineers respond to technical and product-related questions and provide application support to customers who have incorporated our products into their systems. We have centralized our technical support operations at
our corporate headquarters in Maynard, Massachusetts. Our centralized customer support operations allow our technical customer support personnel to work directly with our research and development and operations personnel on a regular
basis, which reduces the time it takes to identify and address our customers’ technical issues and helps our technical support personnel maintain and improve upon their technical skills.
Customers
The number of customers who have purchased and
deployed our products has increased from eight in 2011 to more than 25 during 2015. The following table sets forth our revenue by geographic region for the periods indicated, based on the country or region to which the products were shipped:
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Year Ended December 31,
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2013
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2014
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2015
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(in thousands)
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Americas
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$
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13,945
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$
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32,109
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$
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46,624
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EMEA
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37,866
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60,101
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103,150
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APAC
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25,841
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54,024
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89,282
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$
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77,652
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$
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146,234
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$
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239,056
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Manufacturing
We
contract with third parties to manufacture, assemble and test our products. We utilize a range of CMOS and CMOS-compatible processes to develop and manufacture the coherent DSP ASICs and silicon PICs that are designed into our modules. We select the
semiconductor process and foundry that provides the best combination of performance, cost and feature attributes necessary for our products. For several of our products, a single foundry fab is selected for semiconductor wafer production. We inspect
and further test our products before customer shipments.
We contract with three third-party contract manufacturers to test and build modules
incorporating our coherent DSP ASICs and silicon PICs for high-volume production of our modules. We build the test systems used by our contract manufacturers. We also directly manufacture prototype products and limited production quantities during
initial new product introduction. We undertake final inspection and implement any customer-specific configurations and packaging before customer shipments.
We believe our outsourced manufacturing model enables us to focus our resources and expertise on the design, sale, support and marketing of our products
to best meet customer requirements. We also believe that this manufacturing model provides us with the flexibility required to respond to new
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market opportunities and changes in customer demand, simplifies the scope of our operations and administrative processes and significantly reduces our working capital requirements, while
providing the ability to scale production rapidly.
We subject our third-party manufacturing contractors and foundries to qualification requirements
in order to meet the high quality and reliability standards required of our products. Our engineers and supply chain personnel work closely with third-party contract manufacturers and fab foundries to increase yield, reduce manufacturing costs,
improve product quality and ensure that component sourcing strategies are in place to support our manufacturing needs.
Research and Development
Our engineering group has extensive experience in optical systems and networking, digital signal processing, ASIC development and design, silicon
photonic integration, system software development and high-speed electronics design. As of February 15, 2016, approximately 71% of our employees are engineers or have other technical backgrounds, and approximately 45% of our employees hold a
Ph.D. or other advanced degree. We utilize our hardware and software expertise to integrate coherent DSP ASICs and silicon PICs into high-speed interconnect products that are compatible with industry-standard form factor, interfaces and power
consumption requirements. We participate in industry groups such as Optical Internetworking Forum to help drive the industry towards standardization that allows our customers to more easily integrate our products into their systems. In addition, we
offer our integration expertise to our customers to help expedite their adoption of new products.
We use simulation tools at many levels of
product development, reducing the number of design errors and the need for costly and time consuming development cycles. Our simulation environment makes use of industry standard computer aided design tools as well as models and tools that are
developed internally. Our simulation tools also allow us to make efficient tradeoffs between power consumption, size and performance early in the development cycle. We believe this contributes to the ability of our products to deliver superior
performance with low power consumption.
Our research and development facilities are located in Maynard, Massachusetts and Hazlet, New Jersey. We
have devoted 20,026 square feet of space to our research and development facilities, which we expect to increase in the future. Our research and development facilities are equipped with industry standard test equipment, including optical spectrum
analyzers, high-speed sampling oscilloscopes, logic analyzers, wafer probes, wafer saws, optical network and Ethernet test sets, thousands of kilometers of optical fiber and associated optical amplifiers and other optical test equipment. We use
these facilities to conduct comprehensive testing and validation procedures on internally produced chips, components and products before transferring production to our contract manufacturers for commercial, higher-volume manufacturing.
As research and development is critical to our continuing success, we are committed to maintaining high levels of research and development over the long
term. We incurred research and development expenses of $24.2 million, $28.5 million and $38.7 million in 2013, 2014 and 2015, respectively.
Intellectual Property
Our success and ability to compete
depend substantially upon our core technology and intellectual property rights. We rely on patent, trademark and copyright laws, trade secret protection and confidentiality agreements to protect our intellectual property rights. In addition, we
generally require employees and consultants to execute appropriate non-disclosure and proprietary rights agreements. These agreements acknowledge our exclusive ownership of intellectual property developed for us and require that all proprietary
information remain confidential.
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We maintain a program designed to identify technology that is appropriate for patent and trade secret
protection, and we file patent applications in the United States and certain other countries for inventions that we consider significant. As of February 15, 2016, we had 44 patent applications pending in the United States, six patent
applications pending under Patent Cooperation Treaty filings and nine patents granted in the United States, which expire between 2027 and 2033. Although our business is not materially dependent upon any one patent, our patent rights and the products
made and sold under our patents, taken as a whole, are a significant element of our business. In addition to patents, we also possess other intellectual property, including trademarks, know-how, trade secrets, design rights and copyrights. We
control access to and use of our software, technology and other proprietary information through internal and external controls, including contractual protections with employees, contractors, customers and partners. Our software is protected by U.S.
and international copyright, patent and trade secret laws. Despite our efforts to protect our software, technology and other proprietary information, unauthorized parties may still copy or otherwise obtain and use our software, technology and other
proprietary information. In addition, we intend to expand our international operations, and effective patent, copyright, trademark and trade secret protection may not be available or may be limited in foreign countries.
Companies in the industry in which we operate frequently are sued or receive informal claims of patent infringement or infringement of other
intellectual property rights. We have, from time to time, received such claims from companies, including from competitors and customers, some of which have substantially more resources and have been developing relevant technology for much longer
than us. If we become more successful, we believe that competitors will be more likely to try to develop products that are similar to ours and that may infringe our proprietary rights. It may also be more likely that competitors or other third
parties will claim that our products infringe their proprietary rights. Successful claims of infringement by a third party, if any, could result in significant penalties or injunctions that could prevent us from selling some of our products in
certain markets, result in settlements or judgements that require payment of significant royalties or damages or require us to expend time and money to develop non-infringing products. We cannot assure you that we do not currently infringe, or that
we will not in the future infringe, upon any third-party patents or other proprietary rights.
Competition
The optical communications markets are highly competitive and rapidly evolving. We compete with domestic and international companies, many of which have
substantially greater financial and other resources than we do. We encounter substantial competition in most of our markets, although we believe no one competitor competes with us across all our product lines and markets. Our principal competitors
include Oclaro, Finisar, Lumentum Holdings, Neophotonics and Avago Technologies, as well as equipment manufacturers such as Fujitsu and Sumitomo Electric Industries. Competitors for coherent DSP ASICs also include semiconductor companies such as NEL
and ClariPhy. We also compete with internally developed coherent interconnect solutions of certain network equipment manufacturers, including Ciena, Infinera, Huawei, Cisco and Alcatel-Lucent (which was acquired by Nokia in January 2016).
Consolidation in the optical systems and components industry has increased in recent years, and future consolidation could further intensify the competitive pressures that we face.
The principal competitive factors upon which we compete include performance, low power consumption, rapid innovation, breadth of product line,
availability, product reliability, multi-sourcing and selling price. We believe that we compete effectively by offering high levels of customer value through high speed, high density, low power consumption, broad integration of photonic functions,
software intelligence for configuration, control and monitoring, cost-efficiency, ease of deployment and collaborative product design. We cannot be certain we will continue to compete effectively.
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We also may face competition from companies that may expand into our industry and introduce additional
competitive products. Existing and potential customers are also potential competitors. These customers may internally develop or acquire additional competitive products or technologies, which may cause them to reduce or cease their purchases from
us.
Facilities
Our corporate headquarters are
located in Maynard, Massachusetts, which we occupy under a lease expiring in January 2019, renewable for one additional two-year term. We have additional facilities located in Hazlet, New Jersey, which we occupy under leases expiring in June and
July 2018 with respect to various floors, in Mountain View, California, which we occupy under a lease expiring on July 21, 2018, renewable for an additional one-year term, in Limerick, Ireland, which we occupy under a lease expiring on
January 31, 2017, renewable for an additional term of four years and nine months, and in Nanshan, Shenzhen, which we occupy under a lease expiring on July 12, 2016.
Employees
As of February 15, 2016, we employed 211
full-time employees, consisting of 96 in research and development, 57 in operations, which includes manufacturing, supply chain, quality control and assurance, and 58 in executive, sales, general and administrative, and three part-time employees. We
have never had a work stoppage, and none of our employees are represented by a labor organization or under any collective bargaining arrangements. We consider our employee relations to be good.
Legal Proceedings
On January 22, 2016, ViaSat, Inc.
informed us that it had filed a suit against us alleging, among other things, breach of contract, breach of the implied covenant of good faith and fair dealing and misappropriation of trade secrets. On February 19, 2016, we responded to
ViaSat’s suit and alleged counterclaims against ViaSat including, among other things, patent misappropriation, breach of contract, breach of the implied covenant of good faith and fair dealing, misappropriation of trade secrets and unfair
competition. We are continuing to evaluate ViaSat’s claims, but based on the information available to us today, we currently believe that this suit will not have a material adverse effect on our business or our consolidated financial position,
results of operations or cash flows.
In addition, from time to time we may become involved in legal proceedings or be subject to claims arising in
the ordinary course of our business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our
business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
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MANAGEMENT
Executive Officers, Directors and Significant Employees
The
following table sets forth the name, age and position of each of our executive officers, directors and significant employees.
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Name
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Age
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Position
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Murugesan “Raj” Shanmugaraj
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57
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President, Chief Executive Officer and Director
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John F. Gavin
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56
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Chief Financial Officer
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Benny P. Mikkelsen
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56
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Founder, Chief Technology Officer and Director
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Christian J. Rasmussen
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47
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Founder, Vice President of Digital Signal Processing and Optics
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Mehrdad Givehchi
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50
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Founder, Vice President of Hardware and Software
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Bhupendra C. Shah
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57
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Vice President of Engineering
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John J. LoMedico
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58
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Vice President of Sales and Business Development
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Janene I. Ásgeirsson
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45
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Vice President, General Counsel and Secretary
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John P. Kavanagh
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52
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Senior Vice President of Operations/Supply Chain
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Renee M. Pianka
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47
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Chief Human Resources Officer
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Eric A. Swanson(1)
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55
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Chairman of the Board of Directors
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Peter Y. Chung(1)(2)(3)
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48
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Director
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Elliot M. Katzman(4)
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59
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Director
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Stan J. Reiss(2)(3)
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44
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Director
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John Ritchie(2)
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50
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Director
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(1)
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Member of nominating and corporate governance committee
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(2)
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Member of audit committee
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(3)
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Member of compensation committee
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(4)
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Mr. Katzman has resigned from our board of directors, effective as of immediately prior to the effectiveness of the registration statement of which this prospectus is a part. He has informed us that his resignation is
not due to any disagreement with us or any matter relating to our operations, policies or practices.
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Murugesan “Raj”
Shanmugaraj
has served as our president and chief executive officer and a director of our company since April 2010. Prior to joining Acacia, from February 2002 to February 2010, Mr. Shanmugaraj was the vice president of business development
in the optical networking division of Alcatel-Lucent USA, Inc., a network equipment manufacturer. Prior to that, Mr. Shanmugaraj founded and served as the chief executive officer of Astral Point Communications Inc., an optical equipment
company, and held various senior executive level positions at PictureTel Corp., a commercial videoconferencing product company, Multilink, Inc., an engineering and product development-based manufacturer of telecommunications network components, and
Motorola Inc., a multinational telecommunications company. Mr. Shanmugaraj holds an M.S. in electrical and computer engineering from the University of Iowa and a B.E. in electronics and communications from the National Institute of Technology,
Trichy in India. We believe that Mr. Shanmugaraj is qualified to serve on our board of directors due to his extensive leadership experience in the optics and network industries, his extensive knowledge of our company and his service as our
president and chief executive officer.
John F. Gavin
has served as our chief financial officer since February 2012. Prior to joining Acacia,
from January 2011 to February 2012, Mr. Gavin was the chief financial officer of Hiperos LLC, a software-as-a-service company. From June 2005 to January 2011, he served as the chief operating officer of Akorri Networks, Inc., a data center
virtualization management company, where he also served as the interim acting chief executive officer in 2010. Previously, Mr. Gavin served as the chief
93
financial officer and chief operating officer of SMaL Camera Technologies, Inc., a designer of CMOS digital imaging solutions for a variety of business and consumer applications, the chief
financial officer of Pirus Networks, Inc., a provider of multi-protocol storage networking switching products, and the chief financial officer of C-Port Corporation, a developer of CMOS microprocessor-based technologies for communications routers
and switches. Mr. Gavin also served in various roles, most recently as the vice president of finance, sales and marketing North America, at Digital Equipment Corporation, a vendor of computer systems, for over 17 years. Mr. Gavin holds a
B.S. in accounting from Stonehill College and a M.B.A. from Anna Maria College.
Benny P. Mikkelsen
, one of the founders of our company, has
served as our chief technology officer and a director since June 2009. Prior to joining Acacia, Mr. Mikkelsen co-founded and served as the vice president of technology of Mintera Corporation, a high-speed transceiver company. Prior to that, he
held various engineering positions with Bell Laboratories, a research and scientific development company owned by Alcatel-Lucent USA, Inc. Mr. Mikkelsen holds an M.S. and Ph.D. in electrical engineering from the Technical University of Denmark.
We believe that as a founder, and based on Mr. Mikkelsen’s deep experience in the optics and network industries, his extensive knowledge of our company and his position as our chief technology officer, Mr. Mikkelsen provides a
valuable contribution to our board of directors.
Christian J. Rasmussen
, one of the founders of our company, has served as our vice
president of digital signal processing and optics since June 2015 and as our director of digital signal processing and optics from June 2009 to June 2015. Prior to joining Acacia, Mr. Rasmussen was a principal optical engineer of Mintera
Corporation, a high-speed transceiver company. Mr. Rasmussen holds an M.S. in electrical engineering and a Ph.D. in optical communications from the Technical University of Denmark.
Mehrdad Givehchi
, one of the founders of our company, has served as our vice president of hardware and software since June 2015 and previously
served as our director of hardware and software from June 2009 to June 2015. Prior to joining Acacia, Mr. Givehchi was the consulting optical engineer of Mintera Corporation, a high-speed transceiver company. Prior to that, he served as the
principal hardware engineer of Sycamore Networks, Inc., a developer and marketer of intelligent networking products for fixed line and mobile network operators, and as the principal hardware engineer of Tektronix, Inc., a designer of test and
measurement equipment. Mr. Givehchi holds a B.S. in electrical engineering from Worcester Polytechnic Institute.
Bhupendra C.
Shah
has served as our vice president of engineering since June 2009. Prior to joining Acacia, Mr. Shah was the director of engineering at Juniper Networks, Inc., a provider of networking products. Prior to that, he was the director of
hardware and software development at Broadcom Corporation, a fabless semiconductor company. Previously, Mr. Shah co-founded and served as the vice president of engineering of Atlantic Cores Incorporated, a developer of standard products and
on-chip intellectual property. Mr. Shah holds a B.S. in electrical engineering from the University of Lowell.
John J. LoMedico
has
served as our vice president of sales and business development since August 2009. Prior to joining Acacia, Mr. LoMedico was the vice president of sales and marketing of CHiL Semiconductor Corp., a producer of digital power management integrated
circuits. Prior to CHiL Semiconductor, Mr. LoMedico served as the vice president of marketing of Applied Micro Circuits Corporation, a fabless semiconductor company, and as the vice president of sales and marketing of Cimaron Communications
Corp., a framer integrated circuit company. Prior to that, Mr. LoMedico served in various management positions in the sales and marketing function at National Semiconductor, a semiconductor manufacturer that was acquired by Texas
Instruments. Mr. LoMedico holds a B.A. from the University of New Hampshire and an M.B.A. from Northeastern University.
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Janene I. Ásgeirsson
has served as our vice president, general counsel and secretary since
April 2015. Prior to joining Acacia, from January 2012 to April 2015, Ms. Ásgeirsson was a counsel in the corporate practice group of the law firm Wilmer Cutler Pickering Hale and Dorr LLP. Prior to that, Ms. Ásgeirsson
served as the senior corporate counsel of Entropic Communications, Inc., a semiconductor company, from June 2010 to January 2012. From August 2006 to June 2010, Ms. Ásgeirsson was a senior associate in the corporate practice group of the
law firm Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP. Previously, Ms. Ásgeirsson was an associate in the corporate practice group of the law firm Foley Hoag LLP. Ms. Ásgeirsson holds a B.A. from the
University of San Diego and a J.D. from Northeastern University School of Law.
John P. Kavanagh
has served as our senior vice president of
operations/supply chain since May 2015. Prior to joining Acacia, from October 2010 to May 2015, Mr. Kavanagh served as the vice president, supply chain of JDS Uniphase Corporation, an optical communications network company. From June 2000 to
October 2010, he held several roles, including vice president, general manager and vice president of supply chain, at Finisar Corporation, a manufacturer of optical communication components. Mr. Kavanagh holds a B.S. in computer engineering
from the University of Limerick in Ireland.
Renee M. Pianka
has served as our chief human resources officer since December 2015. Prior to
joining Acacia, Ms. Pianka was a vice president, human resources for the global services division of EMC Corporation, an information storage and infrastructure company, from January 2015 to December 2015, where she also served in increasingly senior
roles in the human resources department from July 2002 to January 2015, most recently as a senior director of human resources from July 2011 to January 2015, and as a director of human resources from March 2007 to July 2011. Ms. Pianka holds a
B.S. and an M.B.A. from Northeastern University.
Eric A. Swanson
has served as the chairman of our board of directors since August
2009. Since 2006, Mr. Swanson has served as a research associate at the Massachusetts Institute of Technology, and, since January 2004, he has provided consulting services to The Charles Stark Draper Laboratory, Inc. Previously,
Mr. Swanson co-founded Sycamore Networks, Inc., a developer and marketer of intelligent networking products for fixed line and mobile network operators, and served as its general manager and chief scientist. Mr. Swanson holds a B.S.
in electrical engineering from the University of Massachusetts at Amherst and an M.S. in electrical engineering from the Massachusetts Institute of Technology. We believe that Mr. Swanson is qualified to serve on our board of directors due to
his extensive experience in the telecommunication and photonics industries, his deep knowledge of our company, and his experience on other boards of directors.
Peter Y. Chung
has served as a director of our company since April 2013. Mr. Chung is a managing director and the chief executive officer of
Summit Partners, L.P., a growth equity firm, where he has been employed since 1994. He is currently a director of A10 Networks, Inc., a provider of application networking solutions, and M/A-COM Technology Solutions Holdings, Inc., a provider of
analog semiconductor solutions for use in radio frequency, microwave and millimeter wave applications. Previously, Mr. Chung served as a director of various other entities, including NightHawk Radiology Holdings, Inc., a private company
that provides teleradiology services, SeaBright Holdings, Inc., a private specialty workers’ compensation insurer, and Ubiquiti Networks, Inc., a developer of networking technology for service providers and enterprises. Mr. Chung holds an
A.B. in economics from Harvard University and an M.B.A. from the Stanford University Graduate School of Business. We believe that Mr. Chung is qualified to serve as a director of our company due to his wide-ranging experience in investment
banking, private equity and venture capital investing in the communications technology sector and his participation on private and public company boards.
Elliot M. Katzman
has served as a director of our company since June 2010. Since January 2007, Mr. Katzman has served as a general partner
with Commonwealth Capital Ventures, a venture capital
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investment firm specializing in technology companies. Prior to that, Mr. Katzman was a general partner at venture capital firm Kodiak Ventures. Previously, Mr. Katzman founded and
served as the chief executive officer of myteam.com. He also served as the chief financial officer of SolidWorks Corporation, a developer of 3D software tools that enable the creation, simulation, publishing and managing of data, Atria Software
Inc., a software company, and Epoch Systems Inc., a hardware and software company. Mr. Katzman holds a B.S. in business administration from Salem State University and was a certified public accountant. We believe that Mr. Katzman is
qualified to serve as a director of our company due to his experience as an executive officer of several public and private technology companies and his service as a director on several private company boards.
Stan J. Reiss
has served as a director of our company since August 2009. Mr. Reiss is a general partner of Matrix Partners, a venture
capital investment firm specializing in technology companies, where he has worked since July 2000. Prior to that, Mr. Reiss was an engagement manager at McKinsey & Company. Mr. Reiss holds a B.S. in electrical engineering from
Cornell University, M.S. degrees in electrical engineering and operations research from the Massachusetts Institute of Technology and an M.B.A. from the Harvard Business School. We believe that Mr. Reiss is qualified to serve as a director of
our company due to his extensive experience as a venture capitalist in the technology sector and his involvement with several private company boards.
John Ritchie
has been a director of our company since April 2015. Since August 2015, Mr. Ritchie has been the senior vice president, chief
financial officer of Aerohive Networks, Inc., a computer networking equipment company. From April 2013 to January 2015, Mr. Ritchie served as the chief financial officer of Telerik AD, a software development tools company. Prior to that, from
May 2010 to March 2013, Mr. Ritchie was the chief financial officer of Ubiquiti Networks, Inc., a developer of networking technology for service providers and enterprises. Previously, Mr. Ritchie held several executive positions, in each
case most recently the position of chief financial officer, at Electronics For Imaging, Inc., a provider of products, technology and services enabling analog to digital imaging transformation, and Splash Technology Holdings, Inc., which develops,
produces, and markets color servers. Mr. Ritchie holds a B.S. in business administration from San Jose State University. We believe that Mr. Ritchie is qualified to serve as a director of our company due to his service as the chief
financial officer of several publicly traded companies.
Our executive officers are Murugesan “Raj” Shanmugaraj, John F. Gavin, Benny
P. Mikkelsen, Christian J. Rasmussen, Mehrdad Givehchi and Bhupendra C. Shah.
There are no family relationships among any of our directors or
executive officers.
Composition of the Board of Directors
Our board of directors currently consists of seven members. The current members of our board of directors were elected pursuant to an amended and
restated voting agreement among certain of our preferred and common stockholders. The agreement will terminate upon the closing of this offering, at which time there will be no further contractual obligations regarding the election of our directors.
Our directors hold office until their successors have been elected and qualified or until the earlier of their resignation or removal.
In
accordance with the terms of our restated certificate of incorporation and amended and restated bylaws, each of which will become effective upon the closing of this offering, our board of directors will be divided into three classes, each of whose
members will serve for staggered three year terms. Upon the closing of this offering, the members of the classes will be divided as follows:
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the class I directors will be Benny Mikkelsen and Murugesan Shanmugaraj, and their term will expire at the first annual meeting of stockholders held after the closing of this offering;
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the class II directors will be Stan Reiss and Eric Swanson, and their term will expire at the second annual meeting of stockholders held after the closing of this offering; and
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•
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the class III directors will be Peter Chung and John Ritchie, and their term will expire at the third annual meeting of stockholders held after the closing of this offering.
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Our restated certificate of incorporation that will become effective upon the closing of this offering provides that the authorized number of directors
may be changed only by our board of directors. Any additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the
directors. This classification of our board of directors may have the effect of delaying or preventing changes in our control or management.
Our
restated certificate of incorporation and amended and restated bylaws that will become effective upon the closing of this offering provide that our directors may be removed only for cause by the affirmative vote of the holders of at least 75% of the
votes that all our stockholders would be entitled to cast in an annual election of directors. Upon the expiration of the term of a class of directors, directors in that class will be eligible to be elected for a new three-year term at the annual
meeting of stockholders in the year in which their term expires. An election of our directors by our stockholders will be determined by a plurality of the votes cast by the stockholders entitled to vote on the election.
Director Independence
Rule 5605 of the Nasdaq Listing Rules
requires a majority of a listed company’s board of directors to be comprised of independent directors within one year of listing. In addition, the NASDAQ Listing Rules require that, subject to specified exceptions, each member of a listed
company’s audit, compensation and nominating and corporate governance committees be independent and that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act. Under Rule 5605(a)(2), a
director will only qualify as an “independent director” if, in the opinion of our board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the
responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of
directors, or any other board committee, accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries or otherwise be an affiliated person of the listed company or any of its
subsidiaries.
The phase-in periods with respect to director independence under the NASDAQ Listing Rules allow us to have only one independent
member on each of the audit committee, nominating and corporate governance committee and compensation committee upon the listing date of our common stock, a majority of independent members on each committee within 90 days of the listing date (or the
effective date of the registration statement, in the case of the audit committee) and fully independent committees and a majority of independent directors on our board of directors within one year of the listing date (or the effective date of the
registration statement, in the case of the audit committee). The phase-in periods also allow us to have only one member comprise our audit committee by the listing date, two members comprise our audit committee within 90 days of the listing date and
at least three members within one year of the listing date.
In October 2015, our board of directors undertook a review of the composition of our
board of directors and its committees and the independence of each director. Based upon information requested from and provided by each director concerning his background, employment and affiliations, including family relationships, our board of
directors has determined that each of Messrs. Chung,
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Katzman, Ritchie, Reiss and Swanson is an “independent director” as defined under Rule 5605(a)(2) of the Nasdaq Listing Rules. With respect to our audit committee, our board of
directors determined that each of Messrs. Chung and Ritchie, but not Mr. Reiss, satisfies the independence standards for audit committee membership established by the Securities and Exchange Commission and the Nasdaq Listing Rules. We intend to rely
on the phase-in rules discussed above with respect to our audit committee and expect that each member of our audit committee will satisfy the applicable independence requirements within one year of our listing on the Nasdaq Global Market. Our board
of directors also determined that Messrs. Reiss and Chung, who comprise our compensation committee, and Messrs. Chung and Swanson, who comprise our nominating and corporate governance committee, satisfy the independence standards for such committees
established by the Securities and Exchange Commission and the Nasdaq Listing Rules, as applicable. In making such determinations, our board of directors considered the relationships that each such non-employee director has with our company and all
other facts and circumstances our board of directors deemed relevant in determining independence, including the beneficial ownership of our capital stock by each non-employee director and any institutional stockholder with which he is affiliated.
Board Leadership Structure
Our corporate governance
guidelines provide that the roles of chairman of the board and chief executive officer may be separated or combined. Our board of directors has considered its leadership structure and determined that at this time the roles of chairman of the board
and chief executive officer should be separate. Separating the chairman and the chief executive officer positions allows our chief executive officer to focus on running the business, while allowing the chairman of our board of directors to lead the
board in its fundamental role of providing advice to and oversight of management. Mr. Swanson has been an integral part of the leadership of our company and our board of directors since August 2009, and his strategic vision has guided our
growth and performance. Our board of directors believes that Mr. Swanson is best situated to ensure that the board of director’s attention and efforts are focused on critical matters. Mr. Shanmugaraj has served as our president and
chief executive officer since April 2010. As our board of directors has determined that each of our directors other than Messrs. Mikkelsen and Shanmugaraj is independent, our board of directors believes that the independent directors provide
effective oversight of management. Our board of directors believes that its leadership structure is appropriate because it strikes an effective balance between strategy development and independent leadership and management oversight in the board
process.
Board Committees
Our board of directors has
established audit, compensation, and nominating and corporate governance committees, each of which operates under a charter that has been approved by our board of directors. Following this offering, a copy of each committee’s charter will be
posted on the corporate governance section of our website,
www.acacia-inc.com
. Information contained on our website is not incorporated by reference into this prospectus, and you should not consider information contained on our website to be
part of this prospectus or in deciding whether to purchase shares of our common stock.
Audit Committee
The audit committee’s responsibilities include:
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appointing, approving the compensation of, and assessing the independence of our registered public accounting firm;
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overseeing the work of our registered public accounting firm, including through the receipt and consideration of reports from such firm;
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reviewing and discussing with management and the registered public accounting firm our annual and quarterly financial statements and related disclosures;
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monitoring our internal control over financial reporting, disclosure controls and procedures and code of business conduct and ethics;
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discussing our risk management policies;
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establishing policies regarding hiring employees from the registered public accounting firm and procedures for the receipt and retention of accounting related complaints and concerns;
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meeting independently with our registered public accounting firm and management;
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reviewing and approving or ratifying any related person transactions; and
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preparing the audit committee report required by SEC rules.
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All audit services and all non-audit
services, other than de minimis non-audit services, to be provided to us by our independent registered public accounting firm must be approved in advance by our audit committee.
The members of our audit committee are Messrs. Chung, Reiss and Ritchie. Our board of directors has determined that Mr. Ritchie is an “audit
committee financial expert” as defined by applicable SEC rules.
Compensation Committee
The compensation committee’s responsibilities include:
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reviewing and approving corporate goals and objectives relevant to CEO compensation;
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determining our CEO’s compensation;
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reviewing and approving, or making recommendations to our board of directors with respect to, the compensation of our other executive officers;
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overseeing an evaluation of our senior executives;
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overseeing and administering our equity incentive plans;
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reviewing and making recommendations to our board of directors with respect to director compensation;
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reviewing and discussing annually with management our “Compensation Discussion and Analysis”; and
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preparing the annual compensation committee report required by SEC rules.
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The members of our
compensation committee are Messrs. Chung and Reiss.
Nominating and Corporate Governance Committee
The nominating and corporate governance committee’s responsibilities include:
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identifying individuals qualified to become board members;
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recommending to our board of directors the persons to be nominated for election as directors and to each of the Board’s committees;
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reviewing and making recommendations to the board with respect to management succession planning;
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developing and recommending to the board corporate governance principles; and
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overseeing an annual evaluation of the board.
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The members of our nominating and corporate governance
committee are Messrs. Chung and Swanson.
Compensation Committee Interlocks and Insider Participation
None of our executive officers serves as a member of the board of directors or compensation committee, or other committee serving an equivalent function,
of any entity that has one or more executive officers who serve as members of our board of directors or our compensation committee. None of the members of our compensation committee is an officer or employee of our company, nor have they ever been
an officer or employee of our company.
Code of Business Conduct and Ethics
We have adopted a written code of business conduct and ethics 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 this offering, we will post a current copy of the code on our website,
www.acacia-inc.com
. In
addition, we intend to post on our website all disclosures that are required by law or the Nasdaq Listing Rules concerning any amendments to, or waivers from, any provision of the code.
100
EXECUTIVE COMPENSATION
Summary Compensation Table
The following table sets
forth the total compensation paid to our chief executive officer and each of our two other most highly compensated executive officers for the year ended December 31, 2015. We refer to these individuals as our “named executive
officers.”
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Name and Principal
Position
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Year
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Salary ($)
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Bonus ($)
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Stock
Awards ($)
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Option
Awards
($)
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All Other
Compensation
($)(1)
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Total ($)
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Murugesan Shanmugaraj
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2015
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$
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326,172
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(3)
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$
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—(4
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)
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$
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1,265,392
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—
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$
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19,227
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$
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1,610,791
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President, Chief Executive Officer and Director
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2014
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$
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246,750
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$
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122,045(5
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)
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—
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—
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$
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13,363
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$
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382,158
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Mehrdad Givehchi
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2015
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$
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277,086
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(6)
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—(4
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)
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$
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1,265,392
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—
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$
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5,141
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$
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1,547,619
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Vice President of Hardware and Software
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Benny P. Mikkelsen
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2015
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$
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216,745
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—(4
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)
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$
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1,265,392
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—
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$
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19,724
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$
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1,501,861
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Chief Technology Officer and Director
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2014
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$
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201,204
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$
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99,441(5
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)
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—
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—
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$
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16,830
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$
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317,475
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(1)
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Includes perquisites and other personal benefits, or property, unless the aggregate amount of such compensation is less than $10,000; all “gross-up” or other amounts reimbursed during the fiscal year for the
payment of taxes; amounts paid pursuant to any plan or arrangement in connection with termination or change of control; company contributions or other allocations to vested and unvested defined contribution plans; dollar value of insurance premiums;
401(k) matching; and dollar value of dividends or other earnings on stock or option awards (when not factored into grant date value).
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(2)
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Represents amounts earned for 2014 performance that were paid in 2015.
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(3)
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Includes a payment in 2015 in the amount of $61,045 for taxes attributable to compensation income earned in 2013 in connection with the issuance in 2013 of restricted stock. A corrected W-2 was filed in 2015 to report
this additional 2013 compensation income.
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(4)
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The bonus amount earned for 2015 performance is not calculable as of February 15, 2016. Such amount will be calculable during the first quarter of 2016.
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(5)
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Represents amounts earned for 2014 performance that were paid in 2015.
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(6)
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Includes a payment in 2015 in the amount of $60,341 for taxes attributable to compensation income earned in 2013 in connection with the issuance in 2013 of restricted stock. A corrected W-2 was filed in 2015 to report
this additional 2013 compensation income.
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Outstanding Equity Awards at Fiscal Year-End
The following table sets forth information regarding outstanding stock awards held as of December 31, 2015 by our named executive officers. It
assumes an initial public offering price of $ (the midpoint of the price range set forth on the cover page of this prospectus).
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Option Awards
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Stock Awards
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Name
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Number
of
Securities
Underlying
Unexercised
Options
Exercisable (#)
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Number of
Securities
Underlying
Unexercised
Options
Unexercisable (#)
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Option
Exercise
Price ($)
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Option
Expiration
Date
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Number
of
Shares or
Units of
Stock
That
Have Not
Vested (#)
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Market
Value of
Shares or
Units of
Stock
That
Have Not
Vested ($)
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Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested (#)
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Equity
Incentive
Plan
Awards:
Market
Value of
Unearned
Shares,
Units or
Other
Rights
That
Have Not
Vested ($)
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Murugesan Shanmugaraj
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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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97,563
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56,250
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Mehrdad Givehchi
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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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97,563
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59,191
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Benny P. Mikkelsen
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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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97,563
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59,191
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Potential Payments upon Termination or Change in Control
The Acacia Communications, Inc. Severance and Change in Control Benefits Plan, which we refer to as the Severance Plan, provides severance benefits to
certain of our executives, including our named executive officers, if their employment is terminated by us “without cause” or, only in connection with a “change in control” of our company, they terminate employment with us for
“good reason” (as each of those terms is defined in the Severance Plan).
Under the Severance Plan, if we terminate an eligible
executive’s employment without cause prior to or more than 12 months following the closing of a change in control of our company, the executive is entitled to (i) continue receiving his or her base salary for a specified period (in the case of
our chief executive officer, for 12 months, and, in the case of all other participants, for nine months) following the date of termination, (ii) company contributions to the cost of health care continuation under the Consolidated Omnibus Budget
Reconciliation Act, or COBRA, for up to 12 months following the date of termination, and (iii) the amount of any unpaid annual bonus determined by our board of directors to be payable to the executive for any completed bonus period which ended prior
to the date of such executive’s termination.
The Severance Plan also provides that, if, within 12 months following the closing of a change in
control of our company, we terminate an eligible executive’s employment without cause or such executive terminates his or her employment with us for good reason, the executive is entitled to (i) a single lump-sum payment equal to a percentage
of his or her annual base salary (in the case of our chief executive officer, 100% and, in the case of all other participants, 75%), (ii) a single lump sum payment in an amount equal to a percentage of his or her target annual bonus for the year in
which the termination of employment occurs (in the case of our chief executive officer, 100% and, in the case of all other participants, 75%), (iii) company contributions to the cost of health care continuation under
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COBRA for up to 12 months following the date of termination of employment, and (iv) the amount of any unpaid annual bonus determined by our board of directors to be payable to the executive for
any completed bonus period which ended prior to the date of such executive’s termination. In addition, all of the executive’s outstanding unvested equity awards will immediately vest in full on the date of such termination.
All payments and benefits provided under the Severance Plan are contingent upon the execution and effectiveness of a release of claims by the executive
in our favor and continued compliance by the executive with any proprietary information and inventions, nondisclosure, non-competition, non-solicitation (or similar) agreement to which we and the executive are party.
Retirement Benefits
We maintain a retirement plan for the
benefit of our employees, including our named executive officers. The plan is intended to qualify as a tax-qualified 401(k) plan so that contributions to the 401(k) plan, and income earned on such contributions, are not taxable to participants until
withdrawn or distributed from the 401(k) plan (except in the case of contributions under the 401(k) plan designated as Roth contributions). The 401(k) plan provides that each participant may contribute up to 90% of his or her pre-tax compensation,
up to an annual statutory limit. Participants who are at least 50 years old can also contribute additional amounts based on statutory limits for “catch-up” contributions. Under the 401(k) plan, each employee is fully vested in his or her
deferred salary contributions. Employee contributions are held and invested by the plan’s trustee as directed by participants. Our 401(k) plan provides for discretionary matching of employee contributions.
Employee Benefits and Perquisites
Our named executive
officers are eligible to participate in our health and welfare plans to the same extent as all full-time employees. In addition, equity awards granted to our executive officers become fully vested and (if applicable) exercisable if we are subject to
a change in control and following such change in control such executive officer is terminated by us without cause or such individual resigns for good reason.
Director Compensation
During the year ended
December 31, 2015, our non-employee directors did not receive any cash compensation for their service on our board of directors or committees of our board of directors. During this period, we granted 16,000 RSUs to each of Mr. Ritchie and
Mr. Swanson in connection with their service on our board of directors. None of our executive officers who also served as a member of our board of directors during our fiscal year ended December 31, 2015, received any additional
compensation for such service as a director.
We also have a policy of reimbursing our directors for their reasonable out-of-pocket expenses
incurred in attending board of directors and committee meetings.
In October 2015, we approved a non-employee director compensation program to
become effective upon the closing of this offering. Under this program, non-employee directors will receive the cash compensation set forth below, and an annual RSU grant having an aggregate fair market value of $100,000 on the date of grant to be
granted at our annual meeting of stockholders beginning in 2017. Each such RSU will vest in full on the date of our next annual stockholder meeting following the date of grant. In addition, new non-employee directors will also be eligible for an
initial RSU grant having an aggregate fair market value of $200,000 on the date of grant, to be granted at our first board of directors meeting occurring on or following such director’s initial election to our board of directors. Such
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RSU will vest in equal annual installments on the first, second and third anniversary of the grant date or immediately in the event of a change of control event.
Following the closing of this offering, each non-employee director will be eligible to receive compensation for his or her service on our board of
directors or committees thereof consisting of annual cash retainers paid quarterly in arrears, as follows:
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Position
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Retainer
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Board Member
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$
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30,000
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Audit Committee Chair
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20,000
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Compensation Committee Chair
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10,000
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Nominating and Corporate Governance Committee Chair
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8,000
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Audit Committee Member
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7,500
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Compensation Committee Member
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6,000
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Nominating and Corporate Governance Committee Member
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4,500
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Stock Option and Other Compensation Plans
Our equity compensation plans consist of our 2009 Stock Plan, as amended to date, our 2016 Equity Incentive Plan, and our 2016 Employee Stock Purchase
Plan, which we refer to as the 2016 ESPP. Prior to this offering, we granted awards under the 2009 Stock Plan. Following the effectiveness of the registration statement for this offering, we expect to grant awards under the 2016 Equity Incentive
Plan.
2016 Equity Incentive Plan
In October
2015, our board of directors adopted, and in January 2016 our stockholders approved, the 2016 Equity Incentive Plan, which will become effective immediately prior to the effectiveness of the registration statement for this offering. The 2016 Equity
Incentive Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, RSUs and other stock-based awards. Upon effectiveness of the 2016 Equity Incentive Plan, the number of
shares of our common stock that will be reserved for issuance under the 2016 Equity Incentive Plan will be the sum of: (1) 2,670,000 plus; (2) the number of shares (up to 4,299,166 shares) equal to the sum of the number of shares of our
common stock then available for issuance under the 2009 Stock Plan and the number of shares of our common stock subject to outstanding awards under the 2009 Stock Plan that expire, terminate or are otherwise surrendered, cancelled, forfeited or
repurchased by us at their original issuance price pursuant to a contractual repurchase right; plus (3) an annual increase, to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2017 and
continuing until, and including, the fiscal year ending December 31, 2025, equal to the lowest of 3,600,000 shares of our common stock, 4.0% of the number of shares of our common stock outstanding on the first day of such fiscal year and an
amount determined by our board of directors.
Our employees, officers, directors, consultants and advisors will be eligible to receive awards
under the 2016 Equity Incentive Plan. Incentive stock options, however, may only be granted to our employees.
Pursuant to the terms of the 2016
Equity Incentive Plan, our board of directors (or a committee delegated by our board of directors) will administer the plan and, subject to any limitations in the plan, will select the recipients of awards and determine:
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the number of shares of our common stock covered by options and the dates upon which the options become exercisable;
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the type of options to be granted;
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the duration of options, which may not be in excess of ten years;
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the exercise price of options, which must be at least equal to the fair market value of our common stock on the date of grant; and
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the number of shares of our common stock subject to and the terms of any stock appreciation rights, restricted stock awards, RSUs or other stock-based awards and the terms and conditions of such awards, including
conditions for repurchase, issue price and repurchase price (though the measurement price of stock appreciation rights must be at least equal to the fair market value of our common stock on the date of grant and the duration of such awards may not
be in excess of ten years).
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If our board of directors delegates authority to an executive officer to grant awards under the 2016
Equity Incentive Plan, the executive officer will have the power to make awards to all of our employees, except executive officers. Our board of directors will fix the terms of the awards to be granted by such executive officer, including the
exercise price of such awards (which may include a formula by which the exercise price will be determined), and the maximum number of shares subject to awards that such executive officer may make.
Effect of Certain Changes in Capitalization.
Upon the occurrence of any stock split, reverse stock split, stock
dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of our common stock other than an ordinary cash dividend, our
board of directors shall equitably adjust:
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the number and class of securities available under the 2016 Equity Incentive Plan;
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the share counting rules under the 2016 Equity Incentive Plan;
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the number and class of securities and exercise price per share of each outstanding option;
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•
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the share and per-share provisions and the measurement price of each outstanding stock appreciation right;
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the number of shares subject to, and the repurchase price per share subject to, each outstanding restricted stock award; and
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the share and per-share related provisions and the purchase price, if any, of each other stock-based award.
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Effect of Certain Corporate Transactions.
Upon a merger or other reorganization event (as defined in our 2016
Equity Incentive Plan), our board of directors may, on such terms as our board of directors determines (except to the extent specifically provided otherwise in an applicable award agreement or other agreement between the participant and us), take
any one or more of the following actions pursuant to the 2016 Equity Incentive Plan as to some or all outstanding awards, other than restricted stock awards:
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provide that all outstanding awards shall be assumed, or substantially equivalent awards shall be substituted, by the acquiring or successor corporation (or an affiliate thereof);
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upon written notice to a participant, provide that all of the participant’s unvested and/or vested but unexercised awards will terminate immediately prior to the consummation of such reorganization event unless
exercised by the participant (to the extent then exercisable);
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provide that outstanding awards shall become exercisable, realizable or deliverable, or restrictions applicable to an award shall lapse, in whole or in part, prior to or upon such reorganization event;
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in the event of a reorganization event pursuant to which holders of shares of our common stock will receive a cash payment for each share surrendered in the reorganization event, make or provide for a cash payment to
the participants with respect to each award held by a participant equal to (1) the number of shares of our common stock subject to the vested portion of the award (after giving effect to any acceleration of vesting that occurs upon or
immediately prior to such reorganization event) multiplied by (2) the excess, if any, of the cash payment for each share surrendered in the reorganization event over the exercise, measurement or purchase price of such award and any applicable
tax withholdings, in exchange for the termination of such award; and/or
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provide that, in connection with a liquidation or dissolution, awards shall convert into the right to receive liquidation proceeds (if applicable, net of the exercise, measurement or purchase price thereof and any
applicable tax withholdings).
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Our board of directors does not need to take the same action with respect to all awards, all awards
held by a participant or all awards of the same type.
In the case of certain RSUs, no assumption or substitution is permitted, and the RSUs will
instead be settled in accordance with the terms of the applicable RSU agreement.
Upon the occurrence of a reorganization event other than a
liquidation or dissolution, the repurchase and other rights with respect to outstanding restricted stock awards will continue for the benefit of the successor company and will, unless the board of directors may otherwise determine, apply to the
cash, securities or other property into which shares of our common stock are converted or exchanged pursuant to the reorganization event. Upon the occurrence of a reorganization event involving a liquidation or dissolution, all restrictions and
conditions on each outstanding restricted stock award will automatically be deemed terminated or satisfied, unless otherwise provided in the agreement evidencing the restricted stock award or any other agreement between the participant and us.
At any time, our board of directors may, in its sole discretion, provide that any award under the 2016 Equity Incentive Plan will become immediately
exercisable in full or in part, free of some or all restrictions or conditions, or otherwise realizable in whole or in part as the case may be.
No
award may be granted under the 2016 Equity Incentive Plan on or after the date that is ten years following the effectiveness of the registration statement related to this offering. Our board of directors may amend, suspend or terminate the 2016
Equity Incentive Plan at any time, except that stockholder approval may be required to comply with applicable law or stock market requirements.
On
December 16, 2015, our board of directors granted 450,000 RSUs under the 2016 Equity Incentive Plan, which awards are contingent upon the closing of this offering.
2009 Stock Plan
Our 2009 Stock Plan was adopted
by our board of directors in November 2009, approved by our stockholders in November 2009 and subsequently amended on June 29, 2010, December 20, 2011, March 5, 2012, April 17, 2013, April 23, 2015,
July 23, 2015 and October 21, 2015. The 2009 Stock Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock units and shares, restricted or otherwise, of our common stock. Our employees, officers,
directors, consultants and advisors are eligible to receive awards under our 2009 Stock Plan; however incentive stock options may only be granted to our employees. A maximum of 8,161,226 shares of our common stock are authorized for issuance under
the 2009 Stock Plan.
The type of award granted under our 2009 Stock Plan and the terms of such award are set forth in the applicable award
agreement.
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Pursuant to the terms of the 2009 Stock Plan, our board of directors (or a committee assigned by our board
of directors) administers the 2009 Stock Plan. The board of directors has complete discretion to take any actions it deems necessary or advisable for the administration of the 2009 Stock Plan. All decisions, interpretations and other actions of our
board of directors are final and binding on all participants and all persons deriving their rights from a participant. In addition, subject to any limitations in the 2009 Stock Plan, our board of directors selects the recipients of awards and
determines:
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the number of shares of our common stock covered by options and the dates upon which the options become exercisable;
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the type of options to be granted;
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the duration of options, which may not be in excess of ten years;
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the exercise price of options, which must be at least equal to the fair market value of our common stock on the date of grant; and
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the number of shares of our common stock subject to, and the terms of any restricted stock awards or restricted stock units, and the terms and conditions of such awards, including conditions for repurchase, issue price
and repurchase price.
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Effect of Certain Changes in Capitalization
.
Pursuant to the 2009
Stock Plan, in the event of stock split, stock dividend, a combination of shares, reverse stock-split, a reclassification, or any other increase or decrease in the number of issues shares of our common stock effected without receipt of consideration
by us, proportionate adjustments shall automatically be made in each of
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the number of shares of our common stock available for issuance under the 2009 Stock Plan;
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the number of shares of our common stock covered by each outstanding option or RSU granted under the 2009 Stock Plan; and
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the exercise price under each outstanding option granted under the 2009 Stock Plan.
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Our board of
directors, in its sole discretion, may also make appropriate adjustments to one or more of the same items described above in the event of a declaration of an extraordinary dividend payable in a form other than shares of our common stock that has a
material effect on the fair market value of shares of our common stock, a recapitalization, a spin-off or any similar occurrence.
Effect of
Certain Corporate Transactions
.
In the event that we are a party to a merger or consolidation, all shares of our common stock acquired under the 2009 Stock Plan and all awards outstanding under the 2009 Stock
Plan on the effective date of the transaction shall be treated in the manner described in the agreement of merger or consolidation, which agreement need not treat all awards in an identical manner but which must preserve an award’s status as
exempt from or compliant with Section 409A of the Internal Revenue Code of 1986, as amended (which we refer to as the Code) and must provide for one or more of the following:
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continuation of the outstanding award by us if we are the surviving corporation;
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assumption, or substitution of substantially equivalent awards, of the outstanding award by the surviving corporation or its parent, provided that the assumption or substitution is accomplished in a manner that complies
with the rules regarding assumptions or substitutions that apply to incentive stock options under the Code (whether the outstanding award is an incentive stock option or a nonstatutory stock option);
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acceleration of the date of exercise or vesting of an option (which may be contingent on the closing of the merger or consolidation) followed by the termination of the option if it is not timely exercised prior to the
closing of the merger or consolidation (which exercise may also be contingent on the closing of the merger or consolidation); or
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107
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cancellation of the outstanding award in exchange for a payment (if any) equal the fair market value of a share of common stock as of the closing date of the merger or consolidation minus the per-share exercise price of
the award (if any).
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Subject to the limitations of the 2009 Stock Plan, our board of directors may modify, extend or assume
outstanding options and RSUs and may accept the cancellation of outstanding options in return for the grant of new options for the same or a different number of shares of our common stock or a different exercise price.
As of February 15, 2016, options to purchase 2,409,278 shares of common stock were outstanding under the 2009 Stock Plan, at a weighted-average
exercise price of $2.89 per share, and 1,259,284 options to purchase shares of our common stock had been exercised.
No further awards will be
made under our 2009 Stock Plan on or after the effectiveness of the registration statement for this offering; however, awards outstanding under our 2009 Stock Plan will continue to be governed by their existing terms. Our board of directors may
amend, suspend or terminate the 2009 Stock Plan at any time and for any reason, except that any amendment of the 2009 Stock Plan that increases the number of shares of our common stock available for issuance under the 2009 Stock Plan or that
materially changes the class of persons who are eligible for the grant of incentive stock options is subject to the approval of our stockholders.
2016
Employee Stock Purchase Plan
Our board of directors has adopted, and our stockholders have approved, our 2016 ESPP, which will become
effective immediately prior to the closing of this offering. The 2016 ESPP will be administered by our board of directors or by a committee appointed by our board of directors. The 2016 ESPP initially will provide participating employees with the
opportunity to purchase an aggregate of 700,000 shares of our common stock. The number of shares of our common stock reserved for issuance under the 2016 ESPP automatically will increase on the first day of each fiscal year, beginning with the
fiscal year ending December 31, 2016 and continuing until, and including, the fiscal year ending December 31, 2026, in an amount equal to the lowest of: (1) 900,000 shares of our common stock; (2) 1.0% of the total number of
shares of our common stock outstanding on the first day of the applicable fiscal year; and (3) an amount determined by our board of directors.
All of our employees and employees of any of our designated subsidiaries, as defined in the 2016 ESPP, are eligible to participate in the 2016 ESPP,
provided that:
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such person is customarily employed by us or a designated subsidiary for more than 20 hours a week and for more than five months in a calendar year;
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such person has been employed by us or by a designated subsidiary for at least six months prior to enrolling in the 2016 ESPP; and
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such person was our employee or an employee of a designated subsidiary at least fifteen business days prior to the first day of the applicable offering period under the 2016 ESPP.
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The first offering to our eligible employees to purchase stock under the 2016 ESPP, which we refer to as the first offering period, will begin on the
effective date of the registration statement for this offering and shall end on October 31, 2016. Thereafter, we expect to begin offerings to our eligible employees to purchase stock under the 2016 ESPP on each May 1 and November 1 (or the
next following business day). Each offering, other than the first offering period, will consist of a six-month offering period during which payroll deductions will be made and held for the purchase of our common stock at the end of the offering
period. Our board of directors may, at its discretion, choose a different period of not more than 12 months for offerings.
108
On each offering commencement date, each participant will be granted the right to purchase a number of
shares of our common stock determined by multiplying $2,083 by the number of full months in the offering period and dividing that product by the initial public offering price, in the case of the first offering period, and by the closing price of the
common stock on the first day of the offering period for each subsequent offering period. No employee may be granted an option under the 2016 ESPP that permits the employee’s rights to purchase shares under the plan to accrue at a rate
that exceeds $25,000 of the fair market value of the common stock (determined as of the first day of each offering period) for each calendar year in which the option is outstanding. In addition, no employee may purchase shares of our common
stock under the 2016 ESPP that would result in the employee owning 5% or more of the total combined voting power or value of our stock.
Except with
respect to the first offering period, on the commencement date of each offering period, each eligible employee may authorize up to a maximum of 15% of his or her compensation to be deducted by us during the offering period. Each employee who
continues to be a participant in the 2016 ESPP on the last business day of the offering period will be deemed to have exercised an option to purchase from us the number of whole shares of our common stock that his or her accumulated payroll
deductions on such date will buy, not in excess of the maximum numbers set forth above. Under the terms of the 2016 ESPP, the purchase price shall be determined by our board of directors for each offering period and will be at least 85% of the
applicable closing price of our common stock. If our board of directors does not make a determination of the purchase price, the purchase price will be 85% of the lesser of the closing price of our common stock on the first business day of the
offering period or on the last business day of the offering period.
Each of our eligible employees will be automatically enrolled in the 2016 ESPP
for the first offering period and will be deemed to participate in the 2016 ESPP at a rate of 15% of his or her compensation. Payroll deductions are not required for the first offering period, however, a participant may, at any time after the
effectiveness of the 2016 ESPP’s registration statement on Form S-8, elect to have payroll deductions up to the aggregate amount that would have been credited to his or her account if a deduction of 15% of the compensation that he or she
received on each pay day during the first offering period had been made or decline to participate by filing an appropriate subscription agreement. Upon the automatic exercise of a participant’s option on the last day of the first offering
period, a participant shall be permitted to purchase shares with (i) the accumulated payroll deductions in his or her account, if any, (ii) a direct payment from the participant, or (iii) a combination thereof; provided, however that the total
amount applied to the purchase may not exceed the maximum amount described in the preceding sentence.
An employee may for any reason withdraw from
participation in an offering prior to the end of an offering period and permanently withdraw the balance accumulated in the employee’s account. If an employee elects to discontinue his or her payroll deductions during an offering period but
does not elect to withdraw his or her funds, funds previously deducted will be applied to the purchase of common stock at the end of the offering period. If a participating employee’s employment ends before the last business day of an offering
period, no additional payroll deductions will be made and the balance in the employee’s account will be paid to the employee.
We will be
required to make equitable adjustments to the number and class of securities available under the 2016 ESPP, the share limitations under the 2016 ESPP and the purchase price for an offering period under the 2016 ESPP to reflect stock splits, reverse
stock splits, stock dividends, recapitalizations, combinations of shares, reclassifications of shares, spin-offs and other similar changes in capitalization or events or any dividends or distributions to holders of our common stock other than
ordinary cash dividends.
In connection with a merger or other reorganization event (as defined in the 2016 ESPP), our board of directors or a
committee of our board of directors may take any one or more of the following
109
actions as to outstanding options to purchase shares of our common stock under the 2016 ESPP on such terms as our board of directors or committee determines:
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provide that options shall be assumed, or substantially equivalent options shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof);
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upon written notice to employees, provide that all outstanding options will be terminated immediately prior to the consummation of such reorganization event and that all such outstanding options will become exercisable
to the extent of accumulated payroll deductions as of a date specified by our board of directors or committee in such notice, which date shall not be less than ten days preceding the effective date of the reorganization event;
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upon written notice to employees, provide that all outstanding options will be cancelled as of a date prior to the effective date of the reorganization event and that all accumulated payroll deductions will be returned
to participating employees on such date;
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in the event of a reorganization event under the terms of which holders of our common stock will receive upon consummation thereof a cash payment for each share surrendered in the reorganization event, change the last
day of the offering period to be the date of the consummation of the reorganization event and make or provide for a cash payment to each employee equal to (1) the cash payment for each share surrendered in the reorganization event times the
number of shares of our common stock that the employee’s accumulated payroll deductions as of immediately prior to the reorganization event could purchase at the applicable purchase price, where the acquisition price is treated as the fair
market value of our common stock on the last day of the applicable offering period for purposes of determining the purchase price and where the number of shares that could be purchased is subject to the applicable limitations under the 2016 ESPP
minus (2) the result of multiplying such number of shares by the purchase price; and/or
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provide that, in connection with our liquidation or dissolution, options shall convert into the right to receive liquidation proceeds (net of the purchase price thereof).
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The 2016 ESPP may be terminated at any time by our board of directors. Upon termination, we will refund all amounts in the accounts of participating
employees.
Limitation of Liability and Indemnification
Our restated certificate of incorporation, which will become effective upon the closing of this offering, limits the personal liability of directors for
breach of fiduciary duty to the maximum extent permitted by the Delaware General Corporation Law and provides that no director will have personal liability to us or to our stockholders for monetary damages for breach of fiduciary duty or other duty
as a director. However, these provisions do not eliminate or limit the liability of any of our directors:
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for any breach of the director’s duty of loyalty to us or our stockholders;
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for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law;
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for voting or assenting to unlawful payments of dividends, stock repurchases or other distributions; or
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for any transaction from which the director derived an improper personal benefit.
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Any amendment to or
repeal of these provisions will not eliminate or reduce the effect of these provisions in respect of any act, omission or claim that occurred or arose prior to such amendment or repeal. If the Delaware General Corporation Law is amended to provide
for further limitations on the
110
personal liability of directors of corporations, then the personal liability of our directors will be further limited to the greatest extent permitted by the Delaware General Corporation Law.
In addition, our restated certificate of incorporation, which will become effective upon the closing of this offering, provides that we must
indemnify our directors and officers and we must advance expenses, including attorneys’ fees, to our directors and officers in connection with legal proceedings, subject to very limited exceptions.
We maintain a general liability insurance policy that covers certain liabilities of our directors and officers arising out of claims based on acts or
omissions in their capacities as directors or officers. In addition, we have entered into indemnification agreements with certain of our directors, and we intend to enter into indemnification agreements with all of our directors and executive
officers. These indemnification agreements may require us, among other things, to indemnify each such director and executive officer for some expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by him in any
action or proceeding arising out of his service as one of our directors.
Certain of our non-employee directors may, through their relationships
with their employers, be insured and/or indemnified against certain liabilities incurred in their capacity as members of our board of directors. We have agreed that we will be the indemnitor of “first resort,” however, with respect to any
claims against these directors for indemnification claims that are indemnifiable by both us and their employers. Accordingly, to the extent that indemnification is permissible under applicable law, we will have full liability for such claims
(including for the advancement of any expenses) and we have waived all related rights of contribution, subrogation or other recovery that we might otherwise have against these directors’ employers.
Rule 10b5-1 Sales Plans
Our directors and executive officers
may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis. Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by
the director or officer when entering into the plan, without further direction from them. The director or officer may amend or terminate the plan in some circumstances. Our directors and executive officers may also buy or sell additional shares
outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information.
111
RELATED PERSON TRANSACTIONS
Other than compensation arrangements for our directors and named executive officers which are described elsewhere in this prospectus, below we describe
transactions since January 1, 2013 to which we were a party or will be a party, in which:
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•
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the amounts involved exceeded or will exceed $120,000; and
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•
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any of our directors, executive officers or holders of more than 5% of our capital stock, or any member of the immediate family of, or person sharing the household with, the foregoing persons, had or will have a direct
or indirect material interest.
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Series D Financing and Common Stock Repurchase
On April 17, 2013, we entered into a stock purchase agreement with investors, including Summit Partners, L.P. and existing stockholders Commonwealth
Capital Ventures IV L.P. and entities affiliated with Matrix Partners, who were affiliated with members of our board of directors, to raise approximately $20.0 million through the sale of 3,407,445 shares of our Series D convertible preferred stock,
which we refer to as our Series D preferred stock, at a purchase price of $5.8695 per share. On June 18, 2013, we amended this stock purchase agreement to extend a subsequent closing date and raised approximately an additional $2.0 million from
the sale of 340,745 shares of Series D preferred stock at a purchase price of $5.8695 per share to entities affiliated with Summit Partners, L.P. We refer to these sales collectively as the Series D financing.
In connection with the Series D financing, we entered into a stock repurchase agreement pursuant to which we repurchased 387,379 shares of our common
stock at a purchase price of $4.98 per share, representing an aggregate purchase price of approximately $1.9 million, from eight of our stockholders, including Messrs. Shanmugaraj, Mikkelsen, Rasmussen, Givehchi and Shah and persons affiliated with
Mr. Swanson, each of whom is an executive officer, director or affiliate thereof.
M/A-COM Agreement
We periodically purchase products from M/A-COM Technology Solutions Holdings, Inc., or
M/A-COM,
under general
terms and conditions. One of the members of our board of directors, Peter Y. Chung, is also a member of the board of directors of M/A-COM. During the years ended December 31, 2013, 2014 and 2015, we made purchases of $333,000, $170,000 and
$1.2 million, respectively, from M/A-COM.
Amended and Restated Investors’ Rights Agreement
In connection with the initial closing of the Series D financing, we entered into an amended and restated investors’ rights agreement with our
significant stockholders, including entities affiliated with Summit Partners, L.P., Commonwealth Capital Ventures and Matrix Partners, a copy of which has been filed as an exhibit to the registration statement of which this prospectus forms a part.
Pursuant to this agreement, we granted such stockholders certain registration rights with respect to shares of our common stock, the right to receive financial and other information about us and a right of first offer with respect to future
issuances of our securities. The information rights and rights of first offer granted pursuant to this agreement will terminate pursuant to its terms upon the consummation of this offering; the registration rights will remain in effect. For more
information regarding these registration rights, see “Description of Capital Stock—Registration Rights.”
Indemnification Agreements
Our restated certificate of incorporation provides that we will indemnify our officers and directors to the fullest extent permitted by Delaware law. In
addition, we have entered into indemnification
112
agreements with each of our current and former directors, and prior to the closing of this offering we intend to enter into indemnification agreements with each of our executive officers. See
“Limitation of Liability and Indemnification.”
Arrangements with Executive Officers and Directors
For a description of the compensation arrangements that we have with our executive officers and directors, see “Executive Compensation.”
Issuance of Securities to Executive Officers
On October 21,
2015, we issued 97,563 RSUs to each of Messrs. Shanmugaraj, Mikkelsen and Givehchi, in each case pursuant to our 2009 Stock Plan. The value of the RSUs granted to each such individual was $1,265,392 at the time of issuance. These RSUs vest based on
satisfaction of both a time-based requirement and a liquidity event requirement. The time-based requirement of the RSUs will be satisfied with respect to 25% of the RSUs on August 13, 2016, and with respect to an additional 6.25% of the RSUs each
three-month period thereafter. The liquidity event requirement will be satisfied upon the closing of this offering. In the event that we are subject to a change in control (as such term is defined in the RSU agreement governing the award), the
recipient will get credit for an additional six months of service. In the event of an involuntary termination (as such term is defined in the RSU agreement) after a change in control, all RSUs subject to the award will become fully vested.
In April 2013, we issued 125,000 shares of our common stock to Mr. Shanmugaraj pursuant to a restricted stock purchase agreement. The aggregate
value of these shares at the time of issuance was $187,500. Pursuant to the terms of this restricted stock purchase agreement, we have a right to repurchase some or all of these shares at the original purchase price thereof, which right of
repurchase shall lapse with respect to 1/60th of the shares each month beginning on March 1, 2013. In the event that we are subject to a change in control (as such term is defined in the restricted stock purchase agreement), the repurchase
right will immediately lapse as to an additional number of shares that would otherwise vest in a six-month period. In the event of an involuntary termination (as such term is defined in Mr. Shanmugaraj’s restricted stock purchase
agreement) after a change in control, the right of repurchase will lapse in full and all shares will become vested.
In April 2013, we issued
131,535 shares of our common stock to Mr. Mikkelsen pursuant to a restricted stock purchase agreement. The aggregate value of these shares at the time of issuance was $197,303. Pursuant to the terms of this restricted stock purchase agreement,
we have a right to repurchase some or all of these shares at the original purchase price thereof, which right of repurchase shall lapse with respect to 1/60th of the shares each month beginning on March 1, 2013. In the event that we are subject
to a change in control (as such term is defined in the restricted stock purchase agreement), the repurchase right will immediately lapse as to an additional number of shares that would otherwise vest in a six-month period. In the event of an
involuntary termination (as such term is defined in Mr. Mikkelsen’s restricted stock purchase agreement) after a change in control, the right of repurchase will lapse in full and all shares will become vested.
In April 2013, we issued 131,535 shares of our common stock to Mr. Givehchi pursuant to a restricted stock purchase agreement. The aggregate value
of these shares at the time of issuance was $197,303. Pursuant to the terms of this restricted stock purchase agreement, we have a right to repurchase some or all of these shares at the original purchase price thereof, which right of repurchase
shall lapse with respect to 1/60th of the shares each month beginning on March 1, 2013. In the event that we are subject to a change in control (as such term is defined in the restricted stock purchase agreement), the repurchase right will
immediately lapse as to an additional number of shares that would otherwise vest in a six-month period. In the event of an involuntary termination (as such term is defined in Mr. Givehchi’s restricted stock purchase agreement) after a
change in control, the right of repurchase will lapse in full and all shares will become vested.
113
Policies and Procedures for Related Person Transactions
Our board of directors has adopted written policies and procedures, which will become effective upon the closing of this offering, for the review of any
transaction, arrangement or relationship in which our company is a participant, the amount involved exceeds $120,000, and one of our executive officers, directors, director nominees or 5% stockholders (or their immediate family members), each of
whom we refer to as a “related person,” has a direct or indirect material interest.
If a related person proposes to enter into such a
transaction, arrangement or relationship, which we refer to as a “related person transaction,” the related person must report the proposed related person transaction to our general counsel. The policy calls for the proposed related person
transaction to be reviewed and, if deemed appropriate, approved by the Board’s Audit Committee. Whenever practicable, the reporting, review and approval will occur prior to entry into the transaction. If advance review and approval is not
practicable, the committee will review, and, in its discretion, may ratify the related person transaction. The policy also permits the chairman of the committee to review and, if deemed appropriate, approve proposed related person transactions that
arise between committee meetings, subject to ratification by the committee at its next meeting. Any related person transactions that are ongoing in nature will be reviewed annually.
A related person transaction reviewed under the policy will be considered approved or ratified if it is authorized by the committee after full
disclosure of the related person’s interest in the transaction. As appropriate for the circumstances, the committee will review and consider:
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the related person’s interest in the related person transaction;
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the approximate dollar value of the amount involved in the related person transaction;
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•
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the approximate dollar value of the amount of the related person’s interest in the transaction without regard to the amount of any profit or loss;
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•
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whether the transaction was undertaken in the ordinary course of our business;
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•
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whether the terms of the transaction are no less favorable to us than terms that could have been reached with an unrelated third party;
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•
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the purpose of, and the potential benefits to us of, the transaction; and
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•
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any other information regarding the related person 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.
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The committee may approve or ratify the transaction only if it determines that, under all of the circumstances, the
transaction is in or is not inconsistent with our company’s best interests. The audit committee may impose any conditions on the related person transaction that it deems appropriate.
In addition to the transactions that are excluded by the instructions to the SEC’s related person transaction disclosure rule, the Board has
determined that the following transactions do not create a material direct or indirect interest on behalf of related persons and, therefore, are not related person transactions for purposes of this policy:
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interests arising solely from the related person’s position as a director of another entity, that is a participant in the transaction, where (a) the
related person and all other related persons own in the aggregate less than a 10% equity interest in such entity, (b) interests arising solely from the ownership of a class of the Company’s equity securities if all holders of that class of
equity securities receive the same benefit on a pro rata basis, (c) compensation arrangements with executive officers if the compensation has been approved, or recommended to the board of directors for approval, by our compensation committee, (d)
compensation for services as a
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114
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director of the company if such compensation will be publically reported pursuant to SEC rules, (e) interests arising solely from indebtedness of a 5% stockholder (or their immediate family
member), (f) a transaction where the rates or charges involved in the transaction are determined by competitive bids, (g) a transaction that involves the rendering of services as a common or contract carrier or public utility at rates or charges
fixed in conformity with law or governmental authority, and (h) a transaction that involves services as a bank depositary of funds, transfer agent, registrar, trustee under a trust indenture, or similar services; and
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a transaction that is specifically contemplated by provisions of our charter or bylaws.
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The policy
provides that transactions involving compensation of executive officers shall be reviewed and approved by the Compensation Committee in the manner specified in its charter.
115
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information with respect to the beneficial ownership of our common stock, as of February 15, 2016, by:
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each person, or group of affiliated persons, known by us to beneficially own more than 5% of our common stock;
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•
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each of our named executive officers;
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•
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all of our executive officers and directors as a group; and
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•
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each selling stockholder.
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The number of shares beneficially owned by each stockholder is determined
under rules of the SEC and includes voting or investment power with respect to securities. Under these rules, beneficial ownership includes any shares as to which the individual or entity has sole or shared voting power or investment power. In
computing the number of shares beneficially owned by an individual or entity and the percentage ownership of that person, shares of common stock subject to options, warrants or other rights held by such person that are currently exercisable or will
become exercisable within 60 days after February 15, 2016 are considered outstanding, although these shares are not considered outstanding for purposes of computing the percentage ownership of any other person. Unless otherwise indicated, the
address of all listed stockholders is c/o Acacia Communications, Inc., Three Clock Tower Place, Suite 100, Maynard, Massachusetts 01754. Each of the stockholders listed has sole voting and investment power with respect to the shares beneficially
owned by the stockholder unless noted otherwise, subject to community property laws where applicable. Beneficial ownership representing less than 1% is denoted with an asterisk (*).
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Name
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Shares Beneficially
Owned Prior to Offering
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Number of
Shares
Offered
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Shares Beneficially
Owned After
Offering
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Shares to be
Sold if
Underwriters’
Option is
Exercised in
Full
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Shares Beneficially
Owned After
Offering if
Underwriters’
Option is Exercised
in Full
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Number
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Percentage
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Number
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Percentage
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Number
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Percentage
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5% Stockholders
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Entities affiliated with Matrix Partners(1)
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12,098,220
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39.2
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%
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—
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12,098,220
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—
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12,098,220
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Commonwealth Capital Ventures IV L.P.(2)
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6,077,341
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19.7
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%
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—
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6,077,341
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—
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6,077,341
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Entities affiliated with Summit Partners, L.P.(3)
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2,896,329
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9.4
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%
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—
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2,896,329
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—
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2,896,329
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Executive Officers and Directors
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Murugesan Shanmugaraj(4)
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1,140,000
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3.7
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%
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—
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1,140,000
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114,000
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1,026,000
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Benny Mikkelson
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1,099,107
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3.6
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%
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—
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1,099,107
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109,911
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989,196
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Mehrdad Givehchi(5)
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1,099,107
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3.6
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%
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—
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1,099,107
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109,911
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989,196
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Eric Swanson(6)
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412,118
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1.3
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%
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—
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412,118
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103,329
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308,789
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Eliot Katzman(7)
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6,077,341
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19.7
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%
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—
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6,077,341
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—
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6,077,341
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Peter Chung
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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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Stan Reiss(8)
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12,098,220
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39.2
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%
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—
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12,098,220
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—
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12,098,220
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John Ritchie
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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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All executive officers and directors as a group (11 persons)(9)
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23,614,979
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75.7
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%
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—
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23,614,979
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595,923
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23,019,056
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Other Selling Stockholders
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—
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OFS Fitel LLC(10)
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951,212
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3.1
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%
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—
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951,212
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95,121
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856,091
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Bhupendra C. Shah(11)
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460,735
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1.5
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%
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—
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460,735
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40,000
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420,735
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Christian Rasmussen(12)
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1,048,685
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3.4
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%
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—
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1,048,685
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103,772
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944,913
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John LoMedico(13)
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463,568
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1.5
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%
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—
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463,568
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45,900
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417,668
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John Gavin(14)
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179,666
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*
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—
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179,666
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15,000
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164,666
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116
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(1)
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Consists of 12,091,554 shares of common stock issuable upon conversion of preferred stock held by Matrix Partners VIII, L.P., or Matrix VIII, and 6,666 shares of common stock issuable upon conversion of preferred stock
held by Weston & Co. VIII LLC as nominee for Matrix VIII US Management Co., LLC, or Matrix VIII US MC, which is the beneficial owner of such shares, which we refer to as the “Matrix VIII US MC Shares”. Matrix VIII US MC is the
sole general partner of Matrix VIII, and Mr. Reiss is a managing member of Matrix VIII US MC. Mr. Reiss, by virtue of his management position in Matrix VIII US MC, has sole voting and dispositive power with respect to the Matrix VIII
shares and the Matrix VIII US Shares. Mr. Reiss disclaims beneficial ownership of the Matrix VIII shares and the Matrix VIII US MC Shares, except to the extent of his pecuniary interest therein. Weston & Co, VIII, LLC. also directly
owns other shares in our company as a nominee for other beneficial owners. The address for each of Mr. Reiss, Matrix Partners VIII, L.P. and Matrix VIII US Management Co., LLC. is 101 Main Street, 17th Floor, Cambridge, Massachusetts 02142.
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(2)
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Consists of 6,077,341 shares held by Commonwealth Capital Ventures IV L.P. The general partner of Commonwealth Capital Ventures IV L.P. is Commonwealth Venture Partners IV L.P. Elliot M. Katzman, Jeffrey M. Hurst, R.
Stephen McCormack, Michael T. Fitzgerald and Justin J. Perreault are the general partners of Commonwealth Venture Partners IV L.P. Accordingly, they may be deemed to share beneficial ownership of the shares beneficially owned by Commonwealth Capital
Ventures IV L.P., although each of them disclaims beneficial ownership of such shares, except to the extent of his pecuniary interest therein. The address of Commonwealth Venture Partners IV L.P. is 400 West Cummings Park, Ste. 1725-134, Woburn,
Massachusetts 01801.
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(3)
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Consists of 2,198,853 shares of common stock issuable upon conversion of preferred stock held by Summit Partners Venture Capital Fund III-A, L.P., 666,442 shares of common stock issuable upon conversion of preferred
stock held by Summit Partners Venture Capital Fund III-B, L.P., 28,648 shares of common stock issuable upon conversion of preferred stock held by Summit Investors I, LLC and 2,386 shares of common stock issuable upon conversion of preferred stock
held by Summit Investors I (UK), L.P. Summit Partners, L.P. is the managing member of Summit Partners VC III, LLC, which is the general partner of each of Summit Partners Venture Capital Fund III-A, L.P. and Summit Partners Venture Capital Fund
III-B, L.P. Summit Master Company, LLC is the managing member of Summit Investors Management, LLC, which is the manager of Summit Investors I, LLC, and the general partner of Summit Investors I (UK), L.P. Summit Master Company, LLC, as the managing
member of Summit Investors Management, LLC, has delegated investment decisions, including voting and dispositive power, to Summit Partners, L.P. and its investment committee responsible for voting and investment decisions with respect to Acacia.
Summit Partners, L.P., through a three-person investment committee responsible for voting and investment decisions with respect to Acacia, currently comprised of Martin J. Mannion, Bruce R. Evans and Peter Y. Chung, has voting and dispositive power
over the shares held by each of these entities and therefore may be deemed to beneficially own such shares. In addition, Mr. Chung is a member of Summit Master Company, LLC. Each of the Summit entities mentioned in this footnote disclaims
beneficial ownership of the shares described in this footnote, except for those shares held of record by such entity and except to the extent of their pecuniary interest therein. Each of Summit Partners, L.P., Summit Master Company, LLC, the other
entities affiliated with Summit Partners, L.P. named herein, Mr. Mannion, Mr. Evans and Mr. Chung also disclaims beneficial ownership of such shares except to the extent of their pecuniary interest therein. The address of such
investors is 222 Berkeley Street, 18
th
Floor, Boston, Massachusetts 02116.
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(4)
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Consists of (i) 675,000 shares of common stock held by Mr. Shanmugaraj; (ii) 65,000 shares of common stock issuable upon conversion of preferred stock held by Mr. Shanmugaraj, (iii) 200,000 shares of common stock held
by The Shanmugaraj Irrevocable Children’s Trust and (iv) 200,000 shares of common stock held by The Malini Shanmugaraj 2016 QTIP Trust. The trustees of The Shanmugaraj Irrevocable Children’s Trust are Murugesan Shanmugaraj,
Perumal Mohan and Malini Shanmugaraj and they share voting and dispositive power with respect to the shares held by the trust. The trustees of The Malini Shanmugaraj 2016 QTIP Trust are Malini Shanmugaraj and Steve Stelljes and they share voting and
dispositive power with respect to the shares held by the trust.
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(5)
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Consists of (i) 549,554 shares of common stock held by Givehchi LLC (the “LLC Shares”) and (ii) 549,553 shares of common stock held by Mr. Givehchi. Kurt Steinkrauss, the sole manager of Givehchi LLC, has
sole voting and dispositive power over the LLC Shares.
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(6)
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Consists of (i) 100,433 shares of common stock issuable upon conversion of preferred stock and 155,842 shares of common stock held by Zachary Swanson and (ii) 155,842 shares of common stock held by Katherine
Swanson, who are immediate family members of Eric Swanson.
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(7)
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Consists of the shares held by Commonwealth Capital Ventures IV L.P. See footnote 2. Mr. Katzman disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein.
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(8)
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Consists of the shares held by the entities affiliated with Matrix Partners. See footnote 1. Mr. Reiss disclaims beneficial ownership of these shares, except to the extent of his pecuniary interest therein.
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(9)
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Includes 21,237,323 shares of common stock issuable upon conversion of preferred stock and options to purchase 295,537 shares of common stock that may be exercised within 60 days of February 15, 2016.
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(10)
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Consists of 951,212 shares of common stock issuable upon conversion of preferred stock held by OFS Fitel, LLC (the “OFS Shares”). Each of Timothy F. Murray, the Chief Executive Officer, President and
Chairman of OFS Fitel, LLC, and Ashish Ghandi, the Senior Vice President, Chief Financial Officer and Treasurer of OFS Fitel, LLC, has voting and dispositive power over the OFS Shares. The address for OFS Fitel, LLC is 2000 Northeast Expressway,
Norcross, GA 30071.
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(11)
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Consists of (i) options to purchase 34,758 shares of common stock that may be exercised within 60 days of February 15, 2016, (ii) 212,988 shares of common
stock held by Shah LLC and (iii) 209,133 shares of common stock held by Bhupendra Shah 1999 Trust U/A DTD 10/06/1999 (the “Shah Trust”), (iv) 1,928 shares of common stock held by Ravi Shah and (v) 1,928 shares
of common stock held by Roshan Shah. The manager of Shah LLC is Ramika Shah, Mr.
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Shah’s spouse, and she holds voting and dispositive power with respect to the shares held by Shah LLC. The trustee of the Shah Trust is Steven M. Burke, and he holds voting and dispositive
power with respect to the shares held by the Shah Trust. Ravi Shah and Roshan Shah are immediate family members of Mr. Shah.
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(12)
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Consists of (i) 967,572 shares of common stock held by Mr. Rasmussen and (ii) options to purchase 81,113 shares of common stock that may be exercised within 60 days of February 15, 2016.
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(13)
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Consists of (i) 381,702 shares of common stock held by Mr. LoMedico (ii) 50,000 shares of common stock issuable upon the conversion of preferred stock held by Mr. LoMedico and (iii) options to purchase
31,866 shares of common stock that may be exercised within 60 days of February 15, 2016.
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(14)
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Consists of options to purchase 179,666 shares of common stock held by Mr. Gavin that may be exercised within 60 days of February 15, 2016.
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DESCRIPTION OF CAPITAL STOCK
General
Following the closing of this offering, our
authorized capital stock will consist of 150,000,000 shares of common stock, par value $0.0001 per share, and 5,000,000 shares of preferred stock, par value $0.0001 per share. The following description of our capital stock and provisions of our
restated certificate of incorporation and amended and restated bylaws are summaries and are qualified by reference to the restated certificate of incorporation and amended and restated bylaws that will become effective upon the closing of this
offering. Copies of these documents have been filed with the SEC as exhibits to our registration statement, of which this prospectus forms a part. The description of our common stock reflects changes to our capital structure that will occur upon the
closing of this offering.
As of February 15, 2016, we had issued and outstanding:
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6,914,924 shares of our common stock held by 107 stockholders of record;
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6,009,207 shares of our Series A preferred stock held by 10 stockholders of record;
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10,554,274 shares of our Series B preferred stock held by five stockholders of record;
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3,865,824 shares of our Series C preferred stock held by seven stockholders of record; and
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3,748,190 shares of our Series D preferred stock held by 10 stockholders of record.
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Immediately prior
to the closing of this offering, all of the outstanding shares of our preferred stock will automatically convert into an aggregate of 24,177,495 shares of our common stock.
Common Stock
Holders of our common stock are entitled to one
vote for each share held on all matters submitted to a vote of stockholders and do not have cumulative voting rights. An election of directors by our stockholders shall be determined by a plurality of the votes cast by the stockholders entitled to
vote on the election. Holders of common stock are entitled to receive proportionately any dividends as may be declared by our board of directors, subject to any preferential dividend rights of any series of preferred stock that we may designate and
issue in the future.
In the event of our liquidation or dissolution, the holders of common stock are entitled to receive proportionately our net
assets available for distribution to stockholders after the payment of all debts and other liabilities and subject to the prior rights of any outstanding preferred stock. Holders of common stock have no preemptive, subscription, redemption or
conversion rights. Our outstanding shares of common stock are, and the shares offered by us in this offering will be, when issued and paid for, validly issued, fully paid and nonassessable. The rights, preferences and privileges of holders of common
stock are subject to and may be adversely affected by the rights of the holders of shares of any series of preferred stock that we may designate and issue in the future.
Preferred Stock
Under the terms of our restated certificate
of incorporation that will become effective upon the closing of this offering, our board of directors is authorized to direct us to issue shares of preferred stock in one or more series without stockholder approval. Our board of directors has the
discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.
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The purpose of authorizing our board of directors to issue preferred stock and determine its rights and
preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock, while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could
have the effect of making it more difficult for a third party to acquire, or could discourage a third party from seeking to acquire, a majority of our outstanding voting stock. Upon the closing of this offering, there will be no shares of preferred
stock outstanding, and we have no present plans to issue any shares of preferred stock.
Stock Options
As of February 15, 2016, options to purchase 2,409,278 shares of our common stock were outstanding under our 2009 Stock Plan at a
weighted-average exercise price of $2.89 per share, of which 930,456 were vested and exercisable as of that date.
RSUs
As of February 15, 2016, 1,063,846 shares of our common stock were issuable upon the vesting of RSUs outstanding under our 2009 Stock Plan. In
addition, 450,000 shares of our common stock are issuable upon the vesting of RSUs granted under our 2016 Equity Incentive Plan contingent upon the closing of this offering.
Warrants
We issued a warrant to Massachusetts Development
Communications, Inc. in connection with entering into a promissory note and security agreement in 2011. This warrant is exercisable for an aggregate of 75,000 shares of our Series B preferred stock, subject to certain adjustments, at an exercise
price of $1.43 per share. The warrant is immediately exercisable and terminates ten years after the date issued.
We issued a warrant to Silicon
Valley Bank in connection with entering into a loan and security agreement in 2011. This warrant is exercisable for an aggregate of 135,000 shares of our Series B preferred stock, subject to certain adjustments, at an exercise price of $1.43 per
share. The warrant is immediately exercisable and terminates ten years after the date issued. Further, we issued an additional warrant to Silicon Valley Bank in connection with entering into a modification of the loan and security agreement in 2012.
This warrant is exercisable for an aggregate of 35,000 shares of our Series C preferred stock, subject to certain adjustments, at an exercise price of $2.67 per share. The warrant is immediately exercisable and terminates ten years after the date
issued.
As of February 15, 2016, warrants to purchase 210,000 shares of our Series B preferred stock and warrants to purchase 35,000
shares of our Series C preferred stock were outstanding at a weighted-average exercise price of $1.61 per share.
Registration Rights
Demand Registration Rights
Pursuant to our
amended and restated investors’ rights agreement, until the earlier of April 17, 2017 and six months after the effective date of the registration statement of which this prospectus forms a part, the holders of at least 30% of the shares
having rights under this agreement, which we refer to as registrable securities, can demand that we file up to two registration statements on Form
S-1
registering all or a portion of their registrable
securities, provided that the aggregate offering price is expected to be at least $7.5 million. As of February 15, 2016, the holders of 24,177,495 shares of our common stock, including shares issuable upon the conversion of our preferred stock,
have demand registration rights. Under specified circumstances, we also have the right to defer filing of a requested
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registration statement for a period of not more than 60 days, which right may not be exercised more than once during any 12-month period. These registration rights are subject to additional
conditions and limitations, including the right of the underwriters to limit the number of shares included in any such registration under certain circumstances.
Form S-3 Registration Rights
Pursuant to the amended
and restated investors’ rights agreement, if we are eligible to file a registration statement on Form S-3, the holders of at least 10% of our registrable securities have the right to demand that we file additional registration statements,
including a shelf registration statement, for such holders on Form S-3, if the aggregate anticipated offering price is at least $5.0 million. These holders can demand up to two such registrations in any 12-month period.
Piggyback Registration Rights
Pursuant to the
amended and restated investors’ rights agreement, if we propose to file a registration statement under the Securities Act, other than with respect to a registration related to employee benefit or similar plans, a registration on any form which
does not include substantially the same information as would be required to be included in this registration statement, or a registration in which the only common stock being registered is common stock issuable upon conversion of debt securities
which are also being registered, the holders of registrable securities are entitled to receive notice of the registration and to include their registrable securities in such registration. As of February 15, 2016, the holders of 24,177,495
shares of our common stock, including shares issuable upon the conversion of our preferred stock, will be entitled to notice of this registration and will be entitled to include their registrable securities in this registration statement, but we
anticipate that such right will be waived prior to consummation of this offering. In addition, under the terms of the warrants that we issued to Massachusetts Development Communications, Inc. and Silicon Valley Bank, these warrant holders have the
right to request that any shares issued upon exercise of their warrants be covered by any registration statement that we are otherwise filing to the extent that we are also registering shares held by any parties to the investors’ rights
agreement. The underwriters of any underwritten offering will have the right to limit the number of the number of registrable securities that may be included in the registration statement.
Expenses of Registration
We are required to pay all
expenses relating to any demand, Form S-3 or piggyback registration, other than underwriting discounts and commissions, subject to certain limited exceptions. We will not pay for any expenses of any demand registration if the request is subsequently
withdrawn by the holders of a majority of the shares requested to be included in such a registration statement, subject to limited exceptions.
Anti-Takeover
Provisions
We are subject to Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 prevents
a publicly held Delaware corporation from engaging in a “business combination” with any “interested stockholder” for three years following the date that the person became an interested stockholder, unless the interested
stockholder attained such status with the approval of our board of directors or unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger or consolidation involving
us and the “interested stockholder” and the sale of more than 10% of our assets. In general, an “interested stockholder” is any entity or person beneficially owning 15% or more of our outstanding voting stock and any entity or
person affiliated with or controlling or controlled by such entity or person.
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Staggered Board; Removal of Directors
Our restated certificate of incorporation and our amended and restated bylaws divide our board of directors into three classes with staggered three-year
terms. In addition, a director may be removed only for cause and only by the affirmative vote of the holders of at least 75% of the votes that all our stockholders would be entitled to cast in an annual election of directors. 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.
The classification of our board of directors and the limitations on the removal of directors and filling of vacancies could make it more difficult for a
third party to acquire, or discourage a third party from seeking to acquire, control of our company.
Supermajority Voting
The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required
to amend a corporation’s certificate of incorporation or bylaws, unless a corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our bylaws may be amended or repealed by a majority vote of
our board of directors or the affirmative vote of the holders of at least 75% of the votes that all our stockholders would be entitled to cast in an annual election of directors. In addition, the affirmative vote of the holders of at least 75% of
the votes which all our stockholders would be entitled to cast in an election of directors is required to amend, repeal, or adopt any provisions inconsistent with, any of the provisions of our restated certificate of incorporation described in the
prior two paragraphs.
Stockholder Action; Special Meeting of Stockholders
Our certificate of incorporation provides that any action required or permitted to be taken by our stockholders must be effected at a duly called annual
or special meeting of such stockholders and may not be effected by any consent in writing by such stockholders. Our certificate of incorporation and our amended and restated bylaws also provide that, except as otherwise required by law, special
meetings of our stockholders can only be called by our chairman of the board, our chief executive officer or our board of directors.
Authorized But Unissued
Shares
The authorized but unissued shares of common stock and preferred stock are available for future issuance without stockholder
approval, subject to any limitations imposed by the Nasdaq Listing Rules. These additional shares may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of authorized but unissued and
unreserved common stock and preferred stock could make more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
Choice of Forum
Upon the closing of this offering, our
restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the exclusive forum for any derivative action or proceeding brought on our behalf; any action asserting a breach of fiduciary duty; any
action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our restated certificate of incorporation or our amended and restated bylaws; or any action asserting a claim against us that is governed by the internal
affairs doctrine.
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Transfer Agent and Registrar
The transfer agent and registrar for our common stock will be Computershare Trust Company, N.A.
NASDAQ Global Market
We have applied to have our common
stock listed on the Nasdaq Global Market under the symbol “ACIA.”
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to this offering, there was no public market for our common stock. Future sales of substantial amounts of common stock in the public market, or
the perception that such sales may occur, could adversely affect the market price of our common stock. Although we have applied to have our common stock listed on the Nasdaq Global Market, we cannot assure you that there will be an active public
market for our common stock.
Upon the closing of this offering, we will have outstanding an aggregate of
shares of common stock, assuming the issuance of shares of common stock offered by us in this offering
and no exercise of outstanding options or warrants. Of these shares, all shares sold in this offering will be freely tradable without restriction or further registration under the Securities Act, except for any shares purchased by our
“affiliates,” as that term is defined in Rule 144 under the Securities Act, whose sales would be subject to the Rule 144 resale restrictions described below, other than the holding period requirement.
The remaining shares of common stock will be “restricted securities,”
as that term is defined in Rule 144 under the Securities Act. These restricted securities are eligible for public sale only if they are registered under the Securities Act or if they qualify for an exemption from registration under Rules 144 or 701
under the Securities Act, which are summarized below.
Subject to the lock-up agreements described below and the provisions of Rules 144 and 701
under the Securities Act, these restricted securities will be available for sale in the public market as follows:
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Date
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Number of Shares
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On the date of this prospectus
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0
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90 days after the date of this prospectus
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0
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180 days after the date of this prospectus
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In addition, of the 2,409,278 shares of our common stock that were subject to stock options outstanding as of
February 15, 2016, options to purchase 930,456 shares of common stock were vested as of February 15, 2016 and, upon exercise, these shares will be eligible for sale subject to the lock-up agreements described below and Rules 144 and 701
under the Securities Act.
Lock-Up Agreements
We and each of our directors and executive officers and holders of
[ ] shares, or approximately 99.5%, of our outstanding capital stock, including the selling stockholders, have agreed that, without the prior written
consent of Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank Securities Inc., we and they will not, subject to limited exceptions, during the period ending 180 days after the date of this
prospectus:
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offer, sell, contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares of our common stock, any options or warrants to purchase any shares of our common stock or any
securities convertible into, exchangeable for or that represent the right to receive shares of our common stock; or
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engage in any hedging or other transaction which is designed to or which reasonably could be expected to lead to or result in a sale or disposition of shares of our common stock.
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These agreements are subject to certain exceptions, as described in the section of this prospectus entitled “Underwriting.”
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Upon the expiration of the applicable lock-up periods and any additional contractual lock-up period,
substantially all of the shares subject to such lock-up restrictions will become eligible for sale, subject to the limitations discussed above.
Rule 144
Affiliate Resales of Restricted Securities
In
general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is an affiliate of ours, or who was an affiliate at any time during the 90 days before a sale, who has beneficially
owned shares of our common stock for at least six months would be entitled to sell in “broker’s transactions” or certain “riskless principal transactions” or to market makers, a number of shares within any three-month period
that does not exceed the greater of:
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1% of the number of shares of our common stock then outstanding, which will equal approximately shares immediately after this offering; or
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the average weekly trading volume in 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 such sale.
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Affiliate resales under Rule 144 are also subject to the availability of current public information about us. In addition, if the number of shares being
sold under Rule 144 by an affiliate during any three-month period exceeds 5,000 shares or has an aggregate sale price in excess of $50,000, the seller must file a notice on Form 144 with the SEC and the Nasdaq Global Market concurrently with either
the placing of a sale order with the broker or the execution directly with a market maker.
Non-Affiliate Resales of Restricted Securities
In general, beginning 90 days after the effective date of the registration statement of which this prospectus is a part, a person who is not an affiliate
of ours at the time of sale, and has not been an affiliate at any time during the three months preceding a sale, and who has beneficially owned shares of our common stock for at least six months but less than a year, is entitled to sell such shares
subject only to the availability of current public information about us. If such person has held our shares for at least one year, such person can resell under Rule 144(b)(1) without regard to any Rule 144 restrictions, including the 90-day public
company requirement and the current public information requirement.
Non-affiliate resales are not subject to the manner of sale, volume limitation
or notice filing provisions of Rule 144.
Rule 701
In
general, under Rule 701, any of an issuer’s employees, directors, officers, consultants or advisors who purchases shares from the issuer in connection with a compensatory stock or option plan or other written agreement before the effective date
of a registration statement under the Securities Act is entitled to sell such shares 90 days after such effective date in reliance on Rule 144. An affiliate of the issuer can resell shares in reliance on Rule 144 without having to comply with the
holding period requirement, and non-affiliates of the issuer can resell shares in reliance on Rule 144 without having to comply with the current public information and holding period requirements.
The SEC has indicated that Rule 701 will apply to typical stock options granted by an issuer before it becomes subject to the reporting requirements of
the Exchange Act, along with the shares acquired upon exercise of such options, including exercises after an issuer becomes subject to the reporting requirements of the Exchange Act.
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Equity Plans
We
intend to file one or more registration statements on Form S-8 under the Securities Act to register all shares of common stock issued or issuable under our 2009 Stock Plan, 2016 Equity Incentive Plan and 2016 ESPP. We expect to file the registration
statement covering shares offered pursuant to our 2009 Stock Plan, 2016 Equity Incentive Plan and 2016 ESPP shortly after the date of this prospectus, permitting the resale of such shares by nonaffiliates in the public market without restriction
under the Securities Act and the sale by affiliates in the public market, subject to compliance with the resale provisions of Rule 144.
Registration Rights
Upon the closing of this offering, the holders of shares of common
stock, including shares of common stock that may be issued upon the exercise of our outstanding preferred stock warrants, or their respective transferees, will be entitled to various rights with respect to the registration of these 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, except for shares
purchased by affiliates. See “Description of Capital Stock—Registration Rights” for additional information. Shares covered by a registration statement will be eligible for sale in the public market upon the expiration or release from
the terms of the lock-up agreement.
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MATERIAL U.S. FEDERAL INCOME AND ESTATE TAX CONSIDERATIONS FOR NON-U.S. HOLDERS
OF COMMON STOCK
The following is a general discussion of material U.S. federal income and estate tax considerations relating to ownership and
disposition of our common stock by a non-U.S. holder. For purposes of this discussion, the term “non-U.S. holder” means a beneficial owner (other than a partnership or other pass-through entity) of our common stock that is not, for U.S.
federal income tax purposes:
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an individual who is a citizen or resident of the United States;
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a corporation, or other entity treated as a corporation for U.S. federal income tax purposes, created or organized in or under the laws of the United States or of any political subdivision of the United States;
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an estate the income of which is subject to U.S. federal income taxation regardless of its source; or
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a trust if (1) a U.S. court is able to exercise primary supervision over the administration of the trust and one or more U.S. persons have authority to control all substantial decisions of the trust or (2) the
trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person.
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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 who hold their common stock through partnerships or such 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 own tax advisor regarding the tax consequences of the ownership and
disposition of our common stock through a partnership or other pass-through entity, as applicable.
This discussion is based on current provisions
of 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 change could alter the tax consequences to non-U.S. holders described in this prospectus. There can be no assurance that the Internal Revenue Service, or the IRS, will not challenge one or more
of the tax consequences described in this prospectus.
We assume in this discussion that each non-U.S. holder holds shares of our common stock as a
capital asset (generally, property held for investment) for U.S. federal income tax purposes. This discussion does not address all aspects of U.S. federal income and estate 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 U.S. state, local or non-U.S. taxes, 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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financial institutions;
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brokers or dealers in securities;
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tax-exempt organizations;
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owners that hold our common stock as part of a straddle, hedge, conversion transaction, synthetic security or other integrated investment or who have elected to mark securities to market;
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controlled foreign corporations;
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passive foreign investment companies;
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non-U.S. governments; and
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certain U.S. expatriates.
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THIS DISCUSSION IS FOR GENERAL INFORMATION ONLY AND IS NOT, AND IS NOT
INTENDED TO BE, LEGAL OR TAX ADVICE. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS REGARDING THE U.S. FEDERAL, STATE, LOCAL, ESTATE AND NON-U.S. INCOME AND OTHER TAX CONSIDERATIONS OF ACQUIRING, HOLDING AND DISPOSING OF OUR COMMON
STOCK.
Distributions
As discussed under
“Dividend Policy” above, we do not expect to make cash dividends to holders of our common stock in the foreseeable future. If we make distributions in respect of our common stock, those distributions generally 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, subject to the tax treatment described in this section. 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 the holder’s tax basis in the common stock. Any remaining excess will be treated as capital gain,
subject to the tax treatment described below under the heading “Gain on Sale, Exchange or Other Taxable Disposition of Our Common Stock.” Any such distributions will also be subject to the discussion below under the heading
“FATCA.”
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.
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 (generally including provision of a valid IRS Form
W-8ECI (or applicable successor form) certifying that the dividends are effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States). However, such U.S. effectively connected income, net of specified
deductions and credits, is taxed in the hands of the non-U.S. holder at the same graduated U.S. federal income tax rates as would apply if such holder were a U.S. person (as defined in the Code). Any U.S. effectively connected income received by a
non-U.S. holder that is classified as a corporation for U.S. federal income tax purposes 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) and satisfy
applicable certification and other requirements. Non-U.S. holders are urged to consult their own tax advisors regarding their entitlement to benefits under a relevant income tax treaty and the specific methods available to them to satisfy these
requirements.
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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 an appropriate claim for a refund with the IRS.
Gain on Sale, Exchange or Other
Taxable Disposition of Our Common Stock
Subject to the discussion below under the heading “FATCA,” a non-U.S. holder generally will
not be subject to U.S. federal income tax or withholding tax on any gain realized upon such
non-U.S.
holder’s sale, exchange or other disposition of our common stock unless:
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the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States, and, if an applicable income tax treaty so provides, the gain is attributable to a permanent
establishment or fixed base maintained by the non-U.S. holder in the United States; in these cases, 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 U.S. persons, and, if the non-U.S. holder is a foreign corporation, an additional branch profits tax at a rate of 30% (or a lower rate as may be specified by an applicable income tax treaty between the United States and such
holder’s country of residence) may also apply;
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the non-U.S. holder is a non-resident alien present in the United States for 183 days or more in the taxable year of the disposition and certain other requirements 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 recognized in the taxable year of the disposition, if any; or
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we are or have been, at any time during the five-year period preceding such 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 held no more than 5% of our outstanding common stock, directly or indirectly, during the shorter of the five-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” if the fair market value of its “U.S. real property interests” (as defined in the Code and
applicable regulations) 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 believe that we are
not currently, and we do not anticipate becoming, a “U.S. real property holding corporation” for U.S. federal income tax purposes. If we are a U.S. real property holding corporation and either our common stock is not regularly traded on an
established securities market or a non-U.S. holder holds more than 5% of our outstanding common stock, directly or indirectly, during the applicable testing period, such non-U.S. holder’s gain on the disposition of shares of our common stock
generally will be taxed in the same manner as gain that is effectively connected with the conduct of a U.S. trade or business, except that the branch profits tax generally will not apply.
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Federal Estate Tax
Shares of our common stock that are owned
or treated as owned by an individual who is not a citizen or resident of the United States (as specially defined for U.S. federal estate tax purposes) at the time of death are considered U.S. situs assets and will be included in the
individual’s gross estate for U.S. federal estate tax purposes. Such shares, therefore, may be subject to U.S. federal estate tax, unless an applicable estate tax or other treaty provides otherwise.
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Information Reporting and Backup Withholding
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 generally will have to comply with specific certification procedures to establish that the holder is not a U.S. person (as defined in the Code) in order to avoid backup
withholding at the applicable rate with respect to dividends on our common stock. Generally, a holder will comply with such procedures if it provides a properly executed IRS Form W-8BEN or W-8BEN-E (or other applicable Form W-8), or otherwise meets
documentary evidence requirements for establishing that it is a non-U.S. holder, or otherwise establishes an exemption. Dividends paid to non-U.S. holders subject to withholding of U.S. federal income tax, as described above under
“Distributions,” will generally be exempt from U.S. backup withholding.
Information reporting and backup withholding generally will 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 non-U.S., 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 own 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 timely filed with the IRS.
FATCA
The Foreign Account Tax Compliance Act, or FATCA,
generally imposes a 30% withholding tax on dividends on, and gross proceeds from the sale or disposition of, our common stock if paid to a foreign entity unless (i) if the foreign entity is a “foreign financial institution,” the
foreign entity undertakes certain due diligence, reporting, withholding, and certification obligations, (ii) if the foreign entity is not a “foreign financial institution,” the foreign entity identifies certain of its U.S. investors,
or (iii) the foreign entity is otherwise exempt under FATCA.
Withholding under FATCA generally (1) applies to payments of dividends on
our common stock, and (2) will apply to payments of gross proceeds from a sale or other disposition of our common stock made after December 31, 2018. An intergovernmental agreement between the United States and an applicable foreign
country may modify the requirements described in this section. Under certain circumstances, a non-U.S. holder may be eligible for refunds or credits of the tax. Non-U.S. holders should consult their own tax advisors regarding the possible
implications of FATCA on their investment in our common stock.
The preceding discussion of material U.S. federal tax considerations is for
general information only. It is not legal or tax advice. Prospective investors should consult their own tax advisors regarding the particular U.S. federal, state, local and non-U.S. tax consequences of purchasing, holding and disposing of our common
stock, including the consequences of any proposed changes in applicable laws.
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UNDERWRITING
We, the selling stockholders and the underwriters named below have entered into an underwriting agreement with respect to the shares being offered.
Subject to certain conditions, each underwriter has severally agreed to purchase the number of shares indicated in the following table. Goldman, Sachs & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated and Deutsche Bank
Securities Inc. are the representatives of the underwriters.
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Underwriters
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Number of Shares
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Goldman, Sachs & Co.
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Merrill Lynch, Pierce, Fenner & Smith
Incorporated
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Deutsche Bank Securities Inc.
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Needham & Company, LLC
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Cowen and Company, LLC
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Northland Securities, Inc.(1)
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Total
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(1)
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Northland Capital Markets is the trade name for certain capital markets and investment banking services of Northland Securities, Inc., member FINRA/SIPC.
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The underwriters are committed to take and pay for all of the shares being offered, if any are taken, other than the shares covered by the option
described below unless and until this option is exercised.
The underwriters have an option to buy up to an additional
shares from the company and up to an additional shares from the selling stockholders to cover sales by
the underwriters of a greater number of shares than the total number set forth in the table above. They may exercise that option for 30 days. If any shares are purchased pursuant to this option, the underwriters will severally purchase shares in
approximately the same proportion as set forth in the table above.
The following tables show the per share and total underwriting discounts and
commissions to be paid to the underwriters by us and the selling stockholders. Such amounts are shown assuming both no exercise and full exercise of the underwriters’ option to purchase
additional shares.
Paid by Acacia Communications
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No Exercise
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Full Exercise
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Per Share
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$
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$
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Total
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$
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$
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Paid by the Selling Stockholders
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No Exercise
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Full Exercise
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Per Share
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$
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—
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$
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Total
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$
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—
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$
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Shares sold by the underwriters to the public will initially be offered at the initial public offering price set forth
on the cover of this prospectus. Any shares sold by the underwriters to securities dealers may be sold at a discount of up to $ per share from the initial public offering price.
After the initial offering of the shares, the representatives may change the offering price and the other selling terms. The offering of the shares by the underwriters is subject to receipt and acceptance and subject to the underwriters’ right
to reject any order in whole or in part.
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We and our officers, directors, and holders of substantially all of our common stock, including the selling
stockholders, have agreed with the underwriters, subject to certain exceptions, not to dispose of or hedge any of their common stock or securities convertible into or exchangeable for shares of common stock during the period from the date of this
prospectus continuing through the date 180 days after the date of this prospectus, except with the prior written consent of the representatives. This agreement does not apply to any existing employee benefit plans. See “Shares Available for
Future Sale” for a discussion of certain transfer restrictions.
Prior to the offering, there has been no public market for the shares. The
initial public offering price will be negotiated by us and the representatives. Among the factors to be considered in determining the initial public offering price of the shares, in addition to prevailing market conditions, will be our historical
performance, estimates of our business potential and earnings prospects, an assessment of our management and consideration of the above factors in relation to market valuation of companies in related businesses.
We have applied to list the shares on the Nasdaq Global Market under the symbol “ACIA.”
In connection with the offering, the underwriters may purchase and sell shares of common stock in the open market. These transactions may include short
sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriters of a greater number of shares than they are required to purchase in the offering, and a short position
represents the amount of such sales that have not been covered by subsequent purchases. A “covered short position” is a short position that is not greater than the amount of additional shares for which the underwriters’ option
described above may be exercised. The underwriters may cover any covered short position by either exercising their option to purchase additional shares or purchasing shares in the open market. In determining the source of shares to cover the covered
short position, the underwriters will consider, among other things, the price of shares available for purchase in the open market as compared to the price at which they may purchase additional shares pursuant to the option described above.
“Naked” short sales are any short sales that create a short position greater than the amount of additional shares for which the option described above may be exercised. The underwriters must cover any such naked short position by
purchasing shares in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market after pricing that could adversely
affect investors who purchase in the offering. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriters in the open market prior to the completion of the offering.
The underwriters may also impose a penalty bid. This occurs when a particular underwriter repays to the underwriters a portion of the underwriting
discount received by it because the representatives have repurchased shares sold by or for the account of such underwriter in stabilizing or short covering transactions.
Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriters for their own accounts, may have the
effect of preventing or retarding a decline in the market price of our stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of the common stock. As a result, the price of the common
stock may be higher than the price that otherwise might exist in the open market. The underwriters are not required to engage in these activities and may end any of these activities at any time. These transactions may be effected on NASDAQ, in the
over-the-counter market or otherwise.
We and the selling stockholders estimate that their share of the total expenses of the offering, excluding
underwriting discounts and commissions, will be approximately $ .
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We and the selling stockholders have agreed to indemnify the several underwriters against certain
liabilities, including liabilities under the Securities Act of 1933.
The underwriters and their respective affiliates are full service financial
institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and
non-financial activities and services. Certain of the underwriters and their respective affiliates have provided, and may in the future provide, a variety of these services to the issuer and to persons and entities with relationships with the
issuer, for which they received or will receive customary fees and expenses.
In the ordinary course of their various business activities, the
underwriters and their respective affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively trade securities, derivatives, loans, commodities, currencies, credit default swaps and other
financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of the issuer (directly, as collateral securing other
obligations or otherwise) and/or persons and entities with relationships with the issuer. The underwriters and their respective affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or
express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
European Economic Area
In relation to each Member State of
the European Economic Area which has implemented the Prospectus Directive (each, a Relevant Member State), an offer of shares to the public may not be made in that Relevant Member State, except that an offer of shares to the public may be made at
any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:
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(a)
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to any legal entity which is a qualified investor as defined in the Prospectus Directive;
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(b)
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to fewer than 100 or, if the Relevant Member State has implemented the relevant provisions of the 2010 Amending Directive, 150, natural or legal persons (other than qualified investors as defined in the Prospectus
Directive) subject to obtaining the prior consent of the representatives for any such offer; or
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(c)
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in any other circumstances falling within Article 3(2) of the Prospectus Directive,
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provided that no
such offer of shares shall result in a requirement for the publication of a prospectus pursuant to Article 3 of the Prospectus Directive or any measure implementing the Prospectus Directive in a Relevant Member State and each person who initially
acquires any shares or to whom an offer is made will be deemed to have represented, warranted and agreed to and with the underwriters that it is a qualified investor within the meaning of the law in that Relevant Member State implementing Article
2(1)(e) of the Prospectus Directive.
For the purposes of this provision, the expression an “offer of shares to the public” in relation to
any shares in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the shares to be offered so as to enable an investor to decide to purchase or subscribe the shares,
as the same may be varied in that Relevant Member State by any measure implementing the Prospectus Directive in that Relevant Member State, the expression Prospectus Directive means Directive 2003/71/EC (and amendments thereto, including the 2010 PD
Amending Directive, to the extent implemented in the Relevant Member State) and includes any relevant implementing measure in each Relevant Member State.
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In the case of any shares being offered to a financial intermediary as that term is used in Article 3(2) of
the Prospectus Directive, such financial intermediary will also 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 shares to the public other than their offer or resale in a Relevant Member State to qualified investors as so defined or in circumstances
in which the prior consent of the underwriters has been obtained to each such proposed offer or resale.
United Kingdom
In the United Kingdom, this prospectus is only addressed to and directed as qualified investors who are (i) investment professionals falling within
Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, or the Order; or (ii) high net worth entities and other persons to whom it may lawfully be communicated, falling within Article 49(2)(a) to
(d) of the Order (all such persons together being referred to as “relevant persons”). Any investment or investment activity to which this prospectus relates is available only to relevant persons and will only be engaged with relevant
persons. Any person who is not a relevant person should not act or relay on this prospectus or any of its contents.
Switzerland
The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange, or SIX, or on any other stock exchange or
regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing
prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the
offering may be publicly distributed or otherwise made publicly available in Switzerland.
Neither this document, nor any other offering or
marketing material relating to the offering nor the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the
Swiss Financial Market Supervisory Authority, or FINMA, and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes, or CISA. The investor protection afforded to acquirers of interests
in collective investment schemes under the CISA does not extend to acquirers of shares.
Dubai International Financial Center
This prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority, or DFSA. This
prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any
documents in connection with Exempt Offers. The DFSA has not approved this prospectus nor taken steps to verify the information set forth herein and has no responsibility for the prospectus. The shares to which this prospectus relates may be
illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this prospectus you should consult an authorized
financial advisor.
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Australia
No
placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission, or ASIC, in relation to the offering. This prospectus does not constitute a
prospectus, product disclosure statement or other disclosure document under the Corporations Act 2001, or the Corporations Act, and does not purport to include the information required for a prospectus, product disclosure statement or other
disclosure document under the Corporations Act.
Any offer in Australia of the shares may only be made to persons, or the exempt investors, who are
“sophisticated investors” (within the meaning of section 708(8) of the Corporations Act), “professional investors” (within the meaning of section 708(11) of the Corporations Act) or otherwise pursuant to one or more exemptions
contained in section 708 of the Corporations Act so that it is lawful to offer the shares without disclosure to investors under Chapter 6D of the Corporations Act.
The shares applied for by exempt investors in Australia must not be offered for sale in Australia in the period of 12 months after the date of allotment
under the offering, except in circumstances where disclosure to investors under Chapter 6D of the Corporations Act would not be required pursuant to an exemption under section 708 of the Corporations Act or otherwise or where the offer is pursuant
to a disclosure document which complies with Chapter 6D of the Corporations Act. Any person acquiring shares must observe such Australian on-sale restrictions.
This prospectus contains general information only and does not take account of the investment objectives, financial situation or particular needs of any
particular person. It does not contain any securities recommendations or financial product advice. Before making an investment decision, investors need to consider whether the information in this prospectus is appropriate to their needs, objectives
and circumstances, and, if necessary, seek expert advice on those matters.
Hong Kong
The shares may not be offered or sold in Hong Kong by means of any document other than (i) in circumstances which do not constitute an offer to the
public within the meaning of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Cap. 32 of the Laws of Hong Kong), or the Companies (Winding Up and Miscellaneous Provisions) Ordinance, or which do not constitute an invitation to the
public within the meaning of the Securities and Futures Ordinance (Cap. 571 of the Laws of Hong Kong), or the Securities and Futures Ordinance, or (ii) to “professional investors” as defined in the Securities and Futures Ordinance and
any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” as defined in the Companies (Winding Up and Miscellaneous Provisions) Ordinance, and no advertisement, invitation or
document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case 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 in 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” in Hong Kong as defined in the Securities and Futures Ordinance and any rules made thereunder.
Singapore
This prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this prospectus and any other document or
material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for
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subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor (as defined under Section 4A of the Securities and Futures
Act, Chapter 289 of Singapore, or the SFA) under Section 274 of the SFA, (ii) 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 (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA, in each case subject to conditions set
forth in the SFA.
Where the shares are subscribed or purchased under Section 275 of the SFA by a relevant person which is 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, the
securities (as defined in Section 239(1) of the SFA) of that corporation shall not be transferable for 6 months after that corporation has acquired the shares under Section 275 of the SFA except: (1) to an institutional investor under
Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer in that corporation’s securities pursuant to Section 275(1A) of the SFA, (3) where
no consideration is or will be given for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32 of the Securities and Futures (Offers of
Investments) (Shares and Debentures) Regulations 2005 of Singapore, or Regulation 32.
Where the shares are subscribed or purchased under
Section 275 of the SFA by a relevant person which is a trust (where the trustee is not an accredited investor (as defined in Section 4A of the SFA)) whose sole purpose is to hold investments and each beneficiary of the trust is an
accredited investor, the beneficiaries’ rights and interest (howsoever described) in that trust shall not be transferable for 6 months after that trust has acquired the shares under Section 275 of the SFA except: (1) to an
institutional investor under Section 274 of the SFA or to a relevant person (as defined in Section 275(2) of the SFA), (2) where such transfer arises from an offer that is made on terms that such rights or interest are acquired at a
consideration of not less than S$200,000 (or its equivalent in a foreign currency) for each transaction (whether such amount is to be paid for in cash or by exchange of securities or other assets), (3) where no consideration is or will be given
for the transfer, (4) where the transfer is by operation of law, (5) as specified in Section 276(7) of the SFA, or (6) as specified in Regulation 32.
Japan
The securities have not been and will not be
registered under the Financial Instruments and Exchange Act of Japan (Act No. 25 of 1948, as amended), or the FIEA. The securities may not be offered or sold, directly or indirectly, in Japan or to or for the benefit of any resident of Japan
(including any person resident in Japan or any corporation or other entity organized under the laws of Japan) or to others for reoffering or resale, directly or indirectly, in Japan or to or for the benefit of any resident of Japan, except pursuant
to an exemption from the registration requirements of the FIEA and otherwise in compliance with any relevant laws and regulations of Japan.
Canada
The securities 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 securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.
136
Securities legislation in certain provinces or territories of Canada may provide a purchaser with remedies
for rescission or damages if this prospectus / offering memorandum (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 (or, in the case of securities issued or guaranteed by the government of a non-Canadian
jurisdiction, section 3A.4) 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.
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INDUSTRY AND OTHER DATA
Unless otherwise indicated, information contained in this prospectus concerning our industry and the markets in which we operate, including our general
expectations and market position, is based on information from independent industry analysts and third-party sources, and management estimates. Management estimates are derived from publicly available information released by independent industry
analysts and third-party sources, as well as data from our internal research, and are based on assumptions, which we believe to be reasonable, made by us based on such data, as well as our knowledge of our industry, subscribers and products. This
information involves a number of assumptions and limitations, and we caution you not to give undue weight to such estimates. Projections, assumptions and estimates of our future performance and the future performance of the industries in which we
operate are necessarily subject to a high degree of uncertainty and risk due to a variety of factors, including those described in “Risk Factors” and elsewhere in this prospectus. These and other factors could cause results to differ
materially from those expressed in the estimates made by the independent parties and by us.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed upon for us by Wilmer Cutler Pickering Hale and Dorr LLP. Goodwin Procter LLP
has acted as counsel for the underwriters in connection with certain legal matters related to this offering.
EXPERTS
The consolidated financial statements included in this prospectus have been audited by Deloitte & Touche LLP, an independent
registered public accounting firm, as stated in their report appearing herein and elsewhere in the registration statement. Such consolidated financial statements are included in reliance upon the report of such firm given upon their authority as
experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed with the Securities and Exchange Commission a registration statement on Form
S-1
under the
Securities Act with respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of the registration statement, does not contain all of the information set forth in the registration statement or the exhibits and
schedules filed therewith. For further information about us and the common stock offered hereby, we refer you to the registration statement and the exhibits and schedules filed thereto. Statements contained in this prospectus regarding the contents
of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily complete, and each such statement is qualified in all respects by reference to the full text of such contract or other document filed
as an exhibit to the registration statement. Upon closing of this offering, we will be required to file periodic reports, proxy statements, and other information with the Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934. You may read and copy this information at the Public Reference Room of the Securities and Exchange Commission, 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference rooms by
calling the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission also maintains an Internet website that contains reports, proxy statements and other information about registrants, like us, that file
electronically with the Securities and Exchange Commission. The address of that site is
www.sec.gov
.
138
ACACIA COMMUNICATIONS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
F-1
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Acacia Communications, Inc.
Maynard, Massachusetts
We have audited the accompanying
consolidated balance sheets of Acacia Communications, Inc. and subsidiaries (the “Company”) as of December 31, 2014 and 2015, and the related consolidated statements of operations, redeemable convertible preferred stock and
stockholders’ (deficit) equity, and cash flows for each of the three years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor
were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all material
respects, the financial position of Acacia Communications, Inc. and subsidiaries as of December 31, 2014 and 2015, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2015,
in conformity with accounting principles generally accepted in the United States of America.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 19, 2016
F-2
ACACIA COMMUNICATIONS, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands,
except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
Pro Forma
Stockholders’
Equity
December 31,
2015
|
|
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
21,128
|
|
|
$
|
27,610
|
|
|
|
|
|
|
Accounts receivable
|
|
|
18,055
|
|
|
|
41,260
|
|
|
|
|
|
|
Inventory
|
|
|
14,999
|
|
|
|
27,920
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
2,535
|
|
|
|
3,179
|
|
|
|
|
|
|
Deferred product costs
|
|
|
896
|
|
|
|
3,476
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
57,613
|
|
|
|
103,445
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
7,946
|
|
|
|
15,925
|
|
|
|
|
|
|
Deferred tax assets
|
|
|
—
|
|
|
|
11,189
|
|
|
|
|
|
|
Other assets
|
|
|
101
|
|
|
|
185
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
65,660
|
|
|
$
|
130,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
LIABILITIES, REDEEMABLE CONVERTIBLE PREFERRED STOCK, AND STOCKHOLDERS’ (DEFICIT) EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current portion of long-term debt
|
|
$
|
709
|
|
|
$
|
—
|
|
|
|
|
|
|
Accounts payable
|
|
|
12,705
|
|
|
|
25,015
|
|
|
|
|
|
|
Accrued liabilities
|
|
|
8,800
|
|
|
|
15,521
|
|
|
|
|
|
|
Deferred revenue
|
|
|
3,689
|
|
|
|
7,762
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
25,903
|
|
|
|
48,298
|
|
|
|
|
|
|
Long-term debt, net of current portion and discount
|
|
|
1,406
|
|
|
|
—
|
|
|
|
|
|
|
Redeemable convertible preferred stock warrant liability
|
|
|
1,100
|
|
|
|
3,254
|
|
|
$
|
—
|
|
|
Other long-term liabilities
|
|
|
—
|
|
|
|
396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
28,409
|
|
|
|
51,948
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 13)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock (Note 9):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock, $0.0001 par value;
24,508 shares authorized; 24,177 shares issued
and
outstanding at December 31, 2014 and 2015; no shares issued and outstanding, pro forma (unaudited); liquidation preference of $53,426 at
December 31, 2014 and 2015
|
|
|
66,427
|
|
|
|
70,780
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stockholders’ (deficit) equity:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Common stock, $0.0001 par value; 35,000, 36,330 and 36,330 shares authorized; 6,138, 6,669, and
30,846 shares issued and outstanding at December 31, 2014 and 2015, and December 31, 2015 pro forma (unaudited), respectively
|
|
|
1
|
|
|
|
1
|
|
|
|
3
|
|
|
Additional paid-in capital
|
|
|
—
|
|
|
|
—
|
|
|
|
74,032
|
|
|
(Accumulated deficit) retained earnings
|
|
|
(29,177
|
)
|
|
|
8,015
|
|
|
|
8,015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stockholders’ (deficit) equity
|
|
|
(29,176
|
)
|
|
|
8,016
|
|
|
$
|
82,050
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit (equity)
|
|
$
|
65,660
|
|
|
$
|
130,744
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-3
ACACIA COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in
thousands, except per share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
77,652
|
|
|
$
|
146,234
|
|
|
$
|
239,056
|
|
|
Cost of revenue
|
|
|
47,983
|
|
|
|
93,558
|
|
|
|
145,350
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
29,669
|
|
|
|
52,676
|
|
|
|
93,706
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
24,248
|
|
|
|
28,471
|
|
|
|
38,645
|
|
|
Sales, general and administrative
|
|
|
5,099
|
|
|
|
6,615
|
|
|
|
13,124
|
|
|
Loss on disposal of property and equipment
|
|
|
745
|
|
|
|
108
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
30,092
|
|
|
|
35,194
|
|
|
|
51,769
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income from operations
|
|
|
(423
|
)
|
|
|
17,482
|
|
|
|
41,937
|
|
|
Other (expense) income:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest expense, net
|
|
|
(516
|
)
|
|
|
(390
|
)
|
|
|
(135
|
)
|
|
Change in fair value of preferred stock warrant liability
|
|
|
(94
|
)
|
|
|
(483
|
)
|
|
|
(2,154
|
)
|
|
Other (expense) income
|
|
|
(160
|
)
|
|
|
(156
|
)
|
|
|
157
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total other expense, net
|
|
|
(770
|
)
|
|
|
(1,029
|
)
|
|
|
(2,132)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(Loss) income before income taxes
|
|
|
(1,193
|
)
|
|
|
16,453
|
|
|
|
39,805
|
|
|
Provision (benefit) for income taxes
|
|
|
—
|
|
|
|
2,933
|
|
|
|
(715
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
|
(1,193
|
)
|
|
|
13,520
|
|
|
|
40,520
|
|
|
Accretion of redeemable convertible preferred stock
|
|
|
(3,778
|
)
|
|
|
(4,373
|
)
|
|
|
(4,353
|
)
|
|
Undistributed earnings attributable to participating securities
|
|
|
—
|
|
|
|
(7,419
|
)
|
|
|
(28,570
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to common stockholders—basic and diluted
|
|
$
|
(4,971
|
)
|
|
$
|
1,728
|
|
|
$
|
7,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.12
|
)
|
|
$
|
0.31
|
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(1.12
|
)
|
|
$
|
0.23
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
4,429
|
|
|
|
5,629
|
|
|
|
6,429
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
4,429
|
|
|
|
7,447
|
|
|
|
8,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma net income per share attributable to common stockholders (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
$
|
1.39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
$
|
1.30
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pro forma weighted-average shares used to compute pro forma net income per share attributable to common stockholders (unaudited):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
|
|
|
|
30,606
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
32,733
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-4
ACACIA COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ (DEFICIT) EQUITY
(in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable
Convertible
Preferred Stock
|
|
|
|
|
Common Stock
|
|
|
Additional
Paid-in
Capital
|
|
|
(Accumulated Deficit)
Retained Earnings
|
|
|
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
Shares
|
|
|
Amount
|
|
|
|
|
Total
|
|
|
Balance at January 1, 2013
|
|
|
20,429
|
|
|
$
|
36,474
|
|
|
|
|
|
4,028
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
(33,447
|
)
|
|
$
|
(33,446
|
)
|
|
Issuance of Series D redeemable convertible preferred stock
|
|
|
3,748
|
|
|
|
21,802
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Funds used to repurchase shares
|
|
|
|
|
|
|
|
|
|
|
|
|
(387
|
)
|
|
|
—
|
|
|
|
1,282
|
|
|
|
(1,955
|
)
|
|
|
(673
|
)
|
|
Accretion of preferred stock issuance costs
|
|
|
|
|
|
|
47
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(47
|
)
|
|
|
|
|
|
|
(47
|
)
|
|
Accretion to redemption value
|
|
|
|
|
|
|
3,731
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,525
|
)
|
|
|
(2,206
|
)
|
|
|
(3,731
|
)
|
|
Vesting of restricted common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
1,081
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
Exercise of common stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
237
|
|
|
|
—
|
|
|
|
68
|
|
|
|
|
|
|
|
68
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
222
|
|
|
|
|
|
|
|
222
|
|
|
Net loss
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1,193
|
)
|
|
|
(1,193
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2013
|
|
|
24,177
|
|
|
|
62,054
|
|
|
|
|
|
4,959
|
|
|
|
1
|
|
|
|
—
|
|
|
|
(38,801
|
)
|
|
|
(38,800
|
)
|
|
Accretion of preferred stock issuance costs
|
|
|
|
|
|
|
98
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(98
|
)
|
|
|
|
|
|
|
(98
|
)
|
|
Accretion to redemption value
|
|
|
|
|
|
|
4,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(379
|
)
|
|
|
(3,896
|
)
|
|
|
(4,275
|
)
|
|
Vesting of restricted common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
910
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
Exercise of common stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
269
|
|
|
|
—
|
|
|
|
70
|
|
|
|
|
|
|
|
70
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
407
|
|
|
|
|
|
|
|
407
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,520
|
|
|
|
13,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2014
|
|
|
24,177
|
|
|
|
66,427
|
|
|
|
|
|
6,138
|
|
|
|
1
|
|
|
|
—
|
|
|
|
(29,177
|
)
|
|
|
(29,176
|
)
|
|
Accretion of preferred stock issuance costs
|
|
|
|
|
|
|
80
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(80
|
)
|
|
|
|
|
|
|
(80
|
)
|
|
Accretion to redemption value
|
|
|
|
|
|
|
4,273
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(945
|
)
|
|
|
(3,328
|
)
|
|
|
(4,273
|
)
|
|
Vesting of restricted common stock
|
|
|
|
|
|
|
|
|
|
|
|
|
130
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|
Exercise of common stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
401
|
|
|
|
—
|
|
|
|
200
|
|
|
|
|
|
|
|
200
|
|
|
Stock-based compensation expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
825
|
|
|
|
|
|
|
|
825
|
|
|
Net income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
40,520
|
|
|
|
40,520
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at December 31, 2015
|
|
|
24,177
|
|
|
$
|
70,780
|
|
|
|
|
|
6,669
|
|
|
$
|
1
|
|
|
$
|
—
|
|
|
$
|
8,015
|
|
|
$
|
8,016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-5
ACACIA COMMUNICATIONS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in
thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM OPERATING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(1,193
|
)
|
|
$
|
13,520
|
|
|
$
|
40,520
|
|
|
Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
2,629
|
|
|
|
2,662
|
|
|
|
4,576
|
|
|
Loss on disposal of property and equipment
|
|
|
745
|
|
|
|
108
|
|
|
|
—
|
|
|
Stock-based compensation
|
|
|
1,504
|
|
|
|
407
|
|
|
|
825
|
|
|
Deferred income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
(11,189
|
)
|
|
Non-cash interest
|
|
|
82
|
|
|
|
47
|
|
|
|
80
|
|
|
Change in fair value of preferred stock warrant liability
|
|
|
94
|
|
|
|
483
|
|
|
|
2,154
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts receivable
|
|
|
(2,578
|
)
|
|
|
(5,956
|
)
|
|
|
(23,205
|
)
|
|
Inventory
|
|
|
(11,280
|
)
|
|
|
1,146
|
|
|
|
(12,921
|
)
|
|
Prepaid expenses and other current assets
|
|
|
(32
|
)
|
|
|
(2,087
|
)
|
|
|
1,144
|
|
|
Deferred product costs
|
|
|
(325
|
)
|
|
|
(222
|
)
|
|
|
(2,580
|
)
|
|
Other assets
|
|
|
(21
|
)
|
|
|
21
|
|
|
|
(78
|
)
|
|
Accounts payable
|
|
|
5,300
|
|
|
|
1,734
|
|
|
|
11,942
|
|
|
Accrued liabilities
|
|
|
4,172
|
|
|
|
188
|
|
|
|
6,713
|
|
|
Deferred revenue
|
|
|
(164
|
)
|
|
|
1,346
|
|
|
|
4,073
|
|
|
Other long-term liabilities
|
|
|
—
|
|
|
|
—
|
|
|
|
396
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash (used in) provided by operating activities
|
|
|
(1,067
|
)
|
|
|
13,397
|
|
|
|
22,450
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchases of property and equipment
|
|
|
(2,915
|
)
|
|
|
(6,466
|
)
|
|
|
(12,110
|
)
|
|
Deposits
|
|
|
(21
|
)
|
|
|
(12
|
)
|
|
|
(6
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash used in investing activities
|
|
|
(2,936
|
)
|
|
|
(6,478
|
)
|
|
|
(12,116
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING ACTIVITIES:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Repayment of long-term debt
|
|
|
(56
|
)
|
|
|
(786
|
)
|
|
|
(2,155
|
)
|
|
Repayment of working capital line of credit
|
|
|
—
|
|
|
|
(5,269
|
)
|
|
|
—
|
|
|
Payment of capital lease obligation
|
|
|
—
|
|
|
|
—
|
|
|
|
(63
|
)
|
|
Deferred financing costs
|
|
|
—
|
|
|
|
(35
|
)
|
|
|
(4
|
)
|
|
Payment of IPO costs
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,825
|
)
|
|
Proceeds from issuance of Series D redeemable convertible preferred stock, net of issuance costs of $198
|
|
|
21,802
|
|
|
|
—
|
|
|
|
—
|
|
|
Repurchase of common stock
|
|
|
(1,955
|
)
|
|
|
—
|
|
|
|
—
|
|
|
Proceeds from the exercise of common stock options
|
|
|
68
|
|
|
|
70
|
|
|
|
200
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) financing activities
|
|
|
19,859
|
|
|
|
(6,020
|
)
|
|
|
(3,847
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rates on cash
|
|
|
—
|
|
|
|
(6
|
)
|
|
|
(5
|
)
|
|
Net increase in cash and cash equivalents
|
|
|
15,856
|
|
|
|
893
|
|
|
|
6,482
|
|
|
Cash and cash equivalents—Beginning of period
|
|
|
4,379
|
|
|
|
20,235
|
|
|
|
21,128
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents—End of period
|
|
$
|
20,235
|
|
|
$
|
21,128
|
|
|
$
|
27,610
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental cash flow disclosures:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid for income taxes
|
|
$
|
—
|
|
|
$
|
4,702
|
|
|
$
|
7,311
|
|
|
Cash paid for interest
|
|
$
|
434
|
|
|
$
|
375
|
|
|
$
|
54
|
|
|
Supplemental disclosure of non-cash investing and financing activities
:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital expenditures incurred but not yet paid
|
|
$
|
311
|
|
|
$
|
495
|
|
|
$
|
844
|
|
|
IPO costs incurred but not yet paid
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
215
|
|
|
Property and equipment acquired under capital lease
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
96
|
|
|
Accretion of redemption value on redeemable convertible preferred stock
|
|
$
|
3,731
|
|
|
$
|
4,275
|
|
|
$
|
4,273
|
|
|
Accretion of redeemable convertible preferred stock issuance costs
|
|
$
|
47
|
|
|
$
|
98
|
|
|
$
|
80
|
|
The accompanying notes are an integral part of these consolidated financial statements.
F-6
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF THE BUSINESS AND OPERATIONS
Nature of the Business
Acacia Communications, Inc., was incorporated on June 2, 2009, as a Delaware corporation. Acacia Communications, Inc. and its wholly owned
S
ubsidiaries (the “Subsidiaries”) are collectively referred to as the “Company.” The Company is a leading provider of
high-speed
coherent interconnect products that are
designed to improve the capacity, performance, intelligence and cost of communications networks relied upon by cloud infrastructure operators and content and communications service providers. The Company’s products include a series of
low-power
coherent digital signal processors and silicon photonic integrated circuits integrated into families of optical interconnect modules with transmission speeds ranging from 40 to 400 gigabits per second for
use in long-haul, metro and inter-data center markets.
Operations
The Company is subject to a number of risks common to emerging, technology-based companies, including a history of operating losses, dependence on a
limited number of customers, the successful development and release of new products, dependence on a limited number of suppliers, dependence on key individuals, rapid technological changes, competition from substitute products and larger companies,
and the need for additional financing to fund future operations. The Company has funded its operations to date primarily through the sale of redeemable convertible preferred stock, short- and long-term borrowings, and the sale of its products.
Management believes that existing cash as of December 31, 2015, along with cash generated from the sale of its products and cash available to the Company under its existing working capital line of credit, will be sufficient to fund operating
and capital expenditure requirements through at least 2016.
2. BASIS OF PRESENTATION
Principles of Consolidation
The
accompanying consolidated financial statements have been prepared in accordance with accounting policies generally accepted in the United States of America (“GAAP”) and include the accounts of Acacia Communications, Inc., and the
Subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could
differ from those estimates.
Unaudited Pro Forma Balance Sheet Information
Upon the completion of the Company’s initial public offering (“IPO”), all outstanding redeemable convertible preferred stock will
automatically convert into shares of the Company’s common stock. The unaudited pro forma balance sheet information gives effect to the conversion of the redeemable convertible preferred stock as of December 31, 2015, which converts to
common stock on a one-to-
F-7
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
one basis. In addition, the unaudited pro forma balance sheet assumes the reclassification of the redeemable convertible preferred stock warrant liability to additional paid-in capital upon a
qualifying IPO of the Company’s common stock, assuming the preferred stock warrants automatically become common stock warrants that are classified as equity and are not subject to remeasurement. The effect of these conversions on the unaudited
pro forma balance sheet will increase stockholders’ equity by $74.0 million. Additionally, as discussed in “
—
Unaudited Pro Forma Net Income per Share Attributable to Common Stockholders” below, the Company has
calculated unaudited pro forma basic and diluted net income per share to give effect to the redeemable convertible preferred stock as though such shares had been converted to shares of common stock as of the beginning of the period. As described in
Note 11 below, the Company has granted restricted stock units (“RSUs”) with a performance measure that will be met 185 days following an IPO or sale event. As such, no shares of common stock underlying such RSUs will be issued upon
completion of the Company’s IPO, and therefore these RSUs do not impact the unaudited pro forma balance sheet.
Unaudited Pro Forma
Net Income per Share Attributable to Common Stockholders
The unaudited pro forma basic and diluted net income per share attributable to
common stockholders has been computed to give effect to the assumed automatic conversion of the redeemable convertible preferred stock into shares of common stock upon the completion of the IPO using the if-converted method and the elimination of
the revaluation adjustment on the preferred stock warrants due to the automatic conversion of those warrants into common stock warrants, in each case as though the conversion had occurred as of the beginning of the period.
Comprehensive (Loss) Income
During the years ended December 31, 2013, 2014 and 2015, comprehensive (loss) income equaled net (loss) income.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company
derives its revenue from the sale of its products. The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred, the fee is fixed or determinable, and collectability of the related receivable is reasonably
assured. The Company considers delivery of its products to have occurred once title and risk of loss has been transferred. The Company’s products consist of hardware and software that function together to deliver the products’ essential
functionality. The Company does not sell its software on a standalone basis.
At the time revenue is recognized, the Company establishes an accrual
for estimated warranty expenses associated with sales, recorded as a component of cost of revenue. The Company’s customers generally do not have return rights.
A limited number of revenue arrangements with our customers include more than one element and require the application ASC 605-25,
Revenue
Recognition—Multiple Element Arrangements
. Arrangement consideration is allocated to each element with standalone value based on the relative selling prices of all of the elements in the arrangement using the fair value hierarchy. We
determine the relative selling price of elements based on prices charged for standalone products, when sufficiently concentrated, and third-party evidence of similar elements, or, in the absence of these sources of
F-8
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
evidence, based on management’s best estimate of selling price. Revenue recognized from multiple-element arrangements accounted for less than 2% of our total revenue during the years ended
December 31, 2013, 2014 and 2015.
Deferred Revenue
Deferred revenue represents either advance payments or billings for which the aforementioned revenue recognition criteria have not been met.
Cost of Revenue
The Company records
all costs associated with its product sales in cost of revenue. These costs include the cost of materials, contract manufacturing fees, shipping costs, and quality assurance. Cost of revenue also includes indirect costs such as warranty, excess and
obsolete inventory charges, general overhead costs, depreciation, and royalty fees paid to third parties.
Cash and Cash Equivalents
Cash equivalents include all highly liquid investments with an original maturity of three months or less. Cash equivalents consist of
bank deposit accounts and money market funds as of December 31, 2014 and 2015.
Concentrations of Credit Risk
Financial instruments that subject the Company to significant concentrations of credit risk consist primarily of cash and cash equivalents and accounts
receivable. The Company places its cash and cash equivalents with financial institutions that management believes to be of high credit quality. The majority of the Company’s cash deposits on hand are at one financial institution and deposits
often exceed federally insured limits. To minimize credit risk related to accounts receivable, ongoing credit evaluations of customers’ financial condition are performed and the Company maintains allowances for potential credit losses. The
Company has determined that no allowance is needed as of December 31, 2014 and 2015, as all amounts are expected to be collected.
Inventory
Inventory, which consists
of raw materials, work-in-process, and finished goods, is stated at the lower of cost or market, as determined on a specific cost basis and using the first-in, first-out convention. The Company reduces the carrying value of inventory for those items
that are potentially excess, obsolete, or slow moving based on changes in customer demand, technology developments, or other economic factors.
Initial Public Offering Costs
The
Company defers direct incremental costs attributable with the IPO of its common stock. These costs represent legal, accounting and other direct costs related to the Company’s efforts to raise capital through a public sale of its common stock.
Future costs will be deferred until the completion of the IPO, at which time they will be reclassified to additional paid-in capital as a reduction of the IPO proceeds. As of December 31, 2015, the Company has recorded $2.0 million of IPO
costs as a component of prepaid expenses and other current assets in the accompanying consolidated balance sheets.
F-9
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred Financing Costs
The Company has capitalized certain costs related to the issuance of debt. These costs are amortized to “interest expense” over the term of the
related debt, using the effective interest rate method.
Deferred Product Costs
Deferred product costs represent products that have been delivered, for which the revenue associated with the arrangement has been deferred as a result
of not meeting the revenue recognition criteria. The Company defers the product costs of the delivered items until recognition of the related revenue occurs.
Property and Equipment
Property and
equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the related assets. The costs of additions and improvements are capitalized, while maintenance and repairs are charged to expense as
incurred. The estimated useful lives of the Company’s property and equipment are as follows:
|
|
|
|
|
Engineering lab equipment
|
|
3 years
|
|
Computer software
|
|
1-3 years
|
|
Computer equipment
|
|
3 years
|
|
Furniture and fixtures
|
|
3-7 years
|
|
Leasehold improvements
|
|
Lesser of lease term or life of asset
|
When assets are retired or otherwise disposed of, the assets and related accumulated depreciation are derecognized from
the accounts and the resulting gain or loss is reflected in the accompanying consolidated statements of operations.
Impairment of Long-Lived
Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of
the asset may not be recoverable. When such events occur, the Company compares the carrying amounts of the assets to their undiscounted expected future cash flows. If this comparison indicates that there is an impairment, the amount of the
impairment is calculated as the difference between the carrying value and the fair value. No impairments have been recognized for the years ended December 31, 2013, 2014 and 2015.
Warranties
The Company’s
standard warranty obligation to its customers provides for repair or replacement of a defective product at the Company’s discretion for a period of time following purchase, generally between 12 and 24 months. Factors that affect the warranty
obligation include product failure rates, material usage, and service delivery costs incurred in correcting product failures. The estimated cost associated with fulfilling the Company’s warranty obligation to customers is recorded in cost of
F-10
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
revenue. Changes in the Company’s product warranty liability, which is included as a component of accrued liabilities on the consolidated balance sheets, are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
Warranty reserve, beginning of period
|
|
$
|
30
|
|
|
$
|
161
|
|
|
$
|
508
|
|
|
Provisions made to warranty reserve during the period
|
|
|
234
|
|
|
|
550
|
|
|
|
637
|
|
|
Charges against warranty reserve during the period
|
|
|
(103
|
)
|
|
|
(203
|
)
|
|
|
(382
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Warranty reserve, end of period
|
|
$
|
161
|
|
|
$
|
508
|
|
|
$
|
763
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Advertising Costs
The Company expenses advertising costs as incurred. During the years ended December 31, 2013, 2014 and 2015, the Company did not incur any
advertising expenses.
Research and Development Costs
The Company expenses all research and development costs as incurred. Research and development costs consist primarily of salary and benefit expenses,
including stock-based compensation, for employees and costs for contractors engaged in research, design, and development activities incurred directly and with support from external vendors, such as outsourced development costs, as well as support
costs for prototypes, depreciation, purchased intellectual property, facilities, and travel.
Stock-Based Compensation
The Company accounts for share-based payment awards granted to employees at fair value, which is measured using an estimate of the fair value of the
common stock for restricted stock awards and RSUs, as well as other input assumptions in the Black-Scholes option-pricing model for stock option awards. The measurement date for employee awards is the date of grant. Stock-based compensation costs
are recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period for all time-vested awards.
The following table summarizes the classification of stock-based compensation in the consolidated statements of operations for the years ended
December 31, 2013, 2014 and 2015 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of revenue
|
|
$
|
25
|
|
|
$
|
17
|
|
|
$
|
75
|
|
|
Research and development
|
|
|
960
|
|
|
|
258
|
|
|
|
561
|
|
|
Sales, general and administrative
|
|
|
519
|
|
|
|
132
|
|
|
|
189
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total stock-based compensation
|
|
$
|
1,504
|
|
|
$
|
407
|
|
|
$
|
825
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-11
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Redeemable Convertible Preferred Stock Warrant Liability
The Company’s redeemable convertible preferred stock warrants require liability classification and accounting as the underlying preferred stock is
considered redeemable as discussed in Note 9. At initial recognition, the warrants are recorded at their estimated fair value. The warrants are subject to remeasurement at each balance sheet date, with changes in fair value recognized as a component
of total other expense, net.
Foreign Currency Transactions
The functional currency of the Company’s Subsidiaries is the U.S. dollar. All assets and liabilities denominated in a foreign currency are
remeasured into U.S. dollars at the exchange rate on the consolidated balance sheet date. When transactions are required to be paid in the local currency of any Subsidiary, any resulting foreign currency transaction gain or loss is recorded as a
component of other (expense) income in the accompanying consolidated statements of operations. To date, foreign currency transaction gain or loss associated with the Company’s Subsidiaries has not been significant. The majority of the
Company’s foreign exchange gain or loss is derived from certain outsourced development contracts that are denominated in Euros. During the years ended December 31, 2013 and 2014, the Company recorded foreign currency transaction losses of
$63,000 and $156,000, respectively. During the year ended December 31, 2015, the Company recorded foreign currency transaction gains of $157,000.
Income Taxes
The Company recognizes
deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the Company’s consolidated financial statements and tax returns. Deferred tax assets and liabilities are determined based upon the
differences between the financial statement carrying amounts and the tax bases of existing assets and liabilities and for loss and credit carryforwards, using enacted tax rates expected to be in effect in the year in which the differences are
expected to reverse. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that these assets may not be realized.
The Company accrues liabilities for potential payments of tax to various tax authorities related to uncertain tax positions. Liabilities are based on a
determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be realized following resolution of any potential uncertainties present related to the tax benefit. Potential
interest and penalties associated with such uncertain tax positions are recorded as a component of the provision for income taxes. As of December 31, 2014, there were no uncertain tax positions for which liabilities would be required. As of
December 31, 2015, the Company identified $940,000 of uncertain tax benefits for which liabilities have been recorded.
Operating
Segments
The Company operates as one operating segment. Operating segments are defined as components of an enterprise for which separate
financial information is regularly evaluated by the chief operating decision maker (“CODM”), which is the Company’s chief executive officer, in deciding how to allocate resources and assess performance. The Company’s CODM
evaluates the Company’s financial information and resources and assesses the performance of these resources on a consolidated basis. Since the Company operates in one operating segment, all required financial segment information can be found in
the consolidated financial statements.
F-12
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Revenue by geographic region, based on ship-to destinations, was as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United States
|
|
$
|
11,554
|
|
|
$
|
30,444
|
|
|
$
|
42,263
|
|
|
China
|
|
|
24,916
|
|
|
|
53,340
|
|
|
|
86,048
|
|
|
Germany
|
|
|
10,200
|
|
|
|
38,095
|
|
|
|
77,850
|
|
|
France
|
|
|
16,108
|
|
|
|
8,010
|
|
|
|
3,875
|
|
|
Other
|
|
|
14,874
|
|
|
|
16,345
|
|
|
|
29,020
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total revenue
|
|
$
|
77,652
|
|
|
$
|
146,234
|
|
|
$
|
239,056
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets by geographic region (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2015
|
|
|
United States
|
|
$
|
7,205
|
|
|
$
|
10,896
|
|
|
Canada
|
|
|
612
|
|
|
|
3,227
|
|
|
Thailand
|
|
|
—
|
|
|
|
1,715
|
|
|
Other
|
|
|
129
|
|
|
|
87
|
|
|
|
|
|
|
|
|
|
|
|
|
Total long-lived assets
|
|
$
|
7,946
|
|
|
$
|
15,925
|
|
|
|
|
|
|
|
|
|
|
|
Net (Loss) Income per Share Attributable to Common Stockholders
Basic and diluted net (loss) income per share attributable to common stockholders is presented in conformity with the two-class method required for
participating securities. The Company considers its redeemable convertible preferred stock to be participating securities. In the event a cash dividend is paid on common stock, the holders of redeemable convertible preferred stock are also entitled
to a proportionate share of any such dividend as if they were holders of common stock (on an as-if converted basis). The holders of the redeemable convertible preferred stock do not have a contractual obligation to share in losses. In accordance
with the two-class method, earnings allocated to these participating securities and the related number of outstanding shares of the participating securities, which include contractual participation rights in undistributed earnings, have been
excluded from the computation of basic and diluted net (loss) income per share attributable to common stockholders.
During the periods when the
Company is in a net loss position, basic net loss per share attributable to common stockholders is the same as diluted net loss per share attributable to common stockholders as the inclusion of all potential shares of common stock outstanding would
be antidilutive.
Recent Accounting Pronouncements
In November 2015, the Financial Accounting Standards Board, or FASB, issued
ASU 2015-17,
Income
Taxes—Balance Sheet Classification of Deferred Taxes
,
or
ASU 2015-17.
ASU 2015-17
requires that deferred tax liabilities and assets be
classified as noncurrent within the balance sheet in order to reduce complexity in accounting standards, as previous classification requirements did not generally align with when the deferred tax amounts were recovered. This update, required to be
adopted for all annual periods and interim reporting periods beginning after December 15, 2016, was
F-13
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
early adopted by the Company for the year ending December 31, 2015. The Company’s deferred tax assets have been classified as noncurrent within the balance sheet. Prior periods have not
been retrospectively adjusted as the Company had applied a full valuation allowance.
In July 2015, the FASB issued ASU 2015-11,
Simplifying the
Measurement of Inventory
, or ASU 2015-11. ASU 2015-11 applies to all inventory, except for inventory measured using the last-in, first-out method or the retail inventory method. The guidance allows an entity to measure inventory at the lower of
cost and net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. The amendments in ASU 2015-11 are effective for
fiscal years beginning after December 15, 2015, including interim periods within those fiscal years, and may be applied prospectively with earlier adoption permitted. The adoption of this standard is not expected to have an impact on the
Company’s financial position or results of operations.
In June 2014, the FASB issued ASU 2014-12,
Accounting for Share-Based Payments
When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period
, or ASU 2014-12. ASU 2014-12 provides amendments to ASC No. 718,
Compensation—Stock Compensation
, which
clarifies the guidance for whether to treat a performance target that could be achieved after the requisite service period as a performance condition that affects vesting or as a nonvesting condition that affects the grant-date fair value of an
award. The amendments require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. The amendments in ASU 2014-12 are effective either prospectively to all
awards granted or modified after the effective date or retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified
awards thereafter, during interim and annual periods beginning after December 15, 2015, with early adoption permitted. The adoption of this standard is not expected to have an impact on the Company’s financial position or results of
operations.
In May 2014, FASB issued ASU 2014-09 (ASC 606),
Revenue from Contracts with Customers
, or ASU 2014-09, which affects any
entity that either enters into contracts with customers to transfer goods and services or enters into contracts for the transfer of nonfinancial assets. ASU 2014-09 will replace most existing revenue recognition guidance in GAAP when it becomes
effective. The standard’s core principle is that a company will recognize revenue when it transfers promised goods or services to customers in an amount that reflects the consideration to which the company expects to be entitled in exchange for
those goods or services. In doing so, companies will need to use more judgment and make more estimates than under the currently effective guidance. These may include identifying performance obligations in the contract, estimating the amount of
variable consideration to include in the transaction price, and allocating the transaction price to each separate performance obligation. ASU 2014-09 was initially to be effective for annual periods beginning after December 15, 2016, including
interim periods within that period. In August 2015, the FASB issued ASU 2015-14,
Revenue from Contracts with Customers
, which delays the effective date of ASU 2014-09 by one year and allows for early adoption as of the original effective
date. The Company is currently evaluating the impact of this guidance on its consolidated financial statements.
F-14
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. INVENTORY
Inventory consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2015
|
|
|
Raw materials
|
|
$
|
7,334
|
|
|
$
|
16,023
|
|
|
Work-in-process
|
|
|
1,209
|
|
|
|
2,155
|
|
|
Finished goods
|
|
|
6,456
|
|
|
|
9,742
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventory
|
|
$
|
14,999
|
|
|
$
|
27,920
|
|
|
|
|
|
|
|
|
|
|
|
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2015
|
|
|
Engineering laboratory equipment
|
|
$
|
7,948
|
|
|
$
|
17,757
|
|
|
Computer software
|
|
|
1,924
|
|
|
|
2,398
|
|
|
Computer equipment
|
|
|
1,094
|
|
|
|
1,640
|
|
|
Furniture and fixtures
|
|
|
358
|
|
|
|
370
|
|
|
Leasehold improvements
|
|
|
819
|
|
|
|
1,017
|
|
|
Equipment under capital lease
|
|
|
—
|
|
|
|
96
|
|
|
Construction in progress
|
|
|
2,532
|
|
|
|
3,952
|
|
|
|
|
|
|
|
|
|
|
|
|
Total property and equipment
|
|
|
14,675
|
|
|
|
27,230
|
|
|
Less: Accumulated depreciation
|
|
|
(6,729
|
)
|
|
|
(11,305
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
$
|
7,946
|
|
|
$
|
15,925
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation expense was $2.6 million, $2.7 million and $4.6 million for the years ended December 31,
2013, 2014 and 2015, respectively.
During the years ended December 31, 2013 and 2014, the Company recorded losses on the disposal of property
and equipment of $745,000 and $108,000, respectively, as the underlying equipment was no longer in use. There were no losses on the disposal of property and equipment during the year ended December 31, 2015.
6. ACCRUED LIABILITIES
Accrued liabilities consisted
of the following (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2015
|
|
|
Employee-related liabilities
|
|
$
|
2,060
|
|
|
$
|
3,822
|
|
|
Outsourced foundry services
|
|
|
3,942
|
|
|
|
4,113
|
|
|
Goods and services received not invoiced
|
|
|
728
|
|
|
|
1,974
|
|
|
Accrued income taxes
|
|
|
129
|
|
|
|
1,019
|
|
|
Other accrued liabilities
|
|
|
1,941
|
|
|
|
4,593
|
|
|
|
|
|
|
|
|
|
|
|
|
Total accrued liabilities
|
|
$
|
8,800
|
|
|
$
|
15,521
|
|
|
|
|
|
|
|
|
|
|
|
F-15
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7. FAIR VALUE MEASUREMENT
The Company measures certain financial assets and liabilities at fair value. Fair value is determined based upon the exit price that would be received to
sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are
classified based on a three-level hierarchy, as follows:
Level 1
—Quoted prices in active markets for identical assets or liabilities.
Level 2
—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets
with insufficient volume or infrequent transactions (less active markets), or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the
full term of the assets or liabilities.
Level 3
—Unobservable inputs to the valuation methodology that are significant to the
measurement of fair value of assets or liabilities.
The Company considers all highly liquid investments purchased with a remaining maturity of
three months or less to be cash equivalents. The Company’s cash equivalents consist of money market funds, which are classified within Level 2 of the fair value hierarchy because they are valued using quoted market prices of similar assets
in active markets. In determining the fair value estimates, the Company maximizes the use of observable inputs and minimizes the use of unobservable inputs. When available, the Company uses quoted market prices to measure fair value. The valuation
technique used to measure fair value for the Company’s Level 2 assets is a market approach, using prices and other relevant information generated by market transactions involving identical or comparable assets.
The estimated fair value of the redeemable convertible preferred stock warrants was determined using the
Black-Scholes
option-pricing model (see Note 9).
The fair value of these assets and liabilities
measured on a recurring basis was determined using the following inputs as of December 31, 2014 and 2015 (in thousands).
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total Fair
Value
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents—money market fund
|
|
$
|
—
|
|
|
$
|
16,914
|
|
|
$
|
—
|
|
|
$
|
16,914
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock warrant liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
1,100
|
|
|
$
|
1,100
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-16
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
|
|
Quoted
Prices in
Active
Markets
(Level 1)
|
|
|
Significant
Other
Observable
Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs
(Level 3)
|
|
|
Total Fair
Value
|
|
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash equivalents—money market fund
|
|
$
|
—
|
|
|
$
|
21,524
|
|
|
$
|
—
|
|
|
$
|
21,524
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock warrant liability
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,254
|
|
|
$
|
3,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For certain other financial instruments, including accounts receivable, accounts payable, and other current
liabilities, the carrying amounts approximate their fair value due to the relatively short maturity of these balances.
8. DEBT
Working Capital Line of Credit
During July 2013, the Company amended a loan and security agreement that provides for a working capital line of credit (the “Working Capital Line of
Credit”). The Working Capital Line of Credit is collateralized by substantially all assets of the Company, excluding property and equipment. Certain covenants under the Working Capital Line of Credit restrict the Company’s ability to pay
dividends or make other distributions with respect to the Company’s capital stock, other than dividends payable in shares of common stock. In January 2016, the Company amended the Working Capital Line of Credit to extend the term of the
agreement to June 2016.
The Working Capital Line of Credit agreement initially provided for maximum borrowings of $8.0 million to be used to
finance working capital, subject to a financial covenant of trailing three month Earnings before Interest, Taxes, Depreciation and Amortization (“EBITDA”) of $1.0 million. In July 2014, the Working Capital Line of Credit was amended
to increase the maximum borrowing amount to $15.0 million. In addition, the July 2014 amendment added an adjusted quick ratio financial covenant. Beginning with the month ended June 30, 2014, and each month-end thereafter, the Company is
required to maintain an adjusted quick ratio of 1.25 to 1.00. Payments are due in monthly interest-only installments at a rate of Silicon Valley Bank (“SVB”) Prime plus 1.5%, with the outstanding principal balance due at the maturity date.
The Company repaid the outstanding balance on the Working Capital Line of Credit in October 2014 and there was no amount due under the Working
Capital Line of Credit as of December 31, 2014 or 2015.
In connection with the Working Capital Line of Credit, the Company issued two
warrants. The first warrant was issued to purchase 135,000 shares of Series B redeemable convertible preferred stock at an exercise price of $1.4307 per share, which expires in April 2021 (the “Working Capital Line of Credit Series B
Warrant”). The second warrant was issued to purchase 35,000 shares of Series C redeemable convertible preferred stock at an exercise price of $2.66874 per share, which expires in August 2022 (the “Working Capital Line of Credit
Series C Warrant”). At the date of issuance, the fair value of the Working Capital Line of Credit Series B Warrant and the Working Capital Line of Credit Series C Warrant was recorded as a debt discount and a preferred stock warrant
liability. During the year ended December 31, 2013, the Company recorded amortization of the discount in the amount of
F-17
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$51,000 as a component of interest expense, net in the accompanying consolidated statements of operations. There was no amortization of the debt discount in periods subsequent to
December 31, 2013 as it was fully amortized at that date.
Development Loan
During February 2011, the Company entered into a term loan facility with a finance agency for specific equipment and fixtures (the “Development
Loan”). The Development Loan provides for maximum aggregate borrowings of up to $3.0 million, collateralized by certain property and equipment. Borrowings under this agreement bear interest at a rate of 6.25% per annum and interest-only
payments were due through October 2013, at which time equal monthly principal and interest payments on the outstanding balance commenced and will continue through the maturity date in February 2018. As of December 31, 2014, the outstanding
principal balance under this note, net of unamortized debt discounts, amounted to $2.1 million. As of December 31, 2014, the carrying value of the Development Loan approximated its fair value, based on Level 2 inputs (observable market
prices in less than active markets), as the interest rate associated with the Development Loan was similar to current rates at which the Company could borrow funds. During the year ended December 31, 2015, the Company repaid the remaining
outstanding balance of the Development Loan.
In connection with the Development Loan, the Company issued a warrant to purchase 75,000 shares
of the Company’s Series B redeemable convertible preferred stock at an exercise price of $1.4307 per share, which expires in February 2021 (the “Development Loan Warrant”). At the date of issuance, the fair value of this warrant
was recorded as a debt discount and a preferred stock warrant liability. During the years ended December 31, 2013, 2014 and 2015, the Company recorded amortization of the discount of $13,000, $13,000 and $40,000, respectively, as a component of
interest expense, net in the accompanying consolidated statements of operations.
9. REDEEMABLE CONVERTIBLE PREFERRED STOCK
Redeemable Convertible Preferred Stock
The Company has authorized and issued Series A redeemable convertible preferred stock, Series B redeemable convertible preferred stock, Series C
redeemable convertible preferred stock, and Series D redeemable convertible preferred stock (collectively, the “Preferred Stock”), which are classified in temporary equity in the accompanying consolidated balance sheets.
F-18
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table contains the carrying value of each class of Preferred Stock as of
December 31, 2014 and 2015, as well as their respective liquidation value (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2015
|
|
|
Series A redeemable convertible preferred stock, $0.0001 par value; 6,009 shares authorized; 6,009 shares issued and outstanding at
December 31, 2014 and 2015; liquidation preference of $6,009 at December 31, 2014 and 2015
|
|
$
|
8,409
|
|
|
$
|
8,900
|
|
|
Series B redeemable convertible preferred stock, $0.0001 par value; 10,764 shares authorized; 10,554 shares issued and outstanding at
December 31, 2014 and 2015; liquidation preference of $15,100 at December 31, 2014 and 2015
|
|
|
20,524
|
|
|
|
21,741
|
|
|
Series C redeemable convertible preferred stock, $0.0001 par value; 3,901 shares authorized; 3,866 shares issued and outstanding at
December 31, 2014 and 2015; liquidation preference of $10,317 at December 31, 2014 and 2015
|
|
|
12,627
|
|
|
|
13,462
|
|
|
Series D redeemable convertible preferred stock, $0.0001 par value; 3,834 shares authorized; 3,748 shares issued and outstanding at
December 31, 2014 and 2015; liquidation preference of $22,000 at December 31, 2014 and 2015
|
|
|
24,867
|
|
|
|
26,677
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
66,427
|
|
|
$
|
70,780
|
|
|
|
|
|
|
|
|
|
|
|
The changes in the carrying value of the Preferred Stock are a result of the accretion to redemption value.
The rights and privileges of the Preferred Stock are described below:
Conversion
Each share of Preferred Stock may
be converted at any time, at the option of the holder, into shares of common stock, subject to the applicable conversion rate as determined by dividing the original issue price by the conversion price. The current conversion price (as may be
adjusted for certain dilutive events) is $1.00 for Series A Preferred Stock, $1.4307 for Series B Preferred Stock, $2.66874 for Series C Preferred Stock, and $5.8695 for Series D Preferred Stock. Conversion is mandatory at the
earlier of the closing of an initial public offering of the Company’s common stock at a per share price of at least $14.67 and net proceeds to the Company of at least $20.0 million or at the election of the holders of at least 75% of the then
outstanding shares of Preferred Stock and the holders of at least a majority of the then outstanding shares of Series D Preferred Stock (collectively, the “Requisite Preferred Holders”).
Voting Rights
The preferred stockholders are
entitled to vote on all matters and shall have the number of votes equal to the number of whole shares of common stock into which the shares of Preferred Stock held by such holder are then convertible as of the record date at each meeting of
stockholders of the corporation (and written actions of stockholders in lieu of meetings) with respect to any and all matters presented to the stockholders of the Company for their action or consideration.
F-19
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Dividends
Dividends are payable only when and if declared by the Company’s board of directors (the “Board of Directors”). The Company shall not
declare, pay, or set aside any dividends on shares of any class of common stock, unless the holders of the Preferred Stock then outstanding shall first receive, or simultaneously receive, dividends on each outstanding share of Preferred Stock in an
amount at least equal to that dividend per share of such series of Preferred Stock would equal as converted to common stock and of the accrued dividends unpaid as of such date. As of December 31, 2015, no dividends have been declared or paid.
Liquidation Preference
The holders
of the Preferred Stock have preference in the event of any voluntary or involuntary liquidation, dissolution, or winding-up of the corporation, including a merger or consolidation. Upon such liquidation event, the preferred stockholders are entitled
to be paid out of the assets of the Company available for distribution to its stockholders before any payment shall be made to the holders of common stock or any other class or series of stock ranking on liquidation junior to the Series A, B,
C, and D Preferred Stock an amount equal to the greater of $1.00, $1.4307, $2.66874, and $5.8695, respectively, per share, plus any declared but unpaid dividends or such amount per share as would have been payable had all shares of the Preferred
Stock been converted into common stock immediately prior to the liquidation event. Thereafter, any remaining assets available for distribution would be distributed, subject to limitations for each class of Preferred Stock, among the preferred and
common stockholders, on a pro rata basis treating for this purpose all such securities as if they had been converted to common stock. In the event the assets of the Company available for distribution to its stockholders are insufficient to meet the
liquidation preferences of the Preferred Stock, the holders of shares of each series of Preferred Stock shall share ratably in any distribution of the assets in proportion to the respective amounts due.
Redemption
The Preferred Stock may be
redeemed at the option of the Requisite Preferred Holders in three annual installments on or after March 5, 2017, at a price per share equal to $1.00 for the Series A Preferred Stock, $1.4307 for the Series B Preferred Stock, $2.66874
for the Series C Preferred Stock, and $5.8695 for the Series D Preferred Stock, plus an amount equal to 8% of the original offering price per share for each year between the issuance date and the redemption date, plus dividends accrued but
unpaid. The redemption price is payable in three annual installments commencing 60 days after receipt by the Company at any time on or after March 5, 2017, of written notice from the Requisite Preferred Holders requesting redemption of all
shares of Preferred Stock. The Company is accreting the Preferred Stock to redemption value over the period from the date of issuance to March 5, 2017, such that the carrying amounts of the securities will equal the redemption amounts at the
earliest redemption date.
Redeemable Convertible Preferred Stock Warrants
Preferred stock warrants for redeemable convertible preferred stock are accounted for as liabilities and are marked to fair value at each consolidated
balance sheet date. The valuation technique used to measure fair value for our Working Capital Line of Credit Series B Warrant, Development Loan Warrant and Working Capital Line of Credit Series C Warrant (collectively “Preferred Stock
Warrants”), which are considered Level 3 fair value estimates within the fair value
F-20
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
hierarchy, is the Black-Scholes option pricing model. The significant unobservable inputs used in the fair value measurement of our Preferred Stock Warrants is the fair value of our Series B
and Series C Preferred Stock. We also utilize risk-free interest rate, expected dividend yield, expected volatility and expected term as observable inputs with the fair value of the Series B and Series C Preferred Stock in determining the fair value
of the Preferred Stock Warrants. There is not a direct interrelationship between the unobservable inputs and the observable inputs. A ten percent increase in the fair value of the Series B and Series C Preferred Stock would have changed
the fair value of the redeemable convertible preferred stock warrants by $75,000, $125,000 and $354,000 as of December 31, 2013, 2014 and 2015, respectively.
The assumptions used in determining the fair values of Preferred Stock Warrants as of December 31, 2013, 2014 and 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
2014
|
|
2015
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
2.5% - 2.7%
|
|
2.0% - 2.5%
|
|
1.8% - 2.1%
|
|
Expected dividend yield
|
|
None
|
|
None
|
|
None
|
|
Expected volatility
|
|
68.1% - 90.7%
|
|
69.0% - 71.2%
|
|
58.7% - 60.4%
|
|
Expected term (in years)
|
|
7.1 - 8.7
|
|
6.2 - 7.6
|
|
5.2 - 6.6
|
|
Fair value of Series B preferred stock
|
|
$2.89
|
|
$5.24
|
|
$14.59
|
|
Fair value of Series C preferred stock
|
|
$4.05
|
|
$6.10
|
|
$14.65
|
A summary of the changes in the Company’s redeemable convertible preferred stock warrant liability
measured at fair value using significant unobservable inputs (Level 3) as of and for the years ended December 31, 2013, 2014 and 2015, is as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock warrant liability at beginning of period
|
|
$
|
523
|
|
|
$
|
617
|
|
|
$
|
1,100
|
|
|
Change in fair value
|
|
|
94
|
|
|
|
483
|
|
|
|
2,154
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Redeemable convertible preferred stock warrant liability at end of period
|
|
$
|
617
|
|
|
$
|
1,100
|
|
|
$
|
3,254
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-21
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
10. COMMON STOCK
As of December 31, 2014 and 2015, the Company had authorized 35,000,000 and 36,330,000 shares of common stock, respectively. The following
number of shares of common stock has been reserved for the potential conversion of Preferred Stock and warrants to purchase Preferred Stock, vesting of restricted stock awards and RSUs, and exercise of stock options (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2015
|
|
|
Conversion of Series A redeemable convertible preferred stock
|
|
|
6,009
|
|
|
|
6,009
|
|
|
Conversion of Series B redeemable convertible preferred stock
|
|
|
10,554
|
|
|
|
10,554
|
|
|
Conversion of Series B redeemable convertible preferred stock warrant
|
|
|
210
|
|
|
|
210
|
|
|
Conversion of Series C redeemable convertible preferred stock
|
|
|
3,866
|
|
|
|
3,866
|
|
|
Conversion of Series C redeemable convertible preferred stock warrant
|
|
|
35
|
|
|
|
35
|
|
|
Conversion of Series D redeemable convertible preferred stock
|
|
|
3,748
|
|
|
|
3,748
|
|
|
Vesting of restricted stock
|
|
|
322
|
|
|
|
192
|
|
|
Vesting of restricted stock units
|
|
|
—
|
|
|
|
1,064
|
|
|
Options to purchase common stock
|
|
|
2,299
|
|
|
|
2,472
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
27,043
|
|
|
|
28,150
|
|
|
|
|
|
|
|
|
|
|
|
11. STOCK COMPENSATION PLAN
In November 2009, the Company adopted the 2009 Stock Plan, as amended in April 2013 and October 2015 (the “Plan”), pursuant to which 8,161,226
shares of common stock are authorized for issuance to employees, officers, directors, consultants and advisors of the Company at December 31, 2015. The 2009 Plan provides for the grant of incentive stock options, nonstatutory stock options, and
RSUs and the right to purchase restricted common stock. Recipients of incentive stock options and nonstatutory stock options are eligible to purchase shares of the Company’s common stock at an exercise price equal to the estimated fair value of
such stock on the grant date. Stock options generally vest as follows (1) 20% on the first anniversary of the original vesting date, with the balance vesting monthly over the remaining four years or (2) 25% on the first anniversary of the original
vesting date, with the balance vesting monthly over the remaining three years, unless they contain specific performance and/or market-based vesting provisions. The maximum term of stock options and RSUs granted under the Plan is ten and seven years,
respectively. As of December 31, 2015, approximately 535,000 shares are available for future issuance under the Plan.
Stock Options
The estimated grant-date fair value of the Company’s stock option awards issued to employees was calculated using the Black-Scholes
option-pricing model, based on the following assumptions:
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
2013
|
|
2014
|
|
2015
|
|
Risk-free interest rate
|
|
1.1% - 2.2%
|
|
1.8% - 2.2%
|
|
1.6% - 1.9%
|
|
Expected dividend yield
|
|
None
|
|
None
|
|
None
|
|
Expected volatility
|
|
69.1% - 73.2%
|
|
71.1% - 71.3%
|
|
59.4% - 70.8%
|
|
Expected term (in years)
|
|
6.5
|
|
6.5
|
|
6.3 - 6.5
|
Risk-free Interest Rate.
The risk-free interest rate is based on the U.S. Treasury
yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the option’s expected term.
F-22
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Expected Dividend Yield.
The expected dividend yield assumption is based
on the fact that the Company has never paid cash dividends and has no present intention to pay cash dividends.
Expected
Volatility
. Since there is no trading history associated with the Company’s common stock, the expected volatility was derived from the average historical stock volatilities of several unrelated public companies within
the Company’s industry over a period equivalent to the expected term of the stock option grants.
Expected
Term
. The expected term represents the period that stock options awards are expected to be outstanding. For option grants that are considered to be “plain vanilla,” the Company determines the expected term using
the simplified method. The simplified method deems the term to be the average of the time-to-vesting and the contractual life of the options. The Company uses the simplified method because it does not have sufficient historical option exercise data
to provide a reasonable basis upon which to estimate the expected term.
The fair value of the common stock has been determined by the Board of
Directors at each award grant date based upon a variety of different factors, including the results of valuations prepared by a third-party valuation specialist, the Company’s financial position and historical financial performance, the status
of technological developments within the Company’s platform, the composition and ability of the current engineering and management team, an evaluation or benchmark of the Company’s competition, the current business climate in the
marketplace, the illiquid nature of the common stock, arm’s-length sales of the Company’s capital stock (including redeemable convertible preferred stock), the effect of the rights and preferences of the preferred stockholders, and the
prospects of a liquidity event, among others.
A summary of stock option activity under the Plan for the years ended December 31, 2014 and
2015 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
Options
(in thousands)
|
|
|
Weighted-Average
Exercise Price
|
|
|
Weighted-Average
Remaining
Contractual Term
(in years)
|
|
|
Aggregate
Intrinsic Value
(in thousands)
|
|
|
Outstanding at December 31, 2013
|
|
|
2,049
|
|
|
$
|
0.56
|
|
|
|
8.2
|
|
|
|
|
|
|
Granted
|
|
|
560
|
|
|
|
2.62
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(269
|
)
|
|
|
0.27
|
|
|
|
|
|
|
$
|
632
|
|
|
Cancelled
|
|
|
(41
|
)
|
|
|
1.58
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2014
|
|
|
2,299
|
|
|
|
1.07
|
|
|
|
7.9
|
|
|
$
|
5,563
|
|
|
Granted
|
|
|
685
|
|
|
|
7.35
|
|
|
|
|
|
|
|
|
|
|
Exercised
|
|
|
(401
|
)
|
|
|
0.51
|
|
|
|
|
|
|
$
|
2,777
|
|
|
Cancelled
|
|
|
(111
|
)
|
|
|
2.16
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Outstanding at December 31, 2015
|
|
|
2,472
|
|
|
$
|
2.85
|
|
|
|
7.7
|
|
|
$
|
28,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Vested and expected to vest at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
2,222
|
|
|
$
|
1.06
|
|
|
|
7.9
|
|
|
$
|
7,753
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
2,394
|
|
|
$
|
2.81
|
|
|
|
7.7
|
|
|
$
|
28,031
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercisable at:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2014
|
|
|
754
|
|
|
$
|
0.46
|
|
|
|
7.1
|
|
|
$
|
2,630
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2015
|
|
|
919
|
|
|
$
|
0.82
|
|
|
|
6.6
|
|
|
$
|
12,590
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-23
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During the years ended December 31, 2013, 2014 and 2015, the Company recorded $113,000,
$264,000 and $703,000, respectively, of stock-based compensation expense related to common stock options granted under the Plan. No tax benefits were realized from options in any period. As of December 31, 2014 and 2015, there was $1.3 million
and $3.3 million of unrecognized compensation cost related to unvested common stock options granted under the Plan, which is expected to be recognized over weighted-average periods of 4.02 years and 3.43 years, respectively.
The weighted-average grant date fair value of stock options granted during the years ended December 31, 2013, 2014 and 2015 was $0.60, $1.72 and
$4.39 per share, respectively. The intrinsic value of stock options exercised during the years ended December 31, 2013, 2014 and 2015 was $348,000, $632,000 and $2.8 million, respectively.
Restricted Stock
The Company has
granted restricted stock awards pursuant to the Plan. All such issued shares are subject to repurchase rights that generally lapse over a period of five years. If a holder ceases to maintain a business relationship with the Company, the Company is
entitled to repurchase any unvested shares at the original purchase price. The unvested shares of common stock subject to repurchase are not considered outstanding shares until the holders provide the requisite services and the repurchase right
lapses. As of December 31, 2014 and 2015, 322,000 and 192,000 shares of common stock remained subject to restrictions, respectively. The Company records stock-based compensation expense over the vesting period for the amount that the fair
value exceeded the purchase price as of the grant date. Stock-based compensation expense related to restricted stock awards was $109,000, $143,000 and $122,000 for the years ended December 31, 2013, 2014 and 2015, respectively. As of
December 31, 2014 and 2015, there was $374,000 and $262,000 of unrecognized compensation cost related to unvested restricted stock awards granted under the Plan, which is expected to be recognized over weighted average periods of
3.23 years and 2.17 years, respectively. The Company did not issue any restricted stock awards during the years ended December 31, 2014 or 2015.
A summary of the changes in the Company’s restricted common stock during the years ended December 31, 2014 and 2015 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted Shares
(in thousands)
|
|
|
Weighted-Average
Grant Date Fair
Value
|
|
|
Unvested at December 31, 2013
|
|
|
1,232
|
|
|
$
|
0.42
|
|
|
Vested
|
|
|
(910
|
)
|
|
|
0.16
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2014
|
|
|
322
|
|
|
|
1.14
|
|
|
Vested
|
|
|
(130
|
)
|
|
|
0.83
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2015
|
|
|
192
|
|
|
$
|
1.39
|
|
|
|
|
|
|
|
|
|
|
|
The fair value of shares that vested during the years ended December 31, 2013, 2014 and 2015 was $1.5
million, $2.2 million and $1.0 million, respectively.
Restricted Stock Units
During the year ended December 31, 2015, the Company granted a total of 1,064,000 RSUs to employees, directors and executives. The RSUs vest upon
achievement of a service condition and a
F-24
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
performance condition. As soon as practicable following each vesting date, the Company will issue to the holder of the RSUs the number of shares of common stock equal to the aggregate number of
RSUs that have vested. Notwithstanding the foregoing, the Company may, in its sole discretion, in lieu of issuing shares of common stock to the holder of the RSUs, pay the holder an amount in cash equal to the fair market value of such shares of
common stock. For 845,000 of the RSUs, the service condition is satisfied over a period of four years, with 25% of the awards vesting after 12 months, and the remainder vesting in equal quarterly installments over the succeeding three years. For
182,000 of the RSUs, the service condition is a time-based condition met over a period of four years, with 37.5% met after 18 months and the remainder met in equal quarterly installments over the succeeding two-and-a-half years. For 32,000 of the
RSUs, the service condition is a time-based condition met over a period of three years in approximately equal annual installments. The performance condition for all RSUs is met upon a sale event or 185 days following the IPO, which was not
considered probable as of December 31, 2015, and therefore no stock-based compensation expense has been recorded in the consolidated financial statements. A sale event is defined as (i) a sale of all or substantially all of the assets of
the Company determined on a consolidated basis to an unrelated person or entity; (ii) a merger, reorganization, or consolidation involving the Company in which shares of voting stock of the Company outstanding immediately prior to such
transaction represent or are converted into or exchanged for securities of the surviving or resulting entity immediately upon completion of such transaction which represent less than 50% of the outstanding voting power of such surviving or resulting
entity; or (iii) the acquisition of all or a majority of the outstanding voting stock of the Company in a single transaction or series of related transaction by a person or group of persons. When it becomes probable that the performance
condition will be met, such as upon an IPO, stock-based compensation expense will be recorded for those RSUs where the service condition has been met. The total stock-based compensation expense expected to be recorded over the life of the RSUs was
approximately $13.0 million at December 31, 2015.
On an unaudited pro forma basis, if the performance condition had been met as of December
31, 2015, the Company would have recorded approximately $2.6 million of stock-based compensation expense related to its outstanding RSU awards through December 31, 2015.
A summary of the changes in the Company’s RSUs during the year ended December 31, 2015 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Shares
(in thousands)
|
|
|
Weighted-Average
Grant Date Fair
Value
|
|
|
Unvested at December 31, 2014
|
|
|
—
|
|
|
$
|
—
|
|
|
Granted
|
|
|
1,064
|
|
|
|
12.16
|
|
|
|
|
|
|
|
|
|
|
|
|
Unvested at December 31, 2015
|
|
|
1,064
|
|
|
$
|
12.16
|
|
|
|
|
|
|
|
|
|
|
|
In December 2015, the Company’s board of directors approved the grant of 450,000 RSUs under the 2016
Equity Incentive Plan, the effectiveness of which is contingent upon the closing of the Company’s IPO. These RSUs vest over a period of four years, with 25% of the awards vesting after 12 months, and the remainder vesting in equal quarterly
installments over the succeeding three years.
F-25
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. NET (LOSS) INCOME PER SHARE ATTRIBUTABLE TO COMMON STOCKHOLDERS AND UNAUDITED PRO FORMA NET INCOME PER SHARE
ATTRIBUTABLE TO COMMON STOCKHOLDERS
The following table sets forth the computation of the Company’s basic and diluted net (loss) income
per share attributable to common stockholders (in thousands, except per share amounts):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Numerator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income
|
|
$
|
(1,193
|
)
|
|
|
13,520
|
|
|
$
|
40,520
|
|
|
Less: accretion of redeemable convertible preferred stock
|
|
|
(3,778
|
)
|
|
|
(4,373
|
)
|
|
|
(4,353
|
)
|
|
Less: undistributed earnings attributable to participating securities
|
|
|
—
|
|
|
|
(7,419
|
)
|
|
|
(28,570
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income attributable to common stockholders—basic and diluted
|
|
$
|
(4,971
|
)
|
|
$
|
1,728
|
|
|
$
|
7,597
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders—basic
|
|
|
4,429
|
|
|
|
5,629
|
|
|
|
6,429
|
|
|
Dilutive effect of stock options
|
|
|
—
|
|
|
|
1,299
|
|
|
|
1,669
|
|
|
Dilutive effect of unvested restricted stock
|
|
|
—
|
|
|
|
519
|
|
|
|
213
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted-average shares used to compute net (loss) income per share attributable to common stockholders—diluted
|
|
|
4,429
|
|
|
|
7,447
|
|
|
|
8,311
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net (loss) income per share attributable to common stockholders
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(1.12
|
)
|
|
$
|
0.31
|
|
|
$
|
1.18
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(1.12
|
)
|
|
$
|
0.23
|
|
|
$
|
0.91
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following common stock equivalents (in thousands) were excluded from the computation of diluted net (loss)
income per share for the periods presented because including them would have been antidilutive:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options to purchase common stock
|
|
|
2,120
|
|
|
|
248
|
|
|
|
119
|
|
|
Unvested restricted stock
|
|
|
228
|
|
|
|
—
|
|
|
|
—
|
|
|
Redeemable convertible preferred stock warrants
|
|
|
245
|
|
|
|
245
|
|
|
|
245
|
|
|
Redeemable convertible preferred stock
|
|
|
23,011
|
|
|
|
24,177
|
|
|
|
24,177
|
|
In addition to the potentially dilutive securities above, during the year ended December 31, 2015, the
Company had 1,063,846 RSUs outstanding. Since the performance criteria associated with the vesting of these awards have not been satisfied as of December 31, 2015, the Company has excluded these shares from the table above and the calculation of
diluted net income per share attributable to common stockholders for that period.
Unaudited Pro Forma Net Income per Share
The following table sets forth the computation of the Company’s unaudited pro forma basic and diluted net income per share attributable to
common stockholders for the year ended December 31, 2015 (in thousands, except per share amounts), assuming the automatic conversion of the redeemable convertible
F-26
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
preferred stock and the automatic conversion of the preferred stock warrants into common stock warrants and the remeasurement and the assumed reclassification to equity upon consummation of a
qualified IPO as if it had occurred as of January 1, 2015:
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
2015
|
|
|
|
|
|
|
|
(unaudited)
|
|
|
Numerator:
|
|
|
|
|
|
Net income
|
|
$
|
40,520
|
|
|
Add: change in fair value of preferred stock warrant liability
|
|
|
2,154
|
|
|
|
|
|
|
|
|
Pro forma net income attributable to common stockholders—basic and diluted
|
|
$
|
42,674
|
|
|
|
|
|
|
|
|
Denominator:
|
|
|
|
|
|
Weighted-average shares used to compute net income per share attributable to common stockholders
|
|
|
6,429
|
|
|
Pro forma adjustments to reflect assumed conversion of redeemable convertible preferred stock
|
|
|
24,177
|
|
|
|
|
|
|
|
|
Pro forma weighted-average shares used to compute pro forma net income per share attributable to common stockholders—basic
|
|
|
30,606
|
|
|
Effect of potentially dilutive:
|
|
|
|
|
|
Stock options
|
|
|
1,669
|
|
|
Unvested restricted stock
|
|
|
213
|
|
|
Common stock warrants
|
|
|
245
|
|
|
|
|
|
|
|
|
Pro forma weighted-average shares used to compute pro forma net income per share attributable to common stockholders—diluted
|
|
|
32,733
|
|
|
|
|
|
|
|
|
Pro forma net income per share attributable to common stockholders:
|
|
|
|
|
|
Basic
|
|
$
|
1.39
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
1.30
|
|
|
|
|
|
|
|
13. COMMITMENTS AND CONTINGENCIES
Leases
The Company leases its office
facilities in Maynard, Massachusetts and Hazlet, New Jersey under non-cancelable operating leases that expire in January 2019, with respect to the Massachusetts facility, and June 2018 and July 2018, with respect to various floors of the New Jersey
facility. Rent expense for non-cancelable operating leases with free rental periods or scheduled rent increases is recognized on a straight-line basis over the terms of the leases.
In July 2015, the Company entered into an operating lease for office space in Mountain View, California, which expires in July 2018, renewable for an
additional one-year term. Annual rent due is approximately $69,000.
During the years ended December 31, 2013, 2014 and 2015, rent expense
incurred under these agreements amounted to $441,000, $709,000 and $889,000, respectively.
F-27
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Future minimum lease payments due under these noncancelable lease agreements as of
December 31, 2015, are as follows (in thousands):
|
|
|
|
|
|
|
Year ending December 31,
|
|
Amounts
|
|
|
2016
|
|
$
|
1,050
|
|
|
2017
|
|
|
751
|
|
|
2018
|
|
|
441
|
|
|
2019
|
|
|
19
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
2,261
|
|
|
|
|
|
|
|
In April 2015, the Company entered into a capital lease agreement for the purchase of lab equipment with a fair
value of $96,000. The lease is payable in 12 equal monthly payments through April 2016.
Legal Contingencies
On January 22, 2016, ViaSat, Inc. informed the Company that it had filed a suit against the Company alleging, among other things, breach of
contract, breach of the implied covenant of good faith and fair dealing and misappropriation of trade secrets. The Company is continuing to evaluate ViaSat’s claims, but based on the information available to the Company today, the Company
currently believes that this suit will not have a material adverse effect on the Company’s business or consolidated financial position, results of operations or cash flows.
In addition, from time to time the Company may become involved in legal proceedings or be subject to claims arising in the ordinary course of business.
Although the results of litigation and claims cannot be predicted with certainty, the Company currently believes that the final outcome of these ordinary course matters will not have a material adverse effect on the Company’s business,
operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors.
Indemnification
In the ordinary
course of business, the Company enters into various agreements containing standard indemnification provisions. The Company’s indemnification obligations under such provisions are typically in effect from the date of execution of the applicable
agreement through the end of the applicable statute of limitations. As of December 31, 2013, 2014 and 2015, the Company had not experienced any losses related to these indemnification obligations. The Company does not expect significant claims
related to these indemnification obligations, and consequently, concluded the fair value of these obligations is not material. Accordingly, as of December 31, 2014 and 2015, no amounts have been accrued related to such indemnification
provisions.
Royalty Obligations
The Company incorporates technology into its products that is licensed from third parties. The Company has not committed to any future minimum
obligations under the terms of the technology licensing agreements. The Company is required to pay royalties to the licensors of $15 to $17 per unit sold within the Company’s new 400 Gbps product family and for its newest product within the 100
Gbps product family. In addition, the Company pays royalties of $150 per unit sold for its older products within the 100 Gbps and 40 Gbps product families.
F-28
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Potential Payments upon Termination or Change in Control
In October 2015, the Company adopted the Acacia Communications, Inc. Severance and Change in Control Benefits Plan (the “Severance Plan”),
which provides severance benefits to certain of its executives if their employment is terminated “without cause” or, only in connection with a “change in control” of the Company, they terminate employment for “good
reason” (as each of those terms is defined in the Severance Plan).
Under the Severance Plan, if the Company terminates an eligible
executive’s employment without cause prior to or more than 12 months following the closing of a change in control of the Company, the executive is entitled to (i) continue receiving his or her base salary for a specified period (in
the case of the chief executive officer, for 12 months, and, in the case of all other participants, for nine months) following the date of termination, (ii) company contributions to the cost of health care continuation under the
Consolidated Omnibus Budget Reconciliation Act, or COBRA, for up to 12 months following the date of termination, and (iii) the amount of any unpaid annual bonus determined by the board of directors to be payable to the executive for any
completed bonus period which ended prior to the date of such executive’s termination.
The Severance Plan also provides that, if, within
12 months following the closing of a change in control of the Company, an eligible executive’s employment is terminated without cause or such executive terminates his or her employment for good reason, the executive is entitled to
(i) a single lump-sum payment equal to a percentage of his or her annual base salary (in the case of the chief executive officer, 100% and, in the case of all other participants, 75%), (ii) a single lump sum payment in an amount equal to a
percentage of his or her target annual bonus for the year in which the termination of employment occurs (in the case of the chief executive officer, 100% and, in the case of all other participants, 75%), (iii) company contributions to the cost
of health care continuation under COBRA for up to 12 months following the date of termination of employment, and (iv) the amount of any unpaid annual bonus determined by the board of directors to be payable to the executive for any
completed bonus period which ended prior to the date of such executive’s termination. In addition, all of the executive’s outstanding unvested equity awards will immediately vest in full on the date of such termination.
All payments and benefits provided under the Severance Plan are contingent upon the execution and effectiveness of a release of claims by the executive
in favor of the Company and continued compliance by the executive with any proprietary information and inventions, nondisclosure, non-competition, nonsolicitation (or similar) agreement to which the Company and the executive are party.
Upon the effectiveness of the Severance Plan, the Company would be contingently obligated to make cash payments up to $3.8 million if such events
occur.
14. Income Taxes
The components
of (loss) income before provision (benefit) for income taxes are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
United States
|
|
$
|
(1,196
|
)
|
|
$
|
16,517
|
|
|
$
|
38,719
|
|
|
Foreign
|
|
|
3
|
|
|
|
(64
|
)
|
|
|
1,086
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
(1,193
|
)
|
|
$
|
16,453
|
|
|
$
|
39,805
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-29
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of the provision (benefit) for income taxes are as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
2014
|
|
|
2015
|
|
|
Current income tax provision
|
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
2,797
|
|
|
$
|
10,074
|
|
|
State
|
|
|
129
|
|
|
|
265
|
|
|
Foreign
|
|
|
—
|
|
|
|
135
|
|
|
|
|
|
|
|
|
|
|
|
|
Total current income tax provision
|
|
|
2,926
|
|
|
|
10,474
|
|
|
Deferred income tax provision (benefit)
|
|
|
|
|
|
|
|
|
|
Federal
|
|
|
—
|
|
|
|
(5,861
|
)
|
|
State
|
|
|
—
|
|
|
|
(5,328
|
)
|
|
Foreign
|
|
|
7
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred income tax provision (benefit)
|
|
|
7
|
|
|
|
(11,189
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total income tax provision (benefit)
|
|
$
|
2,933
|
|
|
$
|
(715
|
)
|
|
|
|
|
|
|
|
|
|
|
The income tax provision for the year ended December 31, 2013 was zero as the Company’s immaterial
taxable profits were offset by net operating loss carryforwards and the Company maintained a valuation allowance against the net deferred tax assets.
A reconciliation of the provision for income taxes computed at the statutory federal income tax rate to the provision for income taxes as reflected in
the financial statements is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
Provision for income taxes at statutory rate
|
|
|
(34.0
|
%)
|
|
|
35.0
|
%
|
|
|
35.0
|
%
|
|
(Decreases) increases resulting from:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Federal tax credits
|
|
|
(77.9
|
%)
|
|
|
(3.3
|
%)
|
|
|
(9.5
|
%)
|
|
Change in valuation allowance
|
|
|
103.8
|
%
|
|
|
(14.9
|
%)
|
|
|
(24.9
|
%)
|
|
State tax expense, net of federal benefit
|
|
|
(2.7
|
%)
|
|
|
0.9
|
%
|
|
|
(5.3
|
%)
|
|
Meals and entertainment
|
|
|
2.7
|
%
|
|
|
0.1
|
%
|
|
|
0.2
|
%
|
|
Stock-based compensation expense
|
|
|
3.7
|
%
|
|
|
3.5
|
%
|
|
|
0.6
|
%
|
|
Change in fair value of preferred stock warrants
|
|
|
2.7
|
%
|
|
|
1.0
|
%
|
|
|
1.9
|
%
|
|
Non-deductible interest
|
|
|
1.9
|
%
|
|
|
0.1
|
%
|
|
|
0.1
|
%
|
|
Domestic production activity deduction
|
|
|
—
|
%
|
|
|
(2.3
|
%)
|
|
|
(2.2
|
%)
|
|
Change in uncertain tax positions
|
|
|
—
|
%
|
|
|
—
|
%
|
|
|
2.4
|
%
|
|
Other
|
|
|
(0.2
|
%)
|
|
|
(2.3
|
%)
|
|
|
(0.1
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective income tax rate
|
|
|
—
|
%
|
|
|
17.8
|
%
|
|
|
(1.8
|
%)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
F-30
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Significant components of the Company’s net deferred tax assets at December 31, 2014 and
2015, were as follows (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
|
|
|
|
|
2014
|
|
|
2015
|
|
|
Deferred tax assets:
|
|
|
|
|
|
|
|
|
|
Accrued expenses
|
|
$
|
1,548
|
|
|
$
|
2,433
|
|
|
Operating loss carryforwards
|
|
|
6,865
|
|
|
|
4,955
|
|
|
Credit carryforwards
|
|
|
2,112
|
|
|
|
5,032
|
|
|
Other
|
|
|
182
|
|
|
|
605
|
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax assets
|
|
$
|
10,707
|
|
|
$
|
13,025
|
|
|
Deferred tax liabilities:
|
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
(245
|
)
|
|
|
(990
|
)
|
|
Compensation
|
|
|
(1
|
)
|
|
|
(97
|
)
|
|
Other
|
|
|
—
|
|
|
|
(195
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Total deferred tax liabilities
|
|
|
(246
|
)
|
|
|
(1,282
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Valuation allowance
|
|
|
(10,461
|
)
|
|
|
(554
|
)
|
|
|
|
|
|
|
|
|
|
|
|
Net deferred tax assets
|
|
$
|
—
|
|
|
$
|
11,189
|
|
|
|
|
|
|
|
|
|
|
|
The table below summarizes changes in the deferred tax asset valuation allowance (in thousands):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
Beginning
Balance
|
|
|
Additions
|
|
|
Reductions
|
|
|
Ending
Balance
|
|
|
2013
|
|
$
|
11,978
|
|
|
|
968
|
|
|
|
—
|
|
|
$
|
12,946
|
|
|
2014
|
|
$
|
12,946
|
|
|
|
—
|
|
|
|
(2,485
|
)
|
|
$
|
10,461
|
|
|
2015
|
|
$
|
10,461
|
|
|
|
—
|
|
|
|
(9,907
|
)
|
|
$
|
554
|
|
The Company recorded a valuation allowance against all of its deferred tax assets as of December 31, 2014.
The valuation allowance decreased in 2014 by $2.5 million due to the corresponding reduction of the deferred tax assets by the same amount. The reduction of deferred tax assets was primarily due to the utilization of net operating loss and tax
credit carryforwards.
The Company accounts for deferred taxes under ASC Topic 740,
Income Taxes
(“ASC 740”) which involves
weighing positive and negative evidence concerning the realizability of the Company’s deferred tax assets in each jurisdiction. The Company evaluated its ability to realize the benefit of its net deferred tax assets and weighed all available
positive and negative evidence both objective and subjective in nature. In determining the need for a valuation allowance, the weight given to positive and negative evidence is commensurate with the extent to which the evidence may be objectively
verified. Consideration was given to negative evidence such as the duration and severity of losses in prior years, as well as the expiration and limitation of tax attributes in various jurisdictions. Positive evidence included three-year cumulative
profitability of $55.1 million at December 31, 2015. Additionally, after implementing a corporate restructuring of our international business during the quarter ended December 31, 2015 and determining that sufficient forecasted
taxable income of appropriate character is expected to continue in future years, the Company believes the weight of the objectively verifiable positive evidence coupled with the subjective positive evidence from forecasted operating plans is
sufficient to overcome the weight of any negative evidence. During the quarter ended December 31,
F-31
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2015, the Company concluded it is more likely than not that it will realize the benefit of $11.2 million of the Company’s net deferred tax assets.
Accordingly, based on its assessment of the realizability of its deferred tax assets, the Company released substantially all of the valuation allowance
maintained against its net U.S. deferred tax assets which resulted in a tax benefit of $9.9 million. As of December 31, 2015, the Company continues to maintain a partial valuation allowance of $554,000 against its U.S. deferred tax assets,
which include federal net operating losses and credits limited under IRC Section 382 as well as state credits accumulated in jurisdictions in which management does not anticipate sufficient taxable income to utilize the credits. Management will
continue to assess the applicability of a valuation allowance at each reporting period.
The benefit for income taxes shown on the consolidated
statements of operations differs from amounts that would result from applying the statutory tax rates to income before taxes primarily because of state income taxes and certain permanent expenses that were not deductible, federal and state research
and development credits, as well as the release of a valuation allowance against foreign, U.S. federal and state deferred tax assets.
As of
December 31, 2015, the Company had $12.2 million and $12.8 million of federal and state net operating loss carryforwards, respectively, that expire at various dates through 2033. As of December 31, 2015, the Company had
$2.5 million and $4.5 million of federal and state research and development credit carryforwards, respectively, that expire at various dates through 2033.
Realization of the future tax benefits is dependent on many factors, including the Company’s ability to generate taxable income within the net
operating loss carryforward period. Utilization of the net operating loss carryforwards is subject to an annual limitation due to the ownership percentage change limitations provided by Section 382 of the Internal Revenue Code of 1986 and
similar state provisions. The annual limitations will result in the expiration of $754,000 of the federal net operating loss carryforwards before utilization. The Company performed an Internal Revenue Code Section 382 study and determined that
utilization of its annual net operating losses are limited to approximately $4.8 million per year through 2017, $2.3 million in 2018 and $1.4 million in years thereafter in connection with changes in control in 2009 and 2013. Through
December 31, 2014, the Company accumulated the unused amount of Section 382 limitations in excess of the amount of net operating loss carryforwards that were originally subject to limitation. Therefore, these unused net operating loss
carryforwards were available for utilization to offset taxable income generated in 2014.
The Company intends to indefinitely reinvest the earnings
of the Company’s foreign subsidiaries notwithstanding that some of these earnings may be taxed before repatriation under the U.S. income tax rules as “deemed distributions.” Other than the earnings taxed on deemed distributions, the
Company does not provide for U.S. income taxes on the earnings of its foreign subsidiaries as such earnings are to be reinvested indefinitely. If these earnings were distributed to the United States in the form of dividends or otherwise or if the
shares of the relevant foreign subsidiaries were sold or otherwise transferred, the Company would be subject to additional U.S. income taxes, subject to adjustment for foreign tax credits, and foreign withholding taxes. As of December 31, 2015,
there was $642,000 of cumulative foreign earnings for which U.S. income taxes have not been provided.
F-32
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company recognizes, in its consolidated financial statements, the effect of a tax position when
it is more likely than not, based on the technical merits, that the position will be sustained upon examination. The aggregate changes in gross unrecognized tax benefits during the year ended December 31, 2015 were as follows (in thousands):
|
|
|
|
|
|
|
|
|
Year Ended
December 31,
2015
|
|
|
Balance at beginning of year
|
|
$
|
—
|
|
|
Increases for the tax positions taken during current period
|
|
|
940
|
|
|
|
|
|
|
|
|
Balance at end of year
|
|
$
|
940
|
|
|
|
|
|
|
|
The Company had no uncertain tax positions during the years ended December 31, 2013 and 2014. Included in
the balance of unrecognized tax benefits as of December 31, 2015 is $396,000 of tax benefits that, if recognized, would affect the effective tax rate. There are no amounts of interest or penalties recognized in the consolidated statement of
operations or accrued on the consolidated balance sheet for any period presented. The Company does not expect any material changes in these uncertain tax benefits within the next 12 months.
The Company is subject to taxation in the United States and various state and foreign jurisdictions. In the normal course of business, the Company is
potentially subject to examination by tax authorities throughout the United States and other foreign jurisdictions in which the Company operates. All tax years since inception remain open to examination by major taxing jurisdictions to which the
Company is subject, as carryforward attributes generated in prior period tax years may still be adjusted upon examination by the Internal Revenue Service or state tax authorities if they have or will be used in a future period. The Company also
files foreign tax returns in Denmark and plans on filing in Ireland when required. The Company is currently under examination by the Internal Revenue Service authorities for the year ending December 31, 2013. There are no state or foreign
examinations in process.
15. CONCENTRATIONS OF RISK
Customer Concentration
Customers
with revenue equal to or greater than 10% of total revenue for the years ended December 31, 2013, 2014 and 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year Ended December 31,
|
|
|
|
|
2013
|
|
|
2014
|
|
|
2015
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A
|
|
|
32
|
%
|
|
|
35
|
%
|
|
|
28
|
%
|
|
B
|
|
|
14
|
%
|
|
|
23
|
%
|
|
|
22
|
%
|
|
C
|
|
|
19
|
%
|
|
|
*
|
|
|
|
*
|
|
|
D
|
|
|
*
|
|
|
|
*
|
|
|
|
13
|
%
|
|
*
|
Less than 10% of total revenue in the period indicated
|
F-33
ACACIA COMMUNICATIONS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Customers that accounted for equal to or greater than 10% of accounts receivable at
December 31, 2014 and 2015 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
|
|
2014
|
|
|
2015
|
|
|
A
|
|
|
21
|
%
|
|
|
21
|
%
|
|
D
|
|
|
14
|
%
|
|
|
24
|
%
|
|
E
|
|
|
*
|
|
|
|
10
|
%
|
|
*
|
Less than 10% of accounts receivable at the date indicated
|
Supplier Concentration
The Company purchases a substantial portion of its inventory from a contract manufacturer located in the United States. Costs incurred with this
contract manufacturer represented approximately 71%, 73% and 32% of total inventory purchases during the years ended December 31, 2013, 2014 and 2015. In addition, during the year ended December 31, 2015, the Company purchased 48% of its
inventory from a contract manufacturer located in Canada.
The Company also outsources certain engineering projects to a foreign company. Costs
incurred with this vendor represented approximately 28%, 26% and 14% of the Company’s total research and development costs during the years ended December 31, 2013, 2014 and 2015, respectively.
16. RETIREMENT PLAN
The Company is the sponsor of
a defined contribution savings plan for all qualified employees under Section 401(k) of the Internal Revenue Code (the “401(k) Plan”). The 401(k) Plan allows participants to contribute a portion of their compensation on a
pre-tax basis up to an amount not to exceed the annual statutory limit applicable to each individual participant. The Company is permitted to make discretionary matching contributions to the 401(k) Plan. During the years ended December 31, 2013
and 2014, the Company did not make any discretionary contributions. The Company began making matching contributions to the plan in April 2015. Total discretionary contributions amounted to $383,000 during the year ended December 31, 2015.
17. RELATED PARTIES
The Company periodically
purchases products from M/A-COM Technology Solutions, Inc. (“M/A-COM”). One of the members of the Board of Directors, Peter Y. Chung, is also a member of the board of directors of M/A-COM. During the years ended December 31,
2013, 2014 and 2015, the Company made purchases of $333,000, $170,000 and $1.2 million from M/A-COM, respectively. There were no amounts due to or from M/A-COM as of December 31, 2014. As of December 31, 2015, the Company had $1,000 of
accounts payable due to M/A-COM.
18. SUBSEQUENT EVENTS
The Company has evaluated subsequent events occurring through February 19, 2016, the date that these consolidated financial statements were
available to be issued, and determined that no subsequent events occurred that would require recognition or disclosure in these consolidated financial statements, apart from the amendment to the Working Capital Line of Credit (see Note 8).
F-34
Shares
Common Stock
Goldman, Sachs & Co.
BofA Merrill Lynch
Deutsche Bank
Securities
Needham & Company
Cowen and Company
Northland Capital Markets
Through and including , 2016
(the 25th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer’s obligation to
deliver a prospectus when acting as an underwriter and with respect to an unsold allotment or subscription.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
The following table indicates the expenses to be incurred in connection with the offering
described in this registration statement, other than underwriting discounts and commissions, all of which will be paid by us. All amounts are estimated except the SEC registration fee, the Financial Industry Regulatory Authority, Inc., or FINRA,
filing fee and the listing fee of the Nasdaq Global Market.
|
|
|
|
|
|
|
|
|
Amount
|
|
|
SEC registration fee
|
|
$
|
15,105
|
|
|
FINRA filing fee
|
|
|
22,350
|
|
|
Nasdaq Global Market listing fee
|
|
|
125,000
|
|
|
Accountants’ fees and expenses
|
|
|
1,250,000
|
|
|
Legal fees and expenses
|
|
|
1,250,000
|
|
|
Blue Sky fees and expenses
|
|
|
5,000
|
|
|
Transfer Agent’s and registrar fees and expenses
|
|
|
16,000
|
|
|
Printing and engraving expenses
|
|
|
150,000
|
|
|
Other expenses of public company preparation
|
|
|
|
*
|
|
Miscellaneous
|
|
|
|
*
|
|
|
|
|
|
|
|
Total expenses
|
|
$
|
|
*
|
|
|
|
|
|
|
|
*
|
To be filed by amendment.
|
Item 14. Indemnification of Directors and Officers.
Section 102 of the General Corporation Law of the State of Delaware permits a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary damages for a breach of fiduciary duty as a director, except where the director breached his duty of loyalty, failed to act in good faith, engaged in intentional misconduct or knowingly
violated a law, authorized the payment of a dividend or approved a stock repurchase in violation of Delaware corporate law or obtained an improper personal benefit. Our certificate of incorporation provides that no director of the Registrant shall
be personally liable to it or its stockholders for monetary damages for any breach of fiduciary duty as a director, notwithstanding any provision of law imposing such liability, except to the extent that the General Corporation Law of the State of
Delaware prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty.
Section 145 of the General
Corporation Law of the State of Delaware provides that a corporation has the power to indemnify a director, officer, employee, or agent of the corporation, or a person serving at the request of the corporation for another corporation, partnership,
joint venture, trust or other enterprise in related capacities against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with an action, suit or
proceeding to which he was or is a party or is threatened to be made a party to any threatened, ending or completed action, suit or proceeding by reason of such position, if such person acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation, and, in any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful, except that, in the case of actions brought by or in the right of the corporation,
no indemnification shall be made with respect to any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that
II-1
the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.
Our restated certificate of
incorporation provides that we will indemnify each person who was or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding (other than an action by or in the right of us) by reason of the fact
that he or she is or was, or has agreed to become, a director or officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation,
partnership, joint venture, trust or other enterprise (all such persons being referred to as an “Indemnitee”), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including
attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in connection with such action, suit or proceeding and any appeal therefrom, if such Indemnitee acted in good faith and in a manner he or she
reasonably believed to be in, or not opposed to, our best interests, and, with respect to any criminal action or proceeding, he or she had no reasonable cause to believe his or her conduct was unlawful. Our restated certificate of incorporation
provides that we will indemnify any Indemnitee who was or is a party to an action or suit by or in the right of us to procure a judgment in our favor by reason of the fact that the Indemnitee is or was, or has agreed to become, a director or
officer, or is or was serving, or has agreed to serve, at our request as a director, officer, partner, employee or trustee of, or in a similar capacity with, another corporation, partnership, joint venture, trust or other enterprise, or by reason of
any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) and, to the extent permitted by law, amounts paid in settlement actually and reasonably incurred in connection with such action,
suit or proceeding, and any appeal therefrom, if the Indemnitee acted in good faith and in a manner he or she reasonably believed to be in, or not opposed to, our best interests, except that no indemnification shall be made with respect to any
claim, issue or matter as to which such person shall have been adjudged to be liable to us, unless a court determines that, despite such adjudication but in view of all of the circumstances, he or she is entitled to indemnification of such expenses.
Notwithstanding the foregoing, to the extent that any Indemnitee has been successful, on the merits or otherwise, he or she will be indemnified by us against all expenses (including attorneys’ fees) actually and reasonably incurred in
connection therewith. Expenses must be advanced to an Indemnitee under certain circumstances.
We have entered into indemnification agreements with
certain of our directors, and we intend to enter into indemnification agreements with all of our directors and executive officers. These indemnification agreements may require us, among other things, to indemnify each such director for some
expenses, including attorneys’ fees, judgments, fines and settlement amounts incurred by him in any action or proceeding arising out of his service as one of our directors.
We maintain a general liability insurance policy that covers certain liabilities of directors and officers of our corporation arising out of claims
based on acts or omissions in their capacities as directors or officers.
In any underwriting agreement we enter into in connection with the sale of
common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act, against certain liabilities.
Item 15. Recent Sales of Unregistered Securities.
Set forth below is information regarding shares of capital stock issued by us since December 31, 2012, that were not registered under the Securities
Act. Also included is the consideration received by
II-2
us for such shares and information relating to the section of the Securities Act, or rule of the Securities and Exchange Commission, under which exemption from registration was claimed.
|
|
(1)
|
Under our 2009 Stock Plan, we granted stock options to purchase an aggregate of 1,891,057 shares of our common stock, with exercise prices ranging from $0.41 to $13.65 per share, an aggregate of 1,063,846
restricted stock units to be settled in shares of our common stock, and an aggregate of 388,070 shares of restricted common stock to certain of our employees, officers, consultants and advisors. 989,476 shares of common stock have been
issued pursuant to the exercise of stock options.
|
|
|
(2)
|
From April 2013 to June 2013, we issued and sold an aggregate of 3,748,190 shares of Series D preferred stock to 10 investors for an aggregate purchase price of approximately $22.0 million.
|
|
|
(3)
|
Under our 2016 Equity Incentive Plan, we granted an aggregate of 450,000 restricted stock units to be settled in shares of our common stock to certain of our employees, which restricted stock units are contingent upon
the closing of this offering.
|
The stock options and the common stock issuable upon the exercise of such options, the restricted stock
units and the restricted common stock described in paragraph (1) of this Item 15 were issued under our 2009 Stock Plan in reliance on the exemption provided by Rule 701 promulgated under the Securities Act. The restricted stock units
described in paragraph (3) of this Item 15 were issued under our 2016 Equity Incentive Plan in reliance on the exemption provided by Rule 701 promulgated under the Securities Act. Each of the recipients of securities in these transactions had
adequate access, through employment, business or other relationships, to information about us.
The offer, sale, and issuance of the securities
described in paragraph (2) were deemed to be exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act because the issuance of the securities to the accredited investors did not involve a public
offering. The recipients of the securities in 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. The recipients of the securities in these transactions were accredited investors as defined in Rule 501 of Regulation D promulgated under the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
The exhibits to the registration statement of which this prospectus is a part are listed in
the Exhibit Index attached hereto and incorporated by reference herein.
|
(b)
|
Financial Statement Schedules.
|
No financial statement schedules have been submitted because they are not
required or are not applicable or because the information required is included in the consolidated financial statements or the notes thereto.
Item 17.
Undertakings.
The undersigned registrant hereby undertakes to provide to the underwriter, at the closing specified in the underwriting
agreement, certificates in such denominations and registered in such names as required by the underwriter to permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act 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
II-3
Commission such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.
The undersigned hereby undertakes that:
|
|
(1)
|
For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective.
|
|
|
(2)
|
For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.
|
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly caused this Amendment No. 1 to the Registration Statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in the Town of Maynard, Commonwealth of Massachusetts, on this 24th day of February, 2016.
|
|
|
|
|
ACACIA COMMUNICATIONS, INC.
|
|
|
|
|
By:
|
|
/s/ Murugesan Shanmugaraj
|
|
|
|
Murugesan Shanmugaraj
|
|
|
|
President and Chief Executive Officer
|
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1 to the Registration Statement has been signed by the following
persons in the capacities held on the dates indicated.
|
|
|
|
|
|
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
/s/ Murugesan Shanmugaraj
Murugesan Shanmugaraj
|
|
President, Chief Executive Officer and
|
|
February 24, 2016
|
|
|
|
Director (Principal Executive Officer)
|
|
|
|
|
|
|
|
/s/ John F. Gavin
John F. Gavin
|
|
Chief Financial Officer (Principal Financial
|
|
February 24, 2016
|
|
|
|
Officer)
|
|
|
|
|
|
|
|
/s/ Francis J. Murphy
Francis J. Murphy
|
|
Corporate Controller
|
|
February 24, 2016
|
|
|
|
(Principal Accounting Officer)
|
|
|
|
|
|
|
|
*
Eric A. Swanson
|
|
Chairman of the Board of Directors
|
|
February 24, 2016
|
|
|
|
|
|
*
Peter Y. Chung
|
|
Director
|
|
February 24, 2016
|
|
|
|
|
|
*
Elliot M. Katzman
|
|
Director
|
|
February 24, 2016
|
|
|
|
|
|
*
Benny P. Mikkelsen
|
|
Director
|
|
February 24, 2016
|
|
|
|
|
|
*
Stan J. Reiss
|
|
Director
|
|
February 24, 2016
|
|
|
|
|
|
*
John Ritchie
|
|
Director
|
|
February 24, 2016
|
|
|
|
|
|
|
|
|
*By:
|
|
/s/ Murugesan Shanmugaraj
|
|
|
|
Murugesan Shanmugaraj
|
|
|
|
Attorney-in-Fact
|
EXHIBIT INDEX
Some of the agreements included as exhibits to this registration statement contain representations and warranties by the parties to the applicable
agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (1) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the
risk to one of the parties if those statements prove to be inaccurate; (2) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (3) may
apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (4) were made only as of the date of the applicable agreement or such other date or dates as may be
specified in the agreement.
The Registrant acknowledges that, notwithstanding the inclusion of the foregoing cautionary statements, it is
responsible for considering whether additional specific disclosures of material information regarding contractual provisions are required to make the statements in this registration statement not misleading.
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Exhibit
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Description
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1.1*
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Form of Underwriting Agreement
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3.1**
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Fourth Amended and Restated Certificate of Incorporation, as amended, of the Registrant
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3.2**
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Bylaws of the Registrant
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3.3
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Form of Restated Certificate of Incorporation of the Registrant (to be effective immediately prior to the closing of this offering)
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3.4**
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Form of Amended and Restated Bylaws of the Registrant (to be effective immediately prior to the closing of this offering)
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4.1**
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Specimen stock certificate evidencing shares of common stock
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4.2**
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Amended and Restated Investors’ Rights Agreement, dated April 17, 2013, by and among the Registrant and the other parties thereto
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5.1*
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Opinion of Wilmer Cutler Pickering Hale and Dorr LLP
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10.1**
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Form of Indemnification Agreement for directors and officers
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10.2 +
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2009 Stock Plan, as amended
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10.3** +
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Forms of Stock Option Agreement under 2009 Stock Plan
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10.4** +
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Form of Restricted Stock Unit Agreement under 2009 Stock Plan
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10.5** +
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Form of Restricted Stock Agreement under 2009 Stock Plan
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10.6+
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2016 Equity Incentive Plan
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10.7+
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Form of Incentive Stock Option Agreement under 2016 Equity Incentive Plan
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10.8+
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Form of Non-statutory Stock Option Agreement under 2016 Equity Incentive Plan
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10.9+
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Form of Restricted Stock Unit Agreement under 2016 Equity Incentive Plan
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10.10+
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2016 Employee Stock Purchase Plan
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10.11** +
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Severance and Change in Control Benefits Plan
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10.12** +
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Form of Restricted Stock Agreement by and between the Registrant and each of Murugesan Shanmugaraj, Benny P. Mikkelsen and Bhupendra C. Shah
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Exhibit
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Description
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10.13
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Commercial Lease, dated October 27, 2009, by and between the Registrant and AS Clock Tower Owner, LLC, as amended
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10.14**
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Commercial Lease, dated January 21, 2013, by and between the Registrant and Hi-Tech Properties, I, LLC, as amended
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10.15
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Loan and Security Agreement, dated as of June 9, 2011, by and between the Registrant and Silicon Valley Bank, as amended
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10.16**†
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Strategic Partnering Agreement, dated March 8, 2011, by and between the Registrant and ADVA Optical Networking North America, Inc., as amended
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10.17†
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General Conditions of Purchase, dated December 3, 2010, by and between the Registrant and ZTE Corporation, as amended
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10.18**†
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Master Supply Agreement, dated October 18, 2013, by and between the Registrant and Fujitsu Semiconductor America, Inc.
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10.19**†
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Manufacturing Services Agreement, dated as of August 6, 2015, by and between the Registrant and Sanmina Corporation
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21.1**
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List of Subsidiaries
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23.1
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Consent of Deloitte & Touche LLP, independent registered public accounting firm
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23.2*
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Consent of Wilmer Cutler Pickering Hale and Dorr LLP (included in Exhibit 5.1)
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24.1**
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Powers of Attorney (included on signature page)
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*
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To be filed by amendment.
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+
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Indicates management contract or compensatory plan.
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†
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Confidential treatment requested as to certain portions, which portions have been omitted and filed separately with the Securities and Exchange Commission.
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EXHIBIT 3.3
RESTATED CERTIFICATE OF INCORPORATION
OF
ACACIA COMMUNICATIONS, INC.
(originally incorporated on June 2, 2009)
FIRST: The name of the Corporation is Acacia Communications, Inc.
SECOND: The address of the Corporation’s registered office in the State of Delaware is Corporation Trust Center, 1209 Orange Street,
in the City of Wilmington, County of New Castle, 19801. The name of its registered agent at that address is The Corporation Trust Company.
THIRD: The nature of the business or purposes to be conducted or promoted by 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.
FOURTH: The total number of shares of all
classes of stock which the Corporation shall have authority to issue is 150,000,000 shares, consisting of (i) 150,000,000 shares of Common Stock, $.0001 par value per share (“Common Stock”), and (ii) 5,000,000 shares of Preferred
Stock, $.0001 par value per share (“Preferred Stock”).
The following is a statement of the designations and the powers,
privileges and rights, and the qualifications, limitations or restrictions thereof in respect of each class of capital stock of the Corporation.
1.
General
. The voting, dividend and liquidation rights of the
holders of the Common Stock are subject to and qualified by the rights of the holders of the Preferred Stock of any series as may be designated by the Board of Directors upon any issuance of the Preferred Stock of any series.
2.
Voting
. The holders of the Common Stock shall have voting rights at all meetings of stockholders, each such holder being entitled to
one vote for each share thereof held by such holder;
provided
,
however
, that, except as otherwise required by law, holders of Common Stock shall not be entitled to vote on any amendment to this Certificate of Incorporation (which, as
used herein, shall mean the certificate of incorporation of the Corporation, as amended from time to time, including the terms of any certificate of designations of any series of Preferred Stock) that relates solely to the terms of one or more
outstanding series of Preferred Stock if the holders of such affected series are entitled, either separately or together as a class with the holders of one or more other such series, to vote thereon pursuant to this Certificate of Incorporation.
There shall be no cumulative voting.
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 the holders of a majority of the stock of the Corporation entitled to vote, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of
Delaware.
3.
Dividends
. Dividends may be declared and paid on the Common Stock from funds lawfully
available therefor as and when determined by the Board of Directors and subject to any preferential dividend or other rights of any then outstanding Preferred Stock.
4.
Liquidation
. Upon the dissolution or liquidation of the Corporation, whether voluntary or involuntary, holders of Common Stock will
be entitled to receive all assets of the Corporation available for distribution to its stockholders, subject to any preferential or other rights of any then outstanding Preferred Stock.
Preferred Stock may be issued from time to time in one or more
series, each of such series to have such terms as stated or expressed herein and in the resolution or resolutions providing for the issue of such series adopted by the Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation may be reissued except as otherwise provided by law.
Authority is hereby expressly granted to the Board of Directors from time to time to issue the Preferred Stock in one or more series, and in
connection with the creation of any such series, by adopting a resolution or resolutions providing for the issuance of the shares thereof and by filing a certificate of designations relating thereto in accordance with the General Corporation Law of
the State of Delaware, to determine and fix the number of shares of such series and such voting powers, full or limited, or no voting powers, and such designations, preferences and relative participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, including without limitation thereof, dividend rights, conversion rights, redemption privileges and liquidation preferences, as shall be stated and expressed in such resolutions, all to the full
extent now or hereafter permitted by the General Corporation Law of the State of Delaware. Without limiting the generality of the foregoing, the resolutions providing for issuance of any series of Preferred Stock may provide that such series shall
be superior or rank equally or be junior to any other series of Preferred Stock to the extent permitted by law.
The number of authorized
shares of Preferred Stock may be increased or decreased (but not below the number of shares then outstanding) by the affirmative vote of the holders of a majority of the voting power of the capital stock of the Corporation entitled to vote thereon,
voting as a single class, irrespective of the provisions of Section 242(b)(2) of the General Corporation Law of the State of Delaware.
FIFTH: Except as otherwise provided herein, the Corporation reserves the right to amend, alter, change or repeal any provision contained in
this Certificate of Incorporation, in the manner now or hereafter prescribed by statute and this Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation.
SIXTH: In furtherance and not in limitation of the powers conferred upon it by the General Corporation Law of the State of Delaware, and
subject to the terms of any series of
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Preferred Stock, the Board of Directors shall have the power to adopt, amend, alter or repeal the By-laws of the Corporation by the affirmative vote of a majority of the directors present at any
regular or special meeting of the Board of Directors at which a quorum is present. The stockholders may not adopt, amend, alter or repeal the By-laws of the Corporation, or adopt any provision inconsistent therewith, unless such action is approved,
in addition to any other vote required by this Certificate of Incorporation, by the affirmative vote of the holders of at least seventy-five percent (75%) of the votes that all the stockholders would be entitled to cast in any annual election
of directors or class of directors. Notwithstanding any other provisions of law, this Certificate of Incorporation or the By-laws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote
of the holders of at least seventy-five percent (75%) of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors shall be required to amend or repeal, or to adopt any provision
inconsistent with, this Article SIXTH.
SEVENTH: Except to the extent that the General Corporation Law of the State of Delaware
prohibits the elimination or limitation of liability of directors for breaches of fiduciary duty, no director of the Corporation shall be personally liable to the Corporation or its stockholders for monetary damages for any breach of fiduciary duty
as a director, notwithstanding any provision of law imposing such liability. No amendment to or repeal of this provision shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect
to any acts or omissions of such director occurring prior to such amendment or repeal. If the General Corporation Law of the State of Delaware is amended to permit further elimination or limitation of 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 as so amended.
EIGHTH: The Corporation shall provide indemnification as follows:
1.
Actions, Suits and Proceedings Other than by or in the Right of the Corporation
. The Corporation shall indemnify each person who was
or is a party or threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Corporation) by reason of the
fact that he or she is or was, or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) (all such persons being referred to hereafter as an “Indemnitee”), or by reason of any action alleged
to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees), liabilities, losses, judgments, fines (including excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974),
and amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if Indemnitee acted in good faith and in a manner which Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction or upon a plea of
nolo contendere
or its equivalent, shall not, of itself, create a presumption that Indemnitee did not act in good faith and in a manner which Indemnitee reasonably
believed to be in, or not opposed to, the best interests of the Corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his or her conduct was unlawful.
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2.
Actions or Suits by or in the Right of the Corporation
. The Corporation shall indemnify
any Indemnitee who was or is a party to or threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that Indemnitee is or was,
or has agreed to become, a director or officer of the Corporation, or is or was serving, or has agreed to serve, at the request of the Corporation, as a director, officer, partner, employee or trustee of, or in a similar capacity with, another
corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan), or by reason of any action alleged to have been taken or omitted in such capacity, against all expenses (including attorneys’ fees) and,
to the extent permitted by law, amounts paid in settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with such action, suit or proceeding and any appeal therefrom, if Indemnitee acted in good faith and in a manner
which Indemnitee reasonably believed to be in, or not opposed to, the best interests of the Corporation, except that no indemnification shall be made under this Section 2 in respect of any claim, issue or matter as to which Indemnitee shall
have been adjudged to be liable to the Corporation, unless, and only to the extent, that the Court of Chancery of Delaware or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of such
liability but in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses (including attorneys’ fees) which the Court of Chancery of Delaware or such other court shall deem proper.
3.
Indemnification for Expenses of Successful Party
. Notwithstanding any other provisions of this Article EIGHTH, to the extent
that an Indemnitee has been successful, on the merits or otherwise, in defense of any action, suit or proceeding referred to in Sections 1 and 2 of this Article EIGHTH, or in defense of any claim, issue or matter therein, or on appeal from any
such action, suit or proceeding, Indemnitee shall be indemnified against all expenses (including attorneys’ fees) actually and reasonably incurred by or on behalf of Indemnitee in connection therewith.
4.
Notification and Defense of Claim
. As a condition precedent to an Indemnitee’s right to be indemnified under this Article
EIGHTH, such Indemnitee must notify the Corporation in writing as soon as reasonably practicable of any action, suit, proceeding or investigation involving such Indemnitee for which indemnity will or could be sought. With respect to any action,
suit, proceeding or investigation of which the Corporation is so notified, the Corporation will be entitled to participate therein at its own expense and/or to assume the defense thereof at its own expense, with legal counsel reasonably acceptable
to Indemnitee. After notice from the Corporation to Indemnitee of its election so to assume such defense, the Corporation shall not be liable to Indemnitee for any legal or other expenses subsequently incurred by Indemnitee in connection with such
action, suit, proceeding or investigation, other than as provided below in this Section 4. Indemnitee shall have the right to employ his or her own counsel in connection with such action, suit, proceeding or investigation, but the fees and
expenses of such counsel incurred after notice from the Corporation of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Corporation,
(ii) counsel to Indemnitee shall have reasonably concluded that there may be
-4-
a conflict of interest or position on any significant issue between the Corporation and Indemnitee in the conduct of the defense of such action, suit, proceeding or investigation or
(iii) the Corporation shall not in fact have employed counsel to assume the defense of such action, suit, proceeding or investigation, in each of which cases the fees and expenses of counsel for Indemnitee shall be at the expense of the
Corporation, except as otherwise expressly provided by this Article EIGHTH. The Corporation shall not be entitled, without the consent of Indemnitee, to assume the defense of any claim brought by or in the right of the Corporation or as to which
counsel for Indemnitee shall have reasonably made the conclusion provided for in clause (ii) above. The Corporation shall not be required to indemnify Indemnitee under this Article EIGHTH for any amounts paid in settlement of any action, suit,
proceeding or investigation effected without its written consent. The Corporation shall not settle any action, suit, proceeding or investigation in any manner which would impose any penalty or limitation on Indemnitee without Indemnitee’s
written consent. Neither the Corporation nor Indemnitee will unreasonably withhold or delay its consent to any proposed settlement.
5.
Advance of Expenses
. Subject to the provisions of Section 6 of this Article EIGHTH, in the event of any threatened or pending action, suit, proceeding or investigation of which the Corporation receives notice under this Article EIGHTH,
any expenses (including attorneys’ fees) incurred by or on behalf of Indemnitee in defending an action, suit, proceeding or investigation or any appeal therefrom shall be paid by the Corporation in advance of the final disposition of such
matter;
provided
,
however
, that the payment of such expenses incurred by or on behalf of Indemnitee in advance of the final disposition of such matter shall be made only upon receipt of an undertaking by or on behalf of Indemnitee to
repay all amounts so advanced in the event that it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Corporation as authorized in this Article EIGHTH; and
provided further
that no such advancement of
expenses shall be made under this Article EIGHTH if it is determined (in the manner described in Section 6) that (i) Indemnitee did not act in good faith and in a manner he or she reasonably believed to be in, or not opposed to, the best
interests of the Corporation, or (ii) with respect to any criminal action or proceeding, Indemnitee had reasonable cause to believe his or her conduct was unlawful. Such undertaking shall be accepted without reference to the financial ability
of Indemnitee to make such repayment.
6.
Procedure for Indemnification and Advancement of Expenses
. In order to obtain
indemnification or advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article EIGHTH, an Indemnitee shall submit to the Corporation a written request. Any such advancement of expenses shall be made promptly, and in any event
within 60 days after receipt by the Corporation of the written request of Indemnitee, unless (i) the Corporation has assumed the defense pursuant to Section 4 of this Article EIGHTH (and none of the circumstances described in
Section 4 of this Article EIGHTH that would nonetheless entitle the Indemnitee to indemnification for the fees and expenses of separate counsel have occurred) or (ii) the Corporation determines within such
60-day
period that Indemnitee did not meet the applicable standard of conduct set forth in Section 1, 2 or 5 of this Article EIGHTH, as the case may be. Any such indemnification, unless ordered by a
court, shall be made with respect to requests under Section 1 or 2 only as authorized in the specific case upon a determination by the Corporation that the indemnification of Indemnitee is proper because Indemnitee has met the applicable
standard of conduct set forth in Section 1 or 2, as the case may be. Such determination shall be made in each instance (a) by a majority vote of the directors of the
-5-
Corporation consisting of persons who are not at that time parties to the action, suit or proceeding in question (“disinterested directors”), whether or not a quorum, (b) by a
committee of disinterested directors designated by majority vote of disinterested directors, whether or not a quorum, (c) if there are no disinterested directors, or if the disinterested directors so direct, by independent legal counsel (who
may, to the extent permitted by law, be regular legal counsel to the Corporation) in a written opinion, or (d) by the stockholders of the Corporation.
7.
Remedies
. Subject to Article TWELFTH, the right to indemnification or advancement of expenses as granted by this Article EIGHTH
shall be enforceable by Indemnitee in any court of competent jurisdiction. Neither the failure of the Corporation to have made a determination prior to the commencement of such action that indemnification is proper in the circumstances because
Indemnitee has met the applicable standard of conduct, nor an actual determination by the Corporation pursuant to Section 6 of this Article EIGHTH that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action
or create a presumption that Indemnitee has not met the applicable standard of conduct. Indemnitee’s expenses (including attorneys’ fees) reasonably incurred in connection with successfully establishing Indemnitee’s right to
indemnification, in whole or in part, in any such proceeding shall also be indemnified by the Corporation. Notwithstanding the foregoing, in any suit brought by Indemnitee to enforce a right to indemnification hereunder it shall be a defense that
the Indemnitee has not met any applicable standard for indemnification set forth in the General Corporation Law of the State of Delaware.
8.
Limitations
. Notwithstanding anything to the contrary in this Article EIGHTH, except as set forth in Section 7 of this Article
EIGHTH, the Corporation shall not indemnify an Indemnitee pursuant to this Article EIGHTH in connection with a proceeding (or part thereof) initiated by such Indemnitee unless the initiation thereof was approved by the Board of Directors of the
Corporation. Notwithstanding anything to the contrary in this Article EIGHTH, the Corporation shall not indemnify an Indemnitee to the extent such Indemnitee is reimbursed from the proceeds of insurance, and in the event the Corporation makes any
indemnification payments to an Indemnitee and such Indemnitee is subsequently reimbursed from the proceeds of insurance, such Indemnitee shall promptly refund indemnification payments to the Corporation to the extent of such insurance reimbursement.
9.
Subsequent Amendment
. No amendment, termination or repeal of this Article EIGHTH or of the relevant provisions of the General
Corporation Law of the State of Delaware or any other applicable laws shall adversely affect or diminish in any way the rights of any Indemnitee to indemnification under the provisions hereof with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts occurring prior to the final adoption of such amendment, termination or repeal.
10.
Other Rights
. The indemnification and advancement of expenses provided by this Article EIGHTH shall not be deemed exclusive of any
other rights to which an Indemnitee seeking indemnification or advancement of expenses may be entitled under any law (common or statutory), agreement or vote of stockholders or disinterested directors or otherwise, both as to action in
Indemnitee’s official capacity and as to action in any other capacity while holding office for the Corporation, and shall continue as to an Indemnitee who has ceased to be a director or officer, and shall inure to the benefit of the estate,
heirs, executors and administrators of
-6-
Indemnitee. Nothing contained in this Article EIGHTH shall be deemed to prohibit, and the Corporation is specifically authorized to enter into, agreements with officers and directors providing
indemnification and advancement of expenses rights and procedures different from, equivalent to, or greater or less than, those set forth in this Article EIGHTH, and this Article EIGHTH shall not be deemed to limit, modify or condition the rights
contained in any such agreement or modify or supplement the procedures contained in any such agreement in any manner that may be adverse to such officers or directors. In addition, the Corporation may, to the extent authorized from time to time by
its Board of Directors, grant indemnification rights to other employees or agents of the Corporation or other persons serving the Corporation and such rights may be equivalent to, or greater or less than, those set forth in this Article EIGHTH.
11.
Partial Indemnification
. If an Indemnitee is entitled under any provision of this Article EIGHTH to indemnification by the
Corporation for some or a portion of the expenses (including attorneys’ fees), liabilities, losses, judgments, fines (including excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974) or amounts paid in
settlement actually and reasonably incurred by or on behalf of Indemnitee in connection with any action, suit, proceeding or investigation and any appeal therefrom but not, however, for the total amount thereof, the Corporation shall nevertheless
indemnify Indemnitee for the portion of such expenses (including attorneys’ fees), liabilities, losses, judgments, fines (including excise taxes and penalties arising under the Employee Retirement Income Security Act of 1974) or amounts paid in
settlement to which Indemnitee is entitled.
12.
Insurance
. The Corporation may purchase and maintain insurance, at its expense, to
protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise (including any employee benefit plan) against any expense, liability or loss incurred by him
or her in any such capacity, or arising out of his or her status as such, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of
Delaware.
13.
Savings Clause
. If this Article EIGHTH or any portion hereof shall be invalidated on any ground by any court of
competent jurisdiction, then the Corporation shall nevertheless indemnify each Indemnitee as to any expenses (including attorneys’ fees), liabilities, losses, judgments, fines (including excise taxes and penalties arising under the Employee
Retirement Income Security Act of 1974) and amounts paid in settlement in connection with any action, suit, proceeding or investigation, whether civil, criminal or administrative, including an action by or in the right of the Corporation, to the
fullest extent permitted by any applicable portion of this Article EIGHTH that shall not have been invalidated and to the fullest extent permitted by applicable law.
14.
Definitions
. Terms used herein and defined in Section 145(h) and Section 145(i) of the General Corporation Law of the
State of Delaware shall have the respective meanings assigned to such terms in such Section 145(h) and Section 145(i).
NINTH:
This Article NINTH is inserted for the management of the business and for the conduct of the affairs of the Corporation.
-7-
1.
General Powers
. The business and affairs of the Corporation shall be managed by or
under the direction of the Board of Directors.
2.
Number of Directors; Election of Directors
. Subject to the rights of holders of
any series of Preferred Stock to elect directors, the number of directors of the Corporation shall be established by the Board of Directors. Election of directors need not be by written ballot, except as and to the extent provided in the By-laws of
the Corporation.
3.
Classes of Directors
. Subject to the rights of holders of any series of Preferred Stock to elect directors,
the Board of Directors shall be and is divided into three classes, designated Class I, Class II and Class III. Each class shall consist, as nearly as may be possible, of
one-third
of the total number of
directors constituting the entire Board of Directors. The Board of Directors is authorized to assign members of the Board of Directors already in office to Class I, Class II or Class III at the time such classification becomes effective.
4.
Terms of Office
. Subject to the rights of holders of any series of Preferred Stock to elect directors, each director shall serve for
a term ending on the date of the third annual meeting of stockholders following the annual meeting of stockholders at which such director was elected;
provided
that each director initially assigned to Class I shall serve for a term
expiring at the Corporation’s first annual meeting of stockholders held after the effectiveness of this Restated Certificate of Incorporation; each director initially assigned to Class II shall serve for a term expiring at the
Corporation’s second annual meeting of stockholders held after the effectiveness of this Restated Certificate of Incorporation; and each director initially assigned to Class III shall serve for a term expiring at the Corporation’s
third annual meeting of stockholders held after the effectiveness of this Restated Certificate of Incorporation;
provided further
, that the term of each director shall continue until the election and qualification of his or her successor and
be subject to his or her earlier death, resignation or removal.
5.
Quorum
. The greater of (a) a majority of the directors at
any time in office and
(b) one-third
of the number of directors fixed pursuant to Section 2 of this Article NINTH shall constitute a quorum of the Board of Directors. If at any meeting of the Board
of Directors there shall be less than such a quorum, a majority of the directors present may adjourn the meeting from time to time without further notice other than announcement at the meeting, until a quorum shall be present.
6.
Action at Meeting
. Every act or decision done or made by a majority of the directors present at a meeting duly held at which a
quorum is present shall be regarded as the act of the Board of Directors unless a greater number is required by law or by this Certificate of Incorporation.
7.
Removal
. Subject to the rights of holders of any series of Preferred Stock, directors of the Corporation may be removed only for
cause and only by the affirmative vote of the holders of at least seventy-five percent (75%) of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors.
8.
Vacancies
. Subject to the rights of holders of any series of Preferred Stock, any vacancy or newly created directorship in the Board
of Directors, however occurring, shall be
-8-
filled only by vote of a majority of the directors then in office, although less than a quorum, or by a sole remaining director and shall not be filled by the stockholders. A director elected to
fill a vacancy shall hold office until the next election of the class for which such director shall have been chosen, subject to the election and qualification of a successor and to such director’s earlier death, resignation or removal.
9.
Stockholder Nominations and Introduction of Business, Etc
. Advance notice of stockholder nominations for election of directors and
other business to be brought by stockholders before a meeting of stockholders shall be given in the manner provided by the By-laws of the Corporation.
10.
Amendments to Article
. Notwithstanding any other provisions of law, this Certificate of Incorporation or the By-laws of the
Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the votes which all the stockholders would be entitled to cast in any
annual election of directors or class of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article NINTH.
TENTH: Stockholders of the Corporation may not take any action by written consent in lieu of a meeting. Notwithstanding any other provisions
of law, this Certificate of Incorporation or the By-laws of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the affirmative vote of the holders of at least seventy-five percent (75%) of the votes
which all the stockholders would be entitled to cast in any annual election of directors or class of directors shall be required to amend or repeal, or to adopt any provision inconsistent with, this Article TENTH.
ELEVENTH: Special meetings of stockholders for any purpose or purposes may be called at any time by only the Board of Directors, the Chairman
of the Board or the Chief Executive Officer, and may not be called by any other person or persons. Business transacted at any special meeting of stockholders shall be limited to matters relating to the purpose or purposes stated in the notice of
meeting. Notwithstanding any other provisions of law, this Certificate of Incorporation or the
By-laws
of the Corporation, and notwithstanding the fact that a lesser percentage may be specified by law, the
affirmative vote of the holders of at least seventy-five percent (75%) of the votes which all the stockholders would be entitled to cast in any annual election of directors or class of directors shall be required to amend or repeal, or to adopt
any provision inconsistent with, this Article ELEVENTH.
TWELFTH: Unless the Corporation consents in writing to the selection of an
alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for: (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any
action asserting a claim of breach of a fiduciary duty owed by any director, officer, other employee or stockholder of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising
pursuant to any provision of the General Corporation Law of the State of Delaware or as to which the General Corporation Law of the State of Delaware confers jurisdiction on the Court of Chancery of the State of Delaware, or (iv) any action
asserting a claim arising pursuant to any provision of this Certificate of Incorporation or the Corporation’s By-Laws (in each case, as they may be amended from time
-9-
to time) or governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed
to have notice of and consented to the provisions of this Article TWELFTH.
IN WITNESS WHEREOF, this Restated Certificate of
Incorporation, which restates, integrates and amends the certificate of incorporation of the Corporation, and which has been duly adopted in accordance with Sections 228, 242 and 245 of the General Corporation Law of the State of Delaware, has been
executed by its duly authorized officer this [ ] day of [ ], 2015.
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ACACIA COMMUNICATIONS, INC.
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By:
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Name: Raj Shanmugaraj
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Title: President
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-10-
Exhibit 10.2
A
CACIA
C
OMMUNICATIONS
, I
NC
.
2009 S
TOCK
P
LAN
A
DOPTED
ON
N
OVEMBER
23, 2009
A
MENDED
ON
J
UNE
29, 2010, D
ECEMBER
20,
2011, M
ARCH
5, 2012,
A
PRIL
17, 2013, A
PRIL
23, 2015,
J
ULY
23, 2015
AND
O
CTOBER
21, 2015
TABLE OF CONTENTS
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Page
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SECTION 1.
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ESTABLISHMENT AND PURPOSE
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1
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SECTION 2.
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ADMINISTRATION
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1
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(a)
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Committees of the Board of Directors
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1
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(b)
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Authority of the Board of Directors
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1
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SECTION 3.
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ELIGIBILITY
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1
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(a)
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General Rule
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1
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(b)
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Ten-Percent
Stockholders
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1
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SECTION 4.
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STOCK SUBJECT TO PLAN
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2
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(a)
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Basic Limitation
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2
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(b)
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Additional Shares
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2
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SECTION 5.
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TERMS AND CONDITIONS OF AWARDS OR SALES OF SHARES
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2
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(a)
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Stock Grant or Purchase Agreement
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2
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(b)
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Duration of Offers and Nontransferability of Rights
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2
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(c)
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Purchase Price
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2
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(d)
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Withholding Taxes
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3
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(e)
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Transfer Restrictions and Forfeiture Conditions
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3
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SECTION 6.
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TERMS AND CONDITIONS OF OPTIONS
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3
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(a)
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Stock Option Agreement
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3
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(b)
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Number of Shares
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3
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(c)
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Exercise Price
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3
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(d)
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Exercisability
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3
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(e)
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Basic Term
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3
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(f)
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Termination of Service (Except by Death)
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4
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(g)
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Leaves of Absence
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4
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(h)
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Death of Optionee
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4
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(i)
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Post-Exercise Restrictions on Transfer of Shares
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5
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(j)
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Pre-Exercise Restrictions on Transfer of Options or Shares
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5
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(k)
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Withholding Taxes
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5
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(l)
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No Rights as a Stockholder
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5
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(m)
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Modification, Extension and Assumption of Options
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5
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(n)
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Company’s Right to Cancel Certain Options
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5
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SECTION 7.
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PAYMENT FOR SHARES
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6
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(a)
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General Rule
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6
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(b)
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Services Rendered
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6
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(c)
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Promissory Note
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6
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(d)
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Surrender of Stock
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6
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(e)
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Exercise/Sale
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6
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(f)
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Other Forms of Payment
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6
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i
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SECTION 8.
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TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS
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6
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(a)
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Restricted Stock Unit Agreement
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6
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(b)
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Payment for Restricted Stock Units
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7
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(c)
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Vesting Conditions
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7
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(d)
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Voting and Dividend Rights
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7
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(e)
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Form and Time of Settlement of Restricted Stock Units
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7
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(f)
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Modification, Extension and Assumption of Restricted Stock Units
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7
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(g)
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Forfeiture
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7
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(h)
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Death of Recipient
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8
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(i)
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Creditors’ Rights
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8
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(j)
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Transferability of Restricted Stock Units
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8
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SECTION 9.
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ADJUSTMENT OF SHARES
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8
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(a)
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General
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8
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(b)
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Mergers and Consolidations
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8
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(c)
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Reservation of Rights
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10
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SECTION 10.
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MISCELLANEOUS PROVISIONS
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10
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(a)
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Securities Law Requirements
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10
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(b)
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No Retention Rights
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10
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(c)
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Treatment as Compensation
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10
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(d)
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Governing Law
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10
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(e)
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Tax Matters
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10
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SECTION 11.
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DURATION AND AMENDMENTS
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11
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(a)
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Term of the Plan
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11
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(b)
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Right to Amend or Terminate the Plan
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11
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(c)
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Effect of Amendment or Termination
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12
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SECTION 12.
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DEFINITIONS
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12
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ii
A
CACIA
C
OMMUNICATIONS
, I
NC
. 2009
S
TOCK
P
LAN
SECTION 1. ESTABLISHMENT AND PURPOSE
.
The purpose of the Plan is to offer selected persons an opportunity to acquire a proprietary interest in the success of the Company, or to
increase such interest, by acquiring Shares of the Company’s Stock. The Plan provides for the direct award or sale of Shares, the grant of Options to purchase Shares and the grant of Restricted Stock Units. Options granted under the Plan may
include Nonstatutory Options as well as ISOs intended to qualify under Section 422 of the Code.
Capitalized terms are defined in
Section 12.
SECTION 2. ADMINISTRATION
.
(a)
Committees of the Board of Directors
. The Plan may be administered by one or more Committees. Each Committee shall consist of
one or more members of the Board of Directors who have been appointed by the Board of Directors. Each Committee shall have such authority and be responsible for such functions as the Board of Directors has assigned to it. If no Committee has been
appointed, the entire Board of Directors shall administer the Plan. Any reference to the Board of Directors in the Plan shall be construed as a reference to the Committee (if any) to whom the Board of Directors has assigned a particular function.
(b)
Authority of the Board of Directors
.
Subject to the provisions of the Plan, the Board of Directors shall
have full authority and discretion to take any actions it deems necessary or advisable for the administration of the Plan. All decisions, interpretations and other actions of the Board of Directors shall be final and binding on all Participants and
all persons deriving their rights from a Participant.
SECTION 3. ELIGIBILITY
.
(a)
General Rule
.
Only Employees, Outside Directors and Consultants shall be eligible for the grant of Nonstatutory
Options, Restricted Stock Units or the direct award or sale of Shares. Only Employees shall be eligible for the grant of ISOs.
(b)
Ten-Percent
Stockholders
.
A person who owns more than 10% of the total combined voting power of all classes of outstanding stock of the Company, its Parent or any of its Subsidiaries shall
not be eligible for the grant of an ISO unless (i) the Exercise Price is at least 110% of the Fair Market Value of a Share on the Date of Grant and (ii) such ISO by its terms is not exercisable after the expiration of five years from the
Date of Grant. For purposes of this Subsection (b), in determining stock ownership, the attribution rules of Section 424(d) of the Code shall be applied.
SECTION 4. STOCK SUBJECT TO PLAN
.
(a) Basic Limitation
.
Not more than 6,835,895 Shares may be issued under the Plan, subject to Subsection (b) below
and Section 9(a).
1
All of these Shares may be issued upon the exercise of ISOs. Except as otherwise provided in Subsection (b) below, the number of Shares that were previously issued or
are subject to Awards outstanding at any time under the Plan shall not exceed the sum of (i) the number of Shares previously issued under the Plan and (ii) the number of Shares that then remain available for issuance under the Plan. The
Company, during the term of the Plan, shall at all times reserve and keep available sufficient Shares to satisfy the requirements of the Plan. Shares offered under the Plan may be authorized but unissued Shares or treasury Shares.
(b) Additional Shares
.
In the event that Shares previously issued under the Plan are reacquired by the Company without
the payment of any consideration therefor in excess of the amount (if any) previously paid by the Participant to the Company in respect of such Shares, such Shares shall be added to the number of Shares then available for issuance under the Plan. In
the event that an outstanding Award for any reason expires or is canceled without the payment of any consideration therefor in excess of the amount (if any) previously paid by the Participant to the Company in respect of such Shares, the Shares
allocable to the unexercised or unvested portion of such Award, as applicable, shall be added to the number of Shares then available for issuance under the Plan.
SECTION 5. TERMS AND CONDITIONS OF AWARDS OR SALES OF SHARES
.
(a) Stock Grant or Purchase Agreement
. Each direct award of Shares under the Plan shall be evidenced by a Stock Grant Agreement between
the Grantee and the Company. Each sale of Shares under the Plan (other than upon exercise of an Option or settlement of Restricted Stock Units) shall be evidenced by a Stock Purchase Agreement between the Purchaser and the Company. Such award or
sale shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Stock Grant
Agreement or Stock Purchase Agreement. The provisions of the various Stock Grant Agreements and Stock Purchase Agreements entered into under the Plan need not be identical.
(b) Duration of Offers and Nontransferability of Rights
. Any right to purchase Shares under the Plan (other than an Option) shall
automatically expire if not exercised by the Purchaser within 30 days after the grant of such right was communicated to the Purchaser by the Company. Such right shall not be transferable and shall be exercisable only by the Purchaser to whom such
right was granted.
(c) Purchase Price
. The Board of Directors shall determine the Purchase Price of Shares to be offered under the
Plan at its sole discretion. The Purchase Price shall be payable in a form described in Section 7.
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Please refer to Exhibit A for a schedule of the initial share reserve and any subsequent increases in the reserve.
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(d) Withholding Taxes
. As a condition to the award, purchase, vesting or transfer of
Shares, the Grantee or Purchaser shall make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such event.
(e) Transfer Restrictions and Forfeiture Conditions
. Any Shares awarded or sold under the Plan shall be subject to such special
forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board of Directors may determine. Such restrictions shall be set forth in the applicable Stock Grant Agreement or Stock Purchase Agreement
and shall apply in addition to any restrictions that may apply to holders of Shares generally.
SECTION 6. TERMS AND CONDITIONS OF OPTIONS
.
(a) Stock Option Agreement
. Each grant of an Option under the Plan shall be evidenced by a Stock Option Agreement between the
Optionee and the Company. The Option shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions which are not inconsistent with the Plan and which the Board of Directors deems appropriate
for inclusion in a Stock Option Agreement. The provisions of the various Stock Option Agreements entered into under the Plan need not be identical.
(b) Number of Shares
. Each Stock Option Agreement shall specify the number of Shares that are subject to the Option and shall provide
for the adjustment of such number in accordance with Section 9. The Stock Option Agreement shall also specify whether the Option is an ISO or a Nonstatutory Option.
(
c) Exercise Price
. Each Stock Option Agreement shall specify the Exercise Price. The Exercise Price of an Option shall not be less
than 100% of the Fair Market Value of a Share on the Date of Grant, and in the case of an ISO a higher percentage may be required by Section 3(b). Subject to the preceding sentence, the Exercise Price shall be determined by the Board of
Directors at its sole discretion. The Exercise Price shall be payable in a form described in Section 7. This Subsection (c) shall not apply to an Option granted pursuant to an assumption of, or substitution for, another option in a manner
that complies with Section 424(a) of the Code (whether or not the Option is an ISO).
(d) Exercisability
. Each Stock Option
Agreement shall specify the date when all or any installment of the Option is to become exercisable. No Option shall be exercisable unless the Optionee (i) has delivered an executed copy of the Stock Option Agreement to the Company or
(ii) otherwise agrees to be bound by the terms of the Stock Option Agreement. The Board of Directors shall determine the exercisability provisions of the Stock Option Agreement at its sole discretion. All of an Optionee’s Options shall
become exercisable in full if Section 9(b)(iv) applies.
(e) Basic Term
. The Stock Option Agreement shall specify the term of
the Option. The term shall not exceed 10 years from the Date of Grant, and in the case of an ISO a shorter term may be required by Section 3(b). Subject to the preceding sentence, the Board of Directors at its sole discretion shall determine
when an Option is to expire.
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(f) Termination of Service (Except by Death)
. If an Optionee’s Service terminates for
any reason other than the Optionee’s death, then the Optionee’s Options shall expire on the earliest of the following dates:
(i) The expiration date determined pursuant to Subsection (e) above;
(ii) The date three months after the termination of the Optionee’s Service for any reason other than Disability, or such
earlier or later date as the Board of Directors may determine (but in no event earlier than 30 days after the termination of the Optionee’s Service); or
(iii) The date six months after the termination of the Optionee’s Service by reason of Disability, or such later date as
the Board of Directors may determine.
The Optionee may exercise all or part of the Optionee’s Options at any time before the expiration of such
Options under the preceding sentence, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and the underlying Shares had vested before
the Optionee’s Service terminated (or vested as a result of the termination). The balance of such Options shall lapse when the Optionee’s Service terminates. In the event that the Optionee dies after the termination of the Optionee’s
Service but before the expiration of the Optionee’s Options, all or part of such Options may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate or by any person who has acquired such Options
directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable before the Optionee’s Service terminated (or became exercisable as a result of the termination) and
the underlying Shares had vested before the Optionee’s Service terminated (or vested as a result of the termination).
(g) Leaves
of Absence
. For purposes of Subsection (f) above, Service shall be deemed to continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the Company in writing and if continued crediting of Service for this
purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company).
(h) Death of
Optionee
. If an Optionee dies while the Optionee is in Service, then the Optionee’s Options shall expire on the earlier of the following dates:
(i) The expiration date determined pursuant to Subsection (e) above; or
(ii) The date 12 months after the Optionee’s death, or such earlier or later date as the Board of Directors may determine
(but in no event earlier than six months after the Optionee’s death).
All or part of the Optionee’s Options may be exercised at any time before
the expiration of such Options under the preceding sentence by the executors or administrators of the Optionee’s estate
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or by any person who has acquired such Options directly from the Optionee by beneficiary designation, bequest or inheritance, but only to the extent that such Options had become exercisable
before the Optionee’s death (or became exercisable as a result of the death) and the underlying Shares had vested before the Optionee’s death (or vested as a result of the Optionee’s death). The balance of such Options shall lapse
when the Optionee dies.
(i) Post-Exercise Restrictions on Transfer of Shares
. Any Shares issued upon exercise of an Option shall
be subject to such special forfeiture conditions, rights of repurchase, rights of first refusal and other transfer restrictions as the Board of Directors may determine. Such restrictions shall be set forth in the applicable Stock Option Agreement
and shall apply in addition to any restrictions that may apply to holders of Shares generally.
(j) Pre-Exercise Restrictions on
Transfer of Options or Shares
. An Option shall be transferable by the Optionee only by (i) a beneficiary designation, (ii) a will or (iii) the laws of descent and distribution, except as provided in the next sentence. If the
applicable Stock Option Agreement so provides, a Nonstatutory Option shall also be transferable by gift or domestic relations order to a Family Member of the Optionee. An ISO may be exercised during the lifetime of the Optionee only by the Optionee
or by the Optionee’s guardian or legal representative.
(k) Withholding Taxes
. As a condition to the grant or exercise of an
Option, the Optionee shall make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with such grant or exercise. The Optionee
shall also make such arrangements as the Board of Directors may require for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in connection with the vesting or transfer of Shares acquired by
exercising an Option or any similar event.
(l) No Rights as a Stockholder
. An Optionee, or a transferee of an Optionee, shall have
no rights as a stockholder with respect to any Shares covered by the Optionee’s Option until such person becomes entitled to receive such Shares by filing a notice of exercise and paying the Exercise Price pursuant to the terms of such Option.
(m) Modification, Extension and Assumption of Options
. Within the limitations of the Plan, the Board of Directors may modify,
extend or assume outstanding Options or may accept the cancellation of outstanding Options (whether granted by the Company or another issuer) in return for the grant of new Options for the same or a different number of Shares and at the same or a
different Exercise Price. The foregoing notwithstanding, no modification of an Option shall, without the consent of the Optionee, impair the Optionee’s rights or increase the Optionee’s obligations under such Option.
(n) Company’s Right to Cancel Certain Options
. Any other provision of the Plan or a Stock Option Agreement notwithstanding, the
Company shall have the right at any time to cancel an Option that was not granted in compliance with Rule 701 under the Securities Act. Prior to canceling such Option, the Company shall give the Optionee not less than 30 days’ notice in
writing. If the Company elects to cancel such Option, it shall deliver to the Optionee consideration with an aggregate Fair Market Value equal to the excess of (i) the Fair Market
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Value of the Shares subject to such Option as of the time of the cancellation over (ii) the Exercise Price of such Option. The consideration may be delivered in the form of cash or cash
equivalents, in the form of Shares, or a combination of both. If the consideration would be a negative amount, such Option may be cancelled without the delivery of any consideration.
SECTION 7. PAYMENT FOR SHARES
.
(a) General Rule
.
The entire Purchase Price or Exercise Price of Shares issued under the Plan shall be payable in cash or
cash equivalents at the time when such Shares are purchased, except as otherwise provided in this Section 7.
(b) Services
Rendered
.
At the discretion of the Board of Directors, Shares may be awarded under the Plan in consideration of services rendered to the Company, a Parent or a Subsidiary prior to the Award.
(c) Promissory Note
.
At the discretion of the Board of Directors, all or a portion of the Purchase Price or Exercise
Price (as the case may be) of Shares issued under the Plan may be paid with a full-recourse promissory note. The Shares shall be pledged as security for payment of the principal amount of the promissory note and interest thereon. The interest rate
payable under the terms of the promissory note shall not be less than the minimum rate (if any) required to avoid the imputation of additional interest under the Code. Subject to the foregoing, the Board of Directors (at its sole discretion) shall
specify the term, interest rate, amortization requirements (if any) and other provisions of such note.
(d) Surrender of
Stock
.
At the discretion of the Board of Directors, all or any part of the Exercise Price may be paid by surrendering, or attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be
surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value as of the date when the Option is exercised.
(e) Exercise/Sale
.
To the extent that a Stock Option Agreement so provides, and if Stock is publicly traded, all or part
of the Exercise Price and any withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver all or part of the sales
proceeds to the Company.
(f) Other Forms of Payment
.
To the extent that a Stock Purchase Agreement or Stock Option
Agreement so provides, the Purchase Price or Exercise Price of Shares issued under the Plan may be paid in any other form permitted by the Delaware General Corporation Law, as amended.
SECTION 8. TERMS AND CONDITIONS OF RESTRICTED STOCK UNITS
.
(a) Restricted Stock Unit Agreement
. Each grant of Restricted Stock Units under the Plan shall be evidenced by a Restricted Stock Unit
Agreement between the recipient and the Company. Restricted Stock Units granted under the Plan shall be subject to all applicable terms and conditions of the Plan and may be subject to any other terms and conditions
6
that are not inconsistent with the Plan and which the Board of Directors deems appropriate for inclusion in a Restricted Stock Unit Agreement. The provisions of the various Restricted Stock Unit
Agreements entered into under the Plan need not be identical.
(b) Payment for Restricted Stock Units
. No cash consideration shall
be required of the recipient in connection with the grant of Restricted Stock Units.
(c) Vesting Conditions
. Restricted Stock
Units may or may not be subject to vesting, as determined in the discretion of the Board of Directors. Vesting may occur, in full or in installments, upon the satisfaction of the vesting conditions specified in the Restricted Stock Unit Agreement,
which may include continued Service with the Company or a Parent or Subsidiary, achievement of performance goals and/or such other criteria as the Board of Directors may determine. A Restricted Stock Unit Agreement may provide for accelerated
vesting upon specified events.
(d) Voting and Dividend Rights
. The recipient of Restricted Stock Units shall have no voting
rights. Prior to settlement or forfeiture, any Restricted Stock Unit granted under the Plan may, at the discretion of the Board of Directors, carry with it a right to dividend equivalents. Such right entitles the recipient to be credited with an
amount equal to all cash dividends paid on one Share for each Restricted Stock Unit held by the recipient at the time the cash dividend is paid. Dividend equivalents may be converted into additional Restricted Stock Units. Settlement of dividend
equivalents may be made in the form of cash, in the form of Shares, or in a combination of both. Prior to distribution, any dividend equivalents that are not paid shall be subject to the same conditions and restrictions as the Restricted Stock Units
to which they attach.
(e) Form and Time of Settlement of Restricted Stock Units
. Settlement of vested Restricted Stock Units may
be made in the form of (i) cash, (ii) Shares or (iii) any combination of cash and Shares, as determined by the Board of Directors. The actual number of Restricted Stock Units eligible for settlement may be larger or smaller than the
number included in the original award, based on predetermined performance factors. Vested Restricted Stock Units shall be settled in such manner and at such time(s) as specified in the Restricted Stock Unit Agreement. Until Restricted Stock Units
are settled, the number of such Restricted Stock Units shall be subject to adjustment pursuant to Section 9.
(f) Modification,
Extension and Assumption of Restricted Stock Units
. Within the limitations of the Plan, the Board of Directors may modify, extend or assume outstanding Restricted Stock Units. The foregoing notwithstanding, no modification of a Restricted Stock
Unit shall, without the consent of the Participant, impair the Participant’s rights or increase the Participant’s obligations under such Restricted Stock Unit.
(g) Forfeiture
. Unless a Restricted Stock Unit Agreement provides otherwise, upon termination of the Participant’s Service or upon
such other time specified in the Restricted Stock Unit Agreement, any unvested Restricted Stock Units shall be forfeited to the Company. For this purpose, Service shall be deemed to continue while the Participant is on a bona fide leave of absence,
if such leave was approved by the Company in writing and if continued crediting of Service for this purpose is expressly required by the terms of such leave or by applicable law (as determined by the Company).
7
(h) Death of Recipient
. Any Restricted Stock Units that become distributable after the
recipient’s death shall be distributed to the recipient’s beneficiary or beneficiaries. Each recipient may designate one or more beneficiaries for this purpose by filing the prescribed form with the Company, and may thereafter change such
designation by filing the prescribed form with the Company at any time. If no beneficiary is designated or if no designated beneficiary survives the Participant, then any Restricted Stock Units that become payable after the Participant’s death
shall be distributed to his or her estate.
(i) Creditors’ Rights
. A holder of Restricted Stock Units shall have no rights
other than those of a general creditor of the Company. Restricted Stock Units represent an unfunded and unsecured obligation of the Company, subject to the terms and conditions of the applicable Restricted Stock Unit Agreement.
(j) Transferability of Restricted Stock Units
. Restricted Stock Units shall be transferable by a Participant only by
(a) beneficiary designation, (b) a will or (c) the laws of descent and distribution.
SECTION 9. ADJUSTMENT OF SHARES
.
(a) General
.
In the event of a subdivision of the outstanding Stock, a declaration of a dividend payable in Shares, a
combination or consolidation of the outstanding Stock into a lesser number of Shares, a reclassification, or any other increase or decrease in the number of issued shares of Stock effected without receipt of consideration by the Company,
proportionate adjustments shall automatically be made in each of (i) the number of Shares available for future grants under Section 4, (ii) the number of Shares covered by each outstanding Option or Restricted Stock Unit and
(iii) the Exercise Price under each outstanding Option. In the event of a declaration of an extraordinary dividend payable in a form other than Shares in an amount that has a material effect on the Fair Market Value of the Stock, a
recapitalization, a spin-off, or a similar occurrence, the Board of Directors at its sole discretion may make appropriate adjustments in one or more of (i) the number of Shares available for future grants under Section 4, (ii) the
number of Shares covered by each outstanding Option or Restricted Stock Unit or (iii) the Exercise Price under each outstanding Option; provided, however, that the Board of Directors shall in any event make such adjustments as may be required
by Section 25102(o) of the California Corporations Code.
(b) Mergers and Consolidations
.
In the event that the
Company is a party to a merger or consolidation, all Shares acquired under the Plan and all Awards outstanding on the effective date of the transaction shall be treated in the manner described in the agreement of merger or consolidation, which need
not treat all Awards in an identical manner. The agreement of merger or consolidation shall provide for one or more of the following with respect to each Award:
(i) The continuation of the outstanding Award by the Company (if the Company is the surviving corporation).
8
(ii) The assumption of the outstanding Award by the surviving corporation or its
parent, provided that the assumption of an Option shall be in a manner that complies with Section 424(a) of the Code (whether or not the Option is an ISO).
(iii) The substitution by the surviving corporation or its parent of an equivalent award for the outstanding Award (including,
but not limited to, an award to acquire the same consideration paid to the holders of Shares in the transaction), provided that the substitution of an Option shall be in a manner that complies with Section 424(a) of the Code (whether or not the
Option is an ISO).
(iv) Full exercisability of the Option and full vesting of the Shares subject to the Option, followed
by the cancellation of the Option. The full exercisability of the Option and full vesting of the Shares subject to the Option may be contingent on the closing of such merger or consolidation. The Optionee shall be able to exercise the Option during
a period of not less than five full business days preceding the closing date of such merger or consolidation, unless (A) a shorter period is required to permit a timely closing of such merger or consolidation and (B) such shorter period
still offers the Optionee a reasonable opportunity to exercise the Option. Any exercise of the Option during such period may be contingent on the closing of such merger or consolidation.
(v) The cancellation of the outstanding Award and a payment to the Participant with respect to each Share subject to the Award
(including both vested and unvested Shares) as of the merger or consolidation equal to the excess of (A) the Fair Market Value of a Share as of the closing date of such merger or consolidation over (if applicable) (B) the per-Share
Exercise Price of the Award (such excess, if any, the “
Spread
”). Such payment shall be made in the form of cash, cash equivalents, or securities of the surviving corporation or its parent with a Fair Market Value equal to the
Spread. Subject to Section 409A of the Code, such payment may be made in installments and may be deferred until the date or dates when the Award would have become vested. Such payment may be subject to vesting based on the Participant’s
continuing Service, provided that the vesting schedule shall not be less favorable to the Participant than the schedule under which the Award would have vested. If the Spread applicable to an Award is zero or a negative number, then the Award may be
cancelled without making a payment to the Participant. For purposes of this Paragraph (v), the Fair Market Value of any security shall be determined without regard to any vesting conditions that may apply to such security. In the event that a
Restricted Stock Unit is subject to Section 409A of the Code, the payment described in this Section 9(b)(v) shall be made on the settlement date specified in the applicable Restricted Stock Unit Agreement, provided that settlement may be
accelerated in accordance with Treasury Regulation 1.409A-3(j)(4).
Any action taken under this Section 9(b) must either preserve an Award’s
status as exempt from Section 409A of the Code or comply with Section 409A of the Code.
9
(c) Reservation of Rights
.
Except as provided in this Section 9, a
Participant shall have no rights by reason of (i) any subdivision or consolidation of shares of stock of any class, (ii) the payment of any dividend or (iii) any other increase or decrease in the number of shares of stock of any
class. Any issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall not affect, and no adjustment by reason thereof shall be made with respect to, the number of Shares subject to an
Award or the Exercise Price of Shares subject to an Option. The grant of an Award pursuant to the Plan shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes to its capital or
business structure, to merge or consolidate or to dissolve, liquidate, sell or transfer all or any part of its business or assets.
SECTION 10.
MISCELLANEOUS PROVISIONS
.
(a) Securities Law Requirements
. Shares shall not be issued under the Plan unless the issuance
and delivery of such Shares comply with (or are exempt from) all applicable requirements of law, including (without limitation) the Securities Act, the rules and regulations promulgated thereunder, state securities laws and regulations, and the
regulations of any stock exchange or other securities market on which the Company’s securities may then be traded. The Company shall not be liable for a failure to issue Shares that is attributable to such requirements.
(b) No Retention Rights
.
Nothing in the Plan or in any right or Award granted under the Plan shall confer upon the
Participant any right to continue in Service for any period of specific duration or interfere with or otherwise restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining the Participant) or of the Participant,
which rights are hereby expressly reserved by each, to terminate his or her Service at any time and for any reason, with or without cause.
(c) Treatment as Compensation
.
Any compensation that an individual earns or is deemed to earn under this Plan shall not
be considered a part of his or her compensation for purposes of calculating contributions, accruals or benefits under any other plan or program that is maintained or funded by the Company, a Parent or a Subsidiary.
(d) Governing Law
.
The Plan and all awards, sales and grants under the Plan shall be governed by, and construed in
accordance with, the laws of the State of Delaware, as such laws are applied to contracts entered into and performed in such State.
(e) Tax Matters
.
(i) As a condition to the award, grant, issuance, vesting, purchase, exercise or transfer of any Award, or Shares issued
pursuant to any Award, granted under this Plan, the Participant shall make such arrangements as the Board of Directors may require or permit for the satisfaction of any federal, state, local or foreign withholding tax obligations that may arise in
connection with such event.
(ii) Unless otherwise expressly set forth in an Award Agreement, it is intended that awards
granted under the Plan shall be exempt from
10
Section 409A of the Code, and any ambiguity in the terms of an Award Agreement and the Plan shall be interpreted consistently with this intent. To the extent an award is not exempt from
Section 409A of the Code (any such award, a “
409A Award
”), any ambiguity in the terms of such award and the Plan shall be interpreted in a manner that to the maximum extent permissible supports the award’s compliance with
the requirements of that statute. Notwithstanding anything to the contrary permitted under the Plan, in no event shall a modification of an Award not already subject to Section 409A of the Code be given effect if such modification would cause
the Award to become subject to Section 409A of the Code unless the parties explicitly acknowledge and consent to the modification as one having that effect. A 409A Award shall be subject to such additional rules and requirements as specified by
the Board of Directors from time to time in order for it to comply with the requirements of Section 409A of the Code. In this regard, if any amount under a 409A Award is payable upon a “separation from service” to an individual who is
considered a “specified employee” (as each term is defined under Section 409A of the Code), then no such payment shall be made prior to the date that is the earlier of (i) six months and one day after the Participant’s
separation from service or (ii) the Participant’s death, but only to the extent such delay is necessary to prevent such payment from being subject to Section 409A(a)(1). In addition, if a transaction subject to Section 9(b)
constitutes a payment event with respect to any 409A Award, then the transaction with respect to such award must also constitute a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) to the extent
required by Section 409A of the Code.
(iii) Neither the Company nor any member of the Board of Directors shall have any liability to
a Participant in the event an Award held by the Participant fails to achieve its intended characterization under applicable tax law.
SECTION 11.
DURATION AND AMENDMENTS
.
(a) Term of the Plan
.
The Plan, as set forth herein, shall become effective on
the date of its adoption by the Board of Directors, subject to the approval of the Company’s stockholders. If the stockholders fail to approve the Plan within 12 months after its adoption by the Board of Directors, then any grants, exercises or
sales that have already occurred under the Plan shall be rescinded and no additional grants, exercises or sales shall thereafter be made under the Plan. The Plan shall terminate automatically 10 years after the later of (i) the date when the
Board of Directors adopted the Plan or (ii) the date when the Board of Directors approved the most recent increase in the number of Shares reserved under Section 4 that was also approved by the Company’s stockholders. The Plan may be
terminated on any earlier date pursuant to Subsection (b) below.
(b) Right to Amend or Terminate the Plan
.
The
Board of Directors may amend, suspend or terminate the Plan at any time and for any reason; provided, however, that any amendment of the Plan shall be subject to the approval of the Company’s stockholders if it (i) increases the number of
Shares available for issuance under the Plan (except as provided in Section 9) or (ii) materially changes the class of persons who are eligible for the grant of ISOs.
11
Stockholder approval shall not be required for any other amendment of the Plan. If the stockholders fail to approve an increase in the number of Shares reserved under Section 4 within 12
months after its adoption by the Board of Directors, then any grants, exercises or sales that have already occurred in reliance on such increase shall be rescinded and no additional grants, exercises or sales shall thereafter be made in reliance on
such increase.
(c) Effect of Amendment or Termination
.
No Shares shall be issued or sold under the Plan after the
termination thereof, except upon exercise of an Option or settlement of a Restricted Stock Unit (or any other right to purchase Shares) granted under the Plan prior to such termination. The termination of the Plan, or any amendment thereof, shall
not affect any Share previously issued or any Award previously granted under the Plan.
SECTION 12. DEFINITIONS
.
(a) “
Award
” shall mean any award granted under the Plan, including an Option, Restricted Stock Unit or other right to acquire
Shares under the Plan.
(b) “
Award Agreement
” shall mean a Stock Option Agreement, Stock Grant Agreement, Stock Purchase
Agreement or Restricted Stock Unit Agreement.
(c) “
Board of Directors
” shall mean the Board of Directors of the Company,
as constituted from time to time.
(d) “
Code
” shall mean the Internal Revenue Code of 1986, as amended.
(e) “
Committee
” shall mean a committee of the Board of Directors, as described in Section 2(a).
(f) “
Company
” shall mean Acacia Communications, Inc., a Delaware corporation.
(g) “
Consultant
” shall mean a person who performs bona fide services for the Company, a Parent or a Subsidiary as a
consultant or advisor, excluding Employees and Outside Directors.
(h) “
Date of Grant
” shall mean the date of grant
specified in the applicable Stock Option Agreement, which date shall be the later of (i) the date on which the Board of Directors resolved to grant the Option or (ii) the first day of the Optionee’s Service.
(i) “
Disability
” shall mean that the Optionee is unable to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment.
(j) “
Employee
” shall mean any individual who is a
common-law
employee of the Company, a Parent or a Subsidiary.
(k) “
Exchange Act
” shall
mean the Securities Exchange Act of 1934, as amended.
12
(l) “
Exercise Price
” shall mean the amount for which one Share may be purchased
upon exercise of an Option, as specified by the Board of Directors in the applicable Stock Option Agreement.
(m) “
Fair Market
Value
” shall mean the fair market value of a Share, as determined by the Board of Directors in good faith. Such determination shall be conclusive and binding on all persons.
(n) “
Family Member
” shall mean (i) any 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, (ii) any person sharing the Participant’s household (other than a tenant or
employee), (iii) a trust in which persons described in Clause (i) or (ii) have more than 50% of the beneficial interest, (iv) a foundation in which persons described in Clause (i) or (ii) or the Participant control the
management of assets and (v) any other entity in which persons described in Clause (i) or (ii) or the Participant own more than 50% of the voting interests.
(o) “
Grantee
” shall mean a person to whom the Board of Directors has awarded Shares under the Plan.
(p) “
ISO
” shall mean an employee incentive stock option described in Section 422(b) of the Code.
(q) “
Nonstatutory Option
” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.
(r) “
Option
” shall mean an ISO or Nonstatutory Option granted under the Plan and entitling the holder to purchase Shares.
(s) “
Optionee
” shall mean a person who holds an Option.
(t) “
Outside Director
” shall mean a member of the Board of Directors who is not an Employee.
(u) “
Parent
” shall mean any corporation (other than the Company) in an unbroken chain of corporations ending with the
Company, if each of the corporations other than the Company owns stock possessing 50% or more of the total combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a
Parent on a date after the adoption of the Plan shall be considered a Parent commencing as of such date.
(v)
“
Participant
” shall mean an individual who holds an Award granted under the Plan.
(w) “
Plan
” shall mean
this Acacia Communications, Inc. 2009 Stock Plan, as amended from time to time.
13
(x) “
Purchase Price
” shall mean the consideration for which one Share may be
acquired under the Plan (other than upon exercise of an Option), as specified by the Board of Directors.
(y) “
Purchaser
”
shall mean a person to whom the Board of Directors has offered the right to purchase Shares under the Plan (other than upon exercise of an Option or settlement of a Restricted Stock Unit).
(z) “
Restricted Stock Unit
” shall mean a bookkeeping entry representing the equivalent of one Share, as awarded under the
Plan.
(aa) “
Restricted Stock Unit Agreement
” shall mean the agreement between the Company and the recipient of a
Restricted Stock Unit that includes the terms, conditions and restrictions pertaining to such Restricted Stock Unit.
(bb)
“
Securities Act
” shall mean the Securities Act of 1933, as amended.
(cc) “
Service
” shall mean service
as an Employee, Outside Director or Consultant.
(dd) “
Share
” shall mean one share of Stock, as adjusted in accordance
with Section 9 (if applicable).
(ee) “
Stock
” shall mean the Common Stock of the Company.
(ff) “
Stock Grant Agreement
” shall mean the agreement between the Company and a Grantee who is awarded Shares under the Plan
that contains the terms, conditions and restrictions pertaining to the award of such Shares.
(gg) “
Stock Option
Agreement
” shall mean the agreement between the Company and an Optionee that contains the terms, conditions and restrictions pertaining to the Optionee’s Option.
(hh) “
Stock Purchase Agreement
” shall mean the agreement between the Company and a Purchaser who purchases Shares under the
Plan that contains the terms, conditions and restrictions pertaining to the purchase of such Shares.
(ii) “
Subsidiary
”
shall mean any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company, if each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other corporations in such chain. A corporation that attains the status of a Subsidiary on a date after the adoption of the Plan shall be considered a Subsidiary commencing as of such date.
14
E
XHIBIT
A
S
CHEDULE
OF
S
HARES
R
ESERVED
FOR
I
SSUANCE
UNDER
THE
P
LAN
|
|
|
|
|
|
|
|
|
|
|
Date of Board
Approval
|
|
Date of Stockholder
Approval
|
|
Number of
Shares Added
|
|
Cumulative Number
of Shares
|
|
|
November 23, 2009
|
|
November 23, 2009
|
|
Not Applicable
|
|
|
3,414,636
|
|
|
June 29, 2010
|
|
June 29, 2010
|
|
585,822
|
|
|
4,000,458
|
|
|
December 20, 2011
|
|
March 5, 2012
|
|
300,000
|
|
|
4,300,458
|
|
|
March 5, 2012
|
|
March 5, 2012
|
|
500,000
|
|
|
4,800,458
|
|
|
April 17, 2013
|
|
April 17, 2013
|
|
1,635,437
|
|
|
6,835,895
|
|
|
October 21, 2015
|
|
October 27, 2015
|
|
1,325,331
|
|
|
8,161,226
|
|
E-1
EXHIBIT 10.6
Acacia Communications, Inc.
2016 EQUITY INCENTIVE PLAN
The purpose of this 2016 Equity Incentive Plan (the
“
Plan
”) of Acacia Communications, Inc., a Delaware corporation (the “
Company
”), is to advance the interests of the Company’s stockholders by enhancing the Company’s ability to attract, retain
and motivate persons who are expected to make important contributions to the Company and by providing such persons with equity ownership opportunities and performance-based incentives that are intended to better align the interests of such persons
with those of the Company’s stockholders. Except where the context otherwise requires, the term “
Company
” shall include any of the Company’s present or future parent or subsidiary corporations as defined in Sections
424(e) or (f) of the Internal Revenue Code of 1986, as amended, and any regulations thereunder (the “
Code
”) and any other business venture (including, without limitation, joint venture or limited liability company) in
which the Company has a controlling interest, as determined by the Board of Directors of the Company (the “
Board
”).
All of the Company’s employees, officers and directors,
as well as consultants and advisors to the Company (as such terms are defined and interpreted for purposes of Form S-8 under the Securities Act of 1933, as amended (the “
Securities Act
”), or any successor form) are eligible
to be granted Awards under the Plan. Each person who is granted an Award under the Plan is deemed a “
Participant
.” “
Award
” means Options (as defined in Section 5), SARs (as defined in
Section 6), Restricted Stock (as defined in Section 7), Restricted Stock Units (as defined in Section 7) and Other Stock-Based Awards (as defined in Section 8).
|
|
3.
|
Administration and Delegation
|
(a)
Administration by Board of Directors
. The
Plan will be administered by the Board. The Board shall have authority to grant Awards and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable. The Board may construe and
interpret the terms of the Plan and any Award agreements entered into under the Plan. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award in the manner and to the extent it shall deem
expedient and it shall be the sole and final judge of such expediency. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all persons having or claiming any interest in the Plan or in any
Award.
(b)
Appointment of Committees
. To the extent permitted by applicable law, the Board may delegate any or all of its powers
under the Plan to one or more committees or subcommittees of the Board (a “
Committee
”). All references in the Plan to the “
Board
” shall mean the Board or a Committee of the Board or the officers
referred to in Section 3(c) to the extent that the Board’s powers or authority under the Plan have been delegated to such Committee or officers.
(c)
Delegation to Officers
. To the extent permitted by applicable law, the Board may
delegate to one or more officers of the Company the power to grant Options, Restricted Stock, and other Awards that constitute rights under Delaware law (subject to any limitations under the Plan) to employees or officers of the Company and to
exercise such other powers under the Plan as the Board may determine,
provided
that the Board shall fix the terms of such Awards to be granted by such officers (including the exercise price of such Awards, which may include a formula by which
the exercise price will be determined) and the maximum number of shares subject to such Awards that the officers may grant;
provided further
, however, that no officer shall be authorized to grant such Awards to any “executive
officer” of the Company (as defined by Rule 3b-7 under the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”)) or to any “officer” of the Company (as defined by Rule 16a-1 under the Exchange Act).
|
4.
|
Stock Available for Awards
|
|
|
(a)
|
Number of Shares; Share Counting
.
|
(1)
Authorized Number of Shares
. Subject to
adjustment under Section 9, Awards may be made under the Plan (any or all of which Awards may be in the form of Incentive Stock Options, as defined in Section 5(b)) for up to such number of shares of common stock, $0.0001 par value per
share, of the Company (the “
Common Stock
”) as is equal to the sum of:
(A) 2,670,000 shares of Common Stock; plus
(B) such additional number of shares of Common Stock (up to 4,299,166 shares) as is equal to the sum of (x) the number of shares of
Common Stock reserved for issuance under the Company’s 2009 Stock Plan, as amended (the “Existing Plan”) that remain available for grant under the Existing Plan immediately prior to the effectiveness of the registration statement for
the Company’s initial public offering and (y) the number of shares of Common Stock subject to awards granted under the Existing Plan which awards expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the
Company at their original issuance price pursuant to a contractual repurchase right (subject, however, in the case of Incentive Stock Options to any limitations of the Code); plus
(C) an annual increase to be added on the first day of each fiscal year, beginning with the fiscal year ending December 31, 2017 and
continuing for each fiscal year until, and including, the fiscal year ending December 31, 2025, equal to the least of (i) 3,600,000 shares of Common Stock, (ii) 4.0% of the outstanding shares on such date and (iii) an amount
determined by the Board.
Shares issued under the Plan may consist in whole or in part of authorized but unissued shares or treasury shares.
(2)
Share Counting
. For purposes of counting the number of shares available for the grant of Awards under the Plan:
-2-
(A) all shares of Common Stock covered by SARs shall be counted against the number of shares
available for the grant of Awards under the Plan; provided, however, that (i) SARs that may be settled only in cash shall not be so counted and (ii) if the Company grants an SAR in tandem with an Option for the same number of shares of
Common Stock and provides that only one such Award may be exercised (a “
Tandem SAR
”), only the shares covered by the Option, and not the shares covered by the Tandem SAR, shall be so counted, and the expiration of one in
connection with the other’s exercise will not restore shares to the Plan;
(B) if any Award (i) expires or is terminated,
surrendered or canceled without having been fully exercised or is forfeited in whole or in part (including as the result of shares of Common Stock subject to such Award being repurchased by the Company at the original issuance price pursuant to a
contractual repurchase right) or (ii) results in any Common Stock not being issued (including as a result of an SAR that was settleable either in cash or in stock actually being settled in cash), the unused Common Stock covered by such Award
shall again be available for the grant of Awards; provided, however, that (1) in the case of Incentive Stock Options, the foregoing shall be subject to any limitations under the Code, (2) in the case of the exercise of an SAR, the number
of shares counted against the shares available under the Plan shall be the full number of shares subject to the SAR multiplied by the percentage of the SAR actually exercised, regardless of the number of shares actually used to settle such SAR upon
exercise and (3) the shares covered by a Tandem SAR shall not again become available for grant upon the expiration or termination of such Tandem SAR; and
(C) shares of Common Stock delivered (by actual delivery, attestation, or net exercise) to the Company by a Participant to (i) purchase
shares of Common Stock upon the exercise of an Award or (ii) satisfy tax withholding obligations (including shares retained from the Award creating the tax obligation) shall be added back to the number of shares available for the future grant
of Awards.
(b)
Substitute Awards
. In connection with a merger or consolidation of an entity with the Company or the acquisition by
the Company of property or stock of an entity, the Board may grant Awards in substitution for any options or other stock or stock-based awards granted by such entity or an affiliate thereof. Substitute Awards may be granted on such terms as the
Board deems appropriate in the circumstances, notwithstanding any limitations on Awards contained in the Plan. Substitute Awards shall not count against the overall share limit set forth in Section 4(a)(1), except as may be required by reason
of Section 422 and related provisions of the Code.
(a)
General
. The Board may grant options to purchase Common Stock
(each, an “
Option
”) and determine the number of shares of Common Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including
conditions relating to applicable federal or state securities laws, as it considers necessary or advisable.
(b)
Incentive Stock
Options
. An Option that the Board intends to be an “incentive stock option” as defined in Section 422 of the Code (an “
Incentive Stock Option
”) shall only be
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granted to employees of Acacia Communications, Inc., any of Acacia Communications, Inc.’s present or future parent or subsidiary corporations as defined in Sections 424(e) or (f) of the
Code, and any other entities the employees of which are eligible to receive Incentive Stock Options under the Code, and shall be subject to and shall be construed consistently with the requirements of Section 422 of the Code. An Option that is
not intended to be an Incentive Stock Option shall be designated a “
Nonstatutory Stock Option
.” The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) that is intended to
be an Incentive Stock Option is not an Incentive Stock Option or if the Company converts an Incentive Stock Option to a Nonstatutory Stock Option.
(c)
Exercise Price
. The Board shall establish the exercise price of each Option and specify the exercise price in the
applicable Option agreement. The exercise price shall be not less than 100% of the fair market value per share of Common Stock as determined by (or in a manner approved by) the Board (“
Fair Market Value
”) on the date the
Option is granted;
provided
that if the Board approves the grant of an Option with an exercise price to be determined on a future date, the exercise price shall be not less than 100% of the Fair Market Value on
such future date.
(d)
Duration of Options
. Each Option shall be exercisable at such times and subject to such terms
and conditions as the Board may specify in the applicable option agreement;
provided, however
, that no Option will be granted with a term in excess of 10 years.
(e)
Exercise of Options
. Options may be exercised by delivery to the Company of a notice of exercise in a form (which may be
electronic) approved by the Company, together with payment in full (in the manner specified in Section 5(f)) of the exercise price for the number of shares for which the Option is exercised. Shares of Common Stock subject to the Option will be
delivered by the Company as soon as practicable following exercise.
(f)
Payment Upon Exercise
. Common Stock purchased upon the
exercise of an Option granted under the Plan shall be paid for as follows:
(1) in cash or by check, payable to the order of the Company;
(2) except as may otherwise be provided in the applicable Option agreement or approved by the Board, in its sole discretion, by
(i) delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price and any required tax withholding or (ii) delivery by the Participant to the
Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a check sufficient to pay the exercise price and any required tax withholding;
(3) to the extent provided for in the applicable Option agreement or approved by the Board, in its sole discretion, by delivery (either by
actual delivery or attestation) of shares of Common Stock owned by the Participant valued at their Fair Market Value, provided (i) such method of payment is then permitted under applicable law, (ii) such Common Stock, if acquired directly
from the Company, was owned by the Participant for such minimum period of time, if any, as may be established by the Board in its sole discretion and (iii) such Common Stock is not subject to any repurchase, forfeiture, unfulfilled vesting or
other similar requirements;
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(4) to the extent provided for in the applicable Nonstatutory Stock Option agreement or approved
by the Board in its sole discretion, by delivery of a notice of “net exercise” to the Company, as a result of which the Participant would receive (i) the number of shares underlying the portion of the Option being exercised, less
(ii) such number of shares as is equal to (A) the aggregate exercise price for the portion of the Option being exercised divided by (B) the Fair Market Value on the date of exercise;
(5) to the extent permitted by applicable law and provided for in the applicable Option agreement or approved by the Board, in its sole
discretion, by payment of such other lawful consideration as the Board may determine; or
(6) by any combination of the above permitted
forms of payment.
(g)
Limitation on Repricing
. Unless such action is approved by the Company’s stockholders, the Company may
not (except as provided for under Section 9): (1) amend any outstanding Option granted under the Plan to provide an exercise price per share that is lower than the then-current exercise price per share of such outstanding Option,
(2) cancel any outstanding option (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awards granted pursuant to Section 4(b)) covering the same or a different number of shares
of Common Stock and having an exercise price per share lower than the then-current exercise price per share of the cancelled option, (3) cancel in exchange for a cash payment any outstanding Option with an exercise price per share above the
then-current Fair Market Value or (4) take any other action under the Plan that constitutes a “repricing” within the meaning of the rules of the NASDAQ Stock Market (“
NASDAQ
”).
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|
6.
|
Stock Appreciation Rights
|
(a)
General
. The Board may grant Awards consisting of
stock appreciation rights (“
SARs
”) entitling the holder, upon exercise, to receive an amount of Common Stock or cash or a combination thereof (such form to be determined by the Board) determined by reference to appreciation,
from and after the date of grant, in the Fair Market Value of a share of Common Stock over the measurement price established pursuant to Section 6(b). The date as of which such appreciation is determined shall be the exercise date.
(b)
Measurement Price
. The Board shall establish the measurement price of each SAR and specify it in the applicable SAR agreement. The
measurement price shall not be less than 100% of the Fair Market Value on the date the SAR is granted;
provided
that if the Board approves the grant of an SAR effective as of a future date, the measurement price shall be not less than 100% of
the Fair Market Value on such future date.
(c)
Duration of SARs
. Each SAR shall be exercisable at such times and subject to
such terms and conditions as the Board may specify in the applicable SAR agreement;
provided, however
, that no SAR will be granted with a term in excess of 10 years.
(d)
Exercise of SARs
. SARs may be exercised by delivery to the Company of a notice of exercise in a form (which may be electronic)
approved by the Company, together with any other documents required by the Board.
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(e)
Limitation on Repricing
. Unless such action is approved by the Company’s
stockholders, the Company may not (except as provided for under Section 9): (1) amend any outstanding SAR granted under the Plan to provide a measurement price per share that is lower than the then-current measurement price per share of
such outstanding SAR, (2) cancel any outstanding SAR (whether or not granted under the Plan) and grant in substitution therefor new Awards under the Plan (other than Awards granted pursuant to Section 4(b)) covering the same or a different
number of shares of Common Stock and having an exercise or measurement price per share lower than the then-current measurement price per share of the cancelled SAR, (3) cancel in exchange for a cash payment any outstanding SAR with a
measurement price per share above the then-current Fair Market Value or (4) take any other action under the Plan that constitutes a “repricing” within the meaning of the rules of NASDAQ.
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7.
|
Restricted Stock; Restricted Stock Units
|
(a)
General
. The Board
may grant Awards entitling recipients to acquire shares of Common Stock (“
Restricted Stock
”), subject to the right of the Company to repurchase all or part of such shares at their issue price or other stated or formula price
(or to require forfeiture of such shares if issued at no cost) from the recipient in the event that conditions specified by the Board in the applicable Award are not satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award. The Board may also grant Awards entitling the recipient to receive shares of Common Stock or cash to be delivered at the time such Award vests (“
Restricted Stock Units
”) (Restricted
Stock and Restricted Stock Units are each referred to herein as a “
Restricted Stock Award
”).
(b)
Terms and Conditions for All Restricted Stock Awards
. The Board shall determine the terms and conditions of a Restricted Stock Award, including the conditions for vesting and repurchase (or forfeiture) and the issue price, if any.
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|
(c)
|
Additional Provisions Relating to Restricted Stock
.
|
(1)
Dividends
. Unless otherwise provided in the applicable Award agreement, any dividends (whether paid in cash, stock or property) declared and paid by the Company with respect to shares of Restricted Stock (“
Accrued
Dividends
”) shall be paid to the Participant only if and when such shares become free from the restrictions on transferability and forfeitability that apply to such shares. Each payment of Accrued Dividends will be made no later than
the end of the calendar year in which the dividends are paid to stockholders of that class of stock or, if later, the 15th day of the third month following the lapsing of the restrictions on transferability and the forfeitability provisions
applicable to the underlying shares of Restricted Stock.
(2)
Stock Certificates
. The Company may
require that any stock certificates issued in respect of shares of Restricted Stock, as well as dividends or distributions paid on such Restricted Stock, shall be deposited in escrow by the Participant, together with a stock power endorsed in blank,
with the Company (or its designee). At the expiration of the applicable restriction periods, the Company (or such designee) shall deliver the certificates no longer subject to such restrictions to the Participant or if the Participant has died, to
his or her Designated Beneficiary. “
Designated Beneficiary
” means (i) the beneficiary designated, in a
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manner determined by the Board, by a Participant to receive amounts due or exercise rights of the Participant in the event of the Participant’s death or (ii) in the absence of an
effective designation by a Participant, the Participant’s estate.
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(d)
|
Additional Provisions Relating to Restricted Stock Units
.
|
(1)
Settlement
. Upon
the vesting of and/or lapsing of any other restrictions (i.e., settlement) with respect to each Restricted Stock Unit, the Participant shall be entitled to receive from the Company such number of shares of Common Stock or (if so provided in the
applicable Award agreement) an amount of cash equal to the Fair Market Value of such number of shares of Common Stock as are set forth in the applicable Restricted Stock Unit agreement. The Board may, in its discretion, provide that settlement of
Restricted Stock Units shall be deferred, on a mandatory basis or at the election of the Participant in a manner that complies with Section 409A of the Code.
(2)
Voting Rights
. A Participant shall have no voting rights with respect to any Restricted Stock Units.
(3)
Dividend Equivalents
. The Award agreement for Restricted Stock Units may provide Participants with the right to receive an amount
equal to any dividends or other distributions declared and paid on an equal number of outstanding shares of Common Stock (“
Dividend Equivalents
”). Dividend Equivalents may be settled in cash and/or shares of Common Stock and
shall be subject to the same restrictions on transfer and forfeitability as the Restricted Stock Units with respect to which paid, in each case to the extent provided in the Award agreement.
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8.
|
Other Stock-Based Awards
|
(a)
General
. Other Awards of shares of
Common Stock, and other Awards that are valued in whole or in part by reference to, or are otherwise based on, shares of Common Stock or other property, may be granted hereunder to Participants (“
Other Stock-Based Awards
”).
Such Other Stock-Based Awards shall also be available as a form of payment in the settlement of other Awards granted under the Plan or as payment in lieu of compensation to which a Participant is otherwise entitled. Other Stock-Based Awards may be
paid in shares of Common Stock or cash, as the Board shall determine.
(b)
Terms and Conditions
. Subject to the
provisions of the Plan, the Board shall determine the terms and conditions of each Other Stock-Based Award, including any purchase price applicable thereto.
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9.
|
Adjustments for Changes in Common Stock and Certain Other Events
|
(a)
Changes in
Capitalization
. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or
distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available under the Plan, (ii) the share counting rules set forth in Section 4(a), (iii) the number
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and class of securities and exercise price per share of each outstanding Option, (iv) the share and per-share provisions and the measurement price of each outstanding SAR, (v) the
number of shares subject to and the repurchase price per share subject to each outstanding Restricted Stock Award and (vi) the share and per-share-related provisions and the purchase price, if any, of each outstanding Other Stock-Based Award,
shall be equitably adjusted by the Company (or substituted Awards may be made, if applicable) in the manner determined by the Board. Without limiting the generality of the foregoing, in the event the Company effects a split of the Common Stock by
means of a stock dividend and the exercise price of and the number of shares subject to an outstanding Option are adjusted as of the date of the distribution of the dividend (rather than as of the record date for such dividend), then an optionee who
exercises an Option between the record date and the distribution date for such stock dividend shall be entitled to receive, on the distribution date, the stock dividend with respect to the shares of Common Stock acquired upon such Option exercise,
notwithstanding the fact that such shares were not outstanding as of the close of business on the record date for such stock dividend.
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(b)
|
Reorganization Events
.
|
(1)
Definition
. A “Reorganization Event” shall
mean: (a) any merger or consolidation of the Company with or into another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is
cancelled, (b) any transfer or disposition of all of the Common Stock of the Company for cash, securities or other property pursuant to a share exchange or other transaction or (c) any liquidation or dissolution of the Company.
(2)
Consequences of a Reorganization Event on Awards Other than Restricted Stock
.
(A) In connection with a Reorganization Event, the Board may take any one or more of the following actions as to all or any (or
any portion of) outstanding Awards other than Restricted Stock on such terms as the Board determines (except to the extent specifically provided otherwise in an applicable Award agreement or another agreement between the Company and the
Participant): (i) provide that such Awards shall be assumed, or substantially equivalent Awards shall be substituted, by the acquiring or succeeding corporation (or an affiliate thereof), (ii) upon written notice to a Participant, provide
that all of the Participant’s unvested and/or unexercised Awards will terminate immediately prior to the consummation of such Reorganization Event unless exercised by the Participant (to the extent then exercisable) within a specified period
following the date of such notice, (iii) provide that outstanding Awards shall become exercisable, realizable, or deliverable, or restrictions applicable to an Award shall lapse, in whole or in part prior to or upon such Reorganization Event,
(iv) in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the Reorganization Event (the “
Acquisition
Price
”), make or provide for a cash payment to Participants with respect to each Award held by a Participant equal to (A) the number of shares of Common Stock subject to the vested portion of the Award (after giving effect to any
acceleration of vesting that occurs upon or immediately prior to such Reorganization Event) multiplied by (B) the excess, if any, of (I) the Acquisition Price over (II) the exercise, measurement or purchase price of such Award and any
applicable tax withholdings, in exchange
-8-
for the termination of such Award, (v) provide that, in connection with a liquidation or dissolution of the Company, Awards shall convert into the right to receive liquidation proceeds (if
applicable, net of the exercise, measurement or purchase price thereof and any applicable tax withholdings) and (vi) any combination of the foregoing. In taking any of the actions permitted under this Section 9(b)(2), the Board shall not
be obligated by the Plan to treat all Awards, all Awards held by a Participant, or all Awards of the same type, identically.
(B)
Notwithstanding the terms of Section 9(b)(2)(A), in the case of outstanding Restricted Stock Units that are subject to Section 409A of the Code: (i) if the applicable Restricted Stock Unit agreement provides that the Restricted Stock
Units shall be settled upon a “change in control event” within the meaning of Treasury Regulation Section 1.409A-3(i)(5)(i), and the Reorganization Event constitutes such a “change in control event”, then no assumption or
substitution shall be permitted pursuant to Section 9(b)(2)(A)(i) and the Restricted Stock Units shall instead be settled in accordance with the terms of the applicable Restricted Stock Unit agreement; and (ii) the Board may only undertake
the actions set forth in clauses (iii), (iv) or (v) of Section 9(b)(2)(A) if the Reorganization Event constitutes a “change in control event” as defined under Treasury Regulation Section 1.409A-3(i)(5)(i) and such
action is permitted or required by Section 409A of the Code; if the Reorganization Event is not a “change in control event” as so defined or such action is not permitted or required by Section 409A of the Code, and the acquiring
or succeeding corporation does not assume or substitute the Restricted Stock Units pursuant to clause (i) of Section 9(b)(2)(A), then the unvested Restricted Stock Units shall terminate immediately prior to the consummation of the
Reorganization Event without any payment in exchange therefor.
(C) For purposes of Section 9(b)(2)(A)(i), an Award (other
than Restricted Stock) shall be considered assumed if, following consummation of the Reorganization Event, such Award confers the right to purchase or receive pursuant to the terms of such Award, for each share of Common Stock subject to the Award
immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the Reorganization Event by holders of Common Stock for each share of Common Stock held
immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Common Stock);
provided,
however
, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate thereof), the Company may, with the consent of the acquiring or succeeding
corporation, provide for the consideration to be received upon the exercise or settlement of the Award to consist solely of such number of shares of common stock of the acquiring or succeeding corporation (or an affiliate thereof) that the Board
determines to be equivalent in value (as of the date of such determination or another date specified by the Board) to the per share consideration received by holders of outstanding shares of Common Stock as a result of the Reorganization Event.
(3)
Consequences of a Reorganization Event on Restricted Stock
. Upon the occurrence of a Reorganization Event other than a
liquidation or dissolution of the Company, the repurchase and other rights of the Company with respect to outstanding Restricted Stock shall inure to the benefit of the Company’s successor and shall, unless the Board determines otherwise, apply
to the cash, securities or other property which the Common Stock was
-9-
converted into or exchanged for pursuant to such Reorganization Event in the same manner and to the same extent as they applied to such Restricted Stock;
provided, however
, that the
Board may provide for termination or deemed satisfaction of such repurchase or other rights under the instrument evidencing any Restricted Stock or any other agreement between a Participant and the Company, either initially or by amendment. Upon the
occurrence of a Reorganization Event involving the liquidation or dissolution of the Company, except to the extent specifically provided to the contrary in the instrument evidencing any Restricted Stock or any other agreement between a Participant
and the Company, all restrictions and conditions on all Restricted Stock then outstanding shall automatically be deemed terminated or satisfied.
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10.
|
General Provisions Applicable to Awards
|
(a)
Transferability of Awards
. Awards
shall not be sold, assigned, transferred, pledged or otherwise encumbered by the person to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution or, other than in the case of an
Incentive Stock Option, pursuant to a qualified domestic relations order, and, during the life of the Participant, shall be exercisable only by the Participant;
provided, however
, that the Board may permit or provide in an Award for the
gratuitous transfer of the Award by the Participant to or for the benefit of any immediate family member, family trust or other entity established for the benefit of the Participant and/or an immediate family member thereof if the Company would be
eligible to use a Form S-8 under the Securities Act for the registration of the sale of the Common Stock subject to such Award to such proposed transferee;
provided further
, that the Company shall not be required to recognize any such
permitted transfer until such time as such permitted transferee shall, as a condition to such transfer, deliver to the Company a written instrument in form and substance satisfactory to the Company confirming that such transferee shall be bound by
all of the terms and conditions of the Award. References to a Participant, to the extent relevant in the context, shall include references to authorized transferees. For the avoidance of doubt, nothing contained in this Section 10(a) shall be
deemed to restrict a transfer to the Company.
(b)
Documentation
. Each Award shall be evidenced in such form (written, electronic
or otherwise) as the Board shall determine. Each Award may contain terms and conditions in addition to those set forth in the Plan.
(c)
Board Discretion
. Except as otherwise provided by the Plan, each Award may be made alone or in addition or in relation to any other Award. The terms of each Award need not be identical, and the Board need not treat Participants uniformly.
(d)
Termination or Change of Status
. The Board shall determine, either at the time an Award is granted or thereafter, the effect
on an Award of the disability, death, termination or other cessation of employment, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which, the Participant,
or the Participant’s legal representative, conservator, guardian or Designated Beneficiary, may exercise rights under the Award.
(e)
Withholding
. The Participant must satisfy all applicable federal, state, and local or other income and employment tax withholding obligations before the Company will deliver
-10-
stock certificates or otherwise recognize ownership of Common Stock under an Award. The Company may decide to satisfy the withholding obligations through additional withholding on salary or
wages. If the Company elects not to or cannot withhold from other compensation, the Participant must pay the Company the full amount, if any, required for withholding or have a broker tender to the Company cash equal to the withholding obligations.
Payment of withholding obligations is due before the Company will issue any shares on exercise, vesting or release from forfeiture of an Award or at the same time as payment of the exercise or purchase price, unless the Company determines otherwise.
If provided for in an Award or approved by the Board in its sole discretion, a Participant may satisfy such tax obligations in whole or in part by delivery (either by actual delivery or attestation) of shares of Common Stock, including shares
retained from the Award creating the tax obligation, valued at their Fair Market Value;
provided, however
, except as otherwise provided by the Board, that the total tax withholding where stock is being used to satisfy such tax obligations
cannot exceed the Company’s minimum statutory withholding obligations (based on minimum statutory withholding rates for federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income). Shares
used to satisfy tax withholding requirements cannot be subject to any repurchase, forfeiture, unfulfilled vesting or other similar requirements.
(f)
Amendment of Award
. Except as otherwise provided in Sections 5(g) and 6(e) with respect to repricings and Section 11(d) with
respect to actions requiring stockholder approval, the Board may amend, modify or terminate any outstanding Award, including but not limited to, substituting therefor another Award of the same or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock Option. The Participant’s consent to such action shall be required unless (i) the Board determines that the action, taking into account any related action, does
not materially and adversely affect the Participant’s rights under the Plan or (ii) the change is permitted under Section 9.
(g)
Conditions on Delivery of Stock
. The Company will not be obligated to deliver any shares of Common Stock pursuant to the Plan or to
remove restrictions from shares previously issued or delivered under the Plan until (i) all conditions of the Award have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other
legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and regulations and any applicable stock exchange or stock market rules and regulations and (iii) the
Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.
(h)
Acceleration
. The Board may at any time provide that any Award shall become immediately exercisable in whole or in part, free of
some or all restrictions or conditions, or otherwise realizable in whole or in part, as the case may be.
(a)
No Right To Employment or Other Status
. No person shall have
any claim or right to be granted an Award by virtue of the adoption of the Plan, and the grant of an Award shall not be construed as giving a Participant the right to continued employment or any other
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relationship with the Company. The Company expressly reserves the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under
the Plan, except as expressly provided in the applicable Award.
(b)
No Rights As Stockholder; Clawback Policy
. Subject to the
provisions of the applicable Award, no Participant or Designated Beneficiary shall have any rights as a stockholder with respect to any shares of Common Stock to be distributed with respect to an Award until becoming the record holder of such
shares. In accepting an award under the Plan, a Participant shall agree to be bound by any clawback policy the Company may adopt in future.
(c)
Effective Date and Term of Plan
. The Plan shall become effective immediately prior to the effectiveness of the Company’s
registration statement for its initial public offering (the “
Effective Date
”). No Awards shall be granted under the Plan after the expiration of 10 years from the Effective Date, but Awards previously granted may extend
beyond that date.
(d)
Amendment of Plan
. The Board may amend, suspend or terminate the Plan or any portion thereof at any time
provided that no amendment that would require stockholder approval under the rules of NASDAQ may be made effective unless and until the Company’s stockholders approve such amendment. In addition, if at any time the approval of the
Company’s stockholders is required as to any other modification or amendment under Section 422 of the Code or any successor provision with respect to Incentive Stock Options, the Board may not effect such modification or amendment without
such approval. Unless otherwise specified in the amendment, any amendment to the Plan adopted in accordance with this Section 11(d) shall apply to, and be binding on the holders of, all Awards outstanding under the Plan at the time the
amendment is adopted, provided the Board determines that such amendment, taking into account any related action, does not materially and adversely affect the rights of Participants under the Plan. No Award shall be made that is conditioned upon
stockholder approval of any amendment to the Plan unless the Award provides that (i) it will terminate or be forfeited if stockholder approval of such amendment is not obtained within no more than 12 months from the date of grant and
(2) it may not be exercised or settled (or otherwise result in the issuance of Common Stock) prior to such stockholder approval.
(e)
Authorization of Sub-Plans (including for Grants to non-U.S. Employees)
. The Board may from time to time establish one or more sub-plans under the Plan for purposes of satisfying applicable securities, tax or other laws of various
jurisdictions. The Board shall establish such sub-plans by adopting supplements to the Plan containing (i) such limitations on the Board’s discretion under the Plan as the Board deems necessary or desirable or (ii) such additional
terms and conditions not otherwise inconsistent with the Plan as the Board shall deem necessary or desirable. All supplements adopted by the Board shall be deemed to be part of the Plan, but each supplement shall apply only to Participants within
the affected jurisdiction and the Company shall not be required to provide copies of any supplement to Participants in any jurisdiction which is not the subject of such supplement.
(f)
Compliance with Section 409A of the Code
. Except as provided in individual Award agreements initially or by amendment, if and
to the extent (i) any portion of any payment, compensation or other benefit provided to a Participant pursuant to the Plan in connection with his or her employment termination constitutes “nonqualified deferred compensation” within
the
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meaning of Section 409A of the Code and (ii) the Participant is a specified employee as defined in Section 409A(a)(2)(B)(i) of the Code, in each case as determined by the
Company in accordance with its procedures, by which determinations the Participant (through accepting the Award) agrees that he or she is bound, such portion of the payment, compensation or other benefit shall not be paid before the day that is six
months plus one day after the date of “separation from service” (as determined under Section 409A of the Code) (the “
New Payment Date
”), except as Section 409A of the Code may then permit. The aggregate of
any payments that otherwise would have been paid to the Participant during the period between the date of separation from service and the New Payment Date shall be paid to the Participant in a lump sum on such New Payment Date, and any remaining
payments will be paid on their original schedule.
The Company makes no representations or warranty and shall have no liability to the
Participant or any other person if any provisions of or payments, compensation or other benefits under the Plan are determined to constitute nonqualified deferred compensation subject to Section 409A of the Code but do not to satisfy the
conditions of that section.
(g)
Effect on Other Employee Benefit Plans
. The value of any Award issued to a Participant and the
shares of Common Stock issuable or amounts payable thereunder shall not be included as compensation, earnings, salaries or other similar terms used when calculating benefits under any employee benefit plan (other than the Plan) sponsored by the
Company, except as such plans otherwise expressly provide.
(h)
Limitations on Liability
. Notwithstanding any other provisions of
the Plan, no individual acting as a director, officer, employee or agent of the Company will be liable to any Participant, former Participant, spouse, beneficiary, or any other person for any claim, loss, liability, or expense incurred in connection
with the Plan, nor will such individual be personally liable with respect to the Plan because of any contract or other instrument he or she executes in his or her capacity as a director, officer, employee or agent of the Company. The Company will
indemnify and hold harmless each director, officer, employee or agent of the Company to whom any duty or power relating to the administration or interpretation of the Plan has been or will be delegated, against any cost or expense (including
attorneys’ fees) or liability (including any sum paid in settlement of a claim with the Board’s approval) arising out of any act or omission to act concerning the Plan unless arising out of such person’s own fraud or bad faith.
(i)
Governing Law
. The provisions of the Plan and all Awards made hereunder shall be governed by and interpreted in accordance with the
laws of the State of Delaware, excluding choice-of-law principles of the law of such state that would require the application of the laws of a jurisdiction other than the State of Delaware.
-13-
EXHIBIT 10.7
ACACIA COMMUNICATIONS, INC.
INCENTIVE STOCK OPTION AGREEMENT
Acacia Communications, Inc. (the “
Company
”) hereby grants the following stock option pursuant to its 2016 Equity Incentive
Plan. The terms and conditions attached hereto are also a part hereof.
Notice of Grant
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Name of optionee (the “
Participant
”):
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Grant Date:
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Number of shares of the Company’s Common
Stock subject to this option (“
Shares
”):
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Option exercise price per Share:
1
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Number, if any, of Shares that vest
immediately on the grant date:
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Shares that are subject to vesting schedule:
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Vesting Start Date:
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Final Exercise Date:
2
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Vesting Schedule:
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All vesting is dependent on the Participant remaining an Eligible Participant, as provided herein.
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This option satisfies in full all commitments that the Company has to the Participant with respect to the
issuance of stock, stock options or other equity securities.
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ACACIA COMMUNICATIONS, INC.
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Signature of Participant
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By:
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Street Address
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Name of Officer
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Title:
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City/State/Zip Code
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1
This must be at least 100% of the fair market value of the Common Stock on the date of grant (or 110% in the case of a Participant that owns more than 10% of the total combined voting power of all
classes of stock of the Company or its parent or subsidiary (a “10% Shareholder”)) for the option to qualify as an incentive stock option (an “ISO”) under Section 422 of the Code.
2
The Final Exercise Date must be no more than 10 years (5 years in the case of a 10% Shareholder) from
the date of grant for the option to qualify as an ISO. The correct approach to calculate the final exercise date is to use the day immediately prior to the date ten years out from the date of the stock option award grant (5 years in the case of a
10% stockholder). For example, an award granted to someone on July 1, 2015 would expire on June 30, 2025 (not on July 1, 2025).
ACACIA COMMUNICATIONS, INC.
Incentive Stock Option Agreement
Incorporated Terms and Conditions
This agreement evidences the grant by the Company, on the grant date
(the “
Grant Date
”) set forth in the Notice of Grant that forms part of this agreement (the “
Notice of Grant
”), to the Participant of an option to purchase, in whole or in part, on the terms provided herein and in
the Company’s 2016 Equity Incentive Plan (the “
Plan
”), the number of Shares set forth in the Notice of Grant of common stock, $0.0001 par value per share, of the Company (“
Common Stock
”), at the exercise price
per Share set forth in the Notice of Grant. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on the Final Exercise Date set forth in the Notice of Grant (the “
Final Exercise Date
”).
It is intended that the option evidenced by this agreement shall be an incentive stock option as defined in Section 422 of the Internal
Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “
Code
”) to the maximum extent permitted by law. Except as otherwise indicated by the context, the term “
Participant
”, as used in this
option, shall be deemed to include any person who acquires the right to exercise this option validly under its terms.
This option will become exercisable (“
vest
”) in
accordance with the vesting schedule set forth in the Notice of Grant.
The right of exercise shall be cumulative so that to the extent
the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination
of this option under Section 3 hereof or the Plan.
(a)
Form of Exercise
. Each election to exercise this option
shall be in writing, in the form of the Stock Option Exercise Notice attached as
Annex A
, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, or in such other form (which may be
electronic) as is approved by the Company, together with payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any
fractional share.
(b)
Continuous Relationship with the Company Required
. Except as otherwise provided in this Section 3, this
option may not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the Grant Date, an employee, director or officer of, or consultant or advisor to, the Company or any other entity
the employees, officers, directors, consultants, or advisors of which are eligible to receive option grants under the Plan (an “
Eligible Participant
”).
- 2 -
(c)
Termination of Relationship with the Company
. If the Participant ceases to be an
Eligible Participant for any reason, then, except as provided in paragraphs (d) and (e) below, the right to exercise this option shall terminate three months after such cessation (but in no event after the Final Exercise Date),
provided
that
this option shall be exercisable only to the extent that the Participant was entitled to exercise this option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the
non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company, the right to exercise this option shall terminate immediately upon such
violation.
(d)
Exercise Period Upon Death or Disability
. If the Participant dies or becomes disabled (within the meaning of
Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has not terminated such relationship for “cause” as specified in paragraph (e) below, this option shall be
exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee),
provided that
this option shall be exercisable only to the
extent that this option was exercisable by the Participant on the date of his or her death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.
(e)
Termination for Cause
. If, prior to the Final Exercise Date, the Participant’s employment is terminated by the Company for
Cause (as defined below), the right to exercise this option shall terminate immediately upon the effective date of such termination of employment. If, prior to the Final Exercise Date, the Participant is given notice by the Company of the
termination of his or her employment by the Company for Cause, and the effective date of such employment termination is subsequent to the date of delivery of such notice, the right to exercise this option shall be suspended from the time of the
delivery of such notice until the earlier of (i) such time as it is determined or otherwise agreed that the Participant’s employment shall not be terminated for Cause as provided in such notice or (ii) the effective date of such
termination of employment (in which case the right to exercise this option shall, pursuant to the preceding sentence, terminate upon the effective date of such termination of employment). If the Participant is party to an employment or severance
agreement with the Company that contains a definition of “cause” for termination of employment, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise, “Cause” shall mean willful misconduct by
the Participant or willful failure by the Participant to perform his or her responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any employment, consulting, advisory, nondisclosure,
non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant’s employment shall be considered to have been terminated for Cause if
the Company determines, within 30 days after the Participant’s resignation, that termination for Cause was warranted.
(a)
Withholding
. No Shares will be issued pursuant to the exercise
of this option unless and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of this option.
- 3 -
(b)
Disqualifying Disposition
. If the Participant disposes of Shares acquired upon
exercise of this option within two years from the Grant Date or one year after such Shares were acquired pursuant to exercise of this option, the Participant shall notify the Company in writing of such disposition.
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5.
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Transfer Restrictions; Clawback.
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(a) This option may not be sold, assigned,
transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this option shall be exercisable only by
the Participant.
(b) In accepting this option, the Participant agrees to be bound by any clawback policy that the Company may adopt in
the future.
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6.
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Provisions of the Plan
.
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This option is subject to the provisions of the Plan
(including the provisions relating to amendments to the Plan), a copy of which is furnished to the Participant with this option.
- 4 -
ANNEX A
ACACIA COMMUNICATIONS, INC.
Stock Option Exercise Notice
Acacia
Communications, Inc.
Three Clock Tower Place, Suite 100
Maynard, MA 01754
Dear Sir or Madam:
I,
(the “
Participant
”), hereby irrevocably exercise the right to purchase
shares of the Common Stock,
$0.0001 par value per share (the “
Shares
”), of Acacia Communications, Inc. (the “
Company
”) at $
per share pursuant to the Company’s
2016 Equity Incentive Plan and a stock option agreement with the Company dated
(the “
Option Agreement
”).
Enclosed herewith is a payment of $
, the aggregate purchase price for the Shares. The certificate for the Shares should be registered in my name
as it appears below or, if so indicated below, jointly in my name and the name of the person designated below, with right of survivorship.
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Signature
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Print Name:
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Address:
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Name and address of persons in whose name the Shares are to be jointly registered (if applicable):
- 5 -
EXHIBIT 10.8
ACACIA COMMUNICATIONS, INC.
NONSTATUTORY STOCK OPTION AGREEMENT
Acacia Communications, Inc. (the “
Company
”) hereby grants the following stock option pursuant to its 2016 Equity Incentive
Plan. The terms and conditions attached hereto are also a part hereof.
Notice of Grant
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Name of optionee (the “
Participant
”):
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Grant Date:
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Number of shares of the Company’s Common
Stock subject to this option (“
Shares
”):
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Option exercise price per Share:
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Number, if any, of Shares that vest
immediately on the grant date:
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Shares that are subject to vesting schedule:
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Vesting Start Date:
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Final Exercise Date:
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Vesting Schedule:
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All vesting is dependent on the Participant remaining an Eligible Participant, as provided herein.
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This option satisfies in full all commitments that the Company has to the Participant with respect to the
issuance of stock, stock options or other equity securities.
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ACACIA COMMUNICATIONS, INC.
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Signature of Participant
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By:
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Street Address
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Name of Officer
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Title:
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City/State/Zip Code
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ACACIA COMMUNICATIONS, INC.
Nonstatutory Stock Option Agreement
Incorporated Terms and Conditions
This agreement evidences the grant by the Company, on the grant date
(the “
Grant Date
”) set forth in the Notice of Grant that forms part of this agreement (the “
Notice of Grant
”), to the Participant of an option to purchase, in whole or in part, on the terms provided herein and in
the Company’s 2016 Equity Incentive Plan (the “
Plan
”), the number of Shares set forth in the Notice of Grant of common stock, $0.0001 par value per share, of the Company (“
Common Stock
”), at the exercise price
per Share set forth in the Notice of Grant. Unless earlier terminated, this option shall expire at 5:00 p.m., Eastern time, on the Final Exercise Date set forth in the Notice of Grant (the “
Final Exercise Date
”).
It is intended that the option evidenced by this agreement shall not be an incentive stock option as defined in Section 422 of the
Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “
Code
”). Except as otherwise indicated by the context, the term “
Participant
”, as used in this option, shall be deemed to
include any person who acquires the right to exercise this option validly under its terms.
This option will become exercisable (“
vest
”) in
accordance with the vesting schedule set forth in the Notice of Grant.
The right of exercise shall be cumulative so that to the extent
the option is not exercised in any period to the maximum extent permissible it shall continue to be exercisable, in whole or in part, with respect to all Shares for which it is vested until the earlier of the Final Exercise Date or the termination
of this option under Section 3 hereof or the Plan.
(a)
Form of Exercise
. Each election to exercise this option
shall be in writing, in the form of the Stock Option Exercise Notice attached as
Annex A
, signed by the Participant, and received by the Company at its principal office, accompanied by this agreement, or in such other form (which may be
electronic) as is approved by the Company, together with payment in full in the manner provided in the Plan. The Participant may purchase less than the number of shares covered hereby, provided that no partial exercise of this option may be for any
fractional share.
(b)
Continuous Relationship with the Company Required
. Except as otherwise provided in this Section 3, this
option may not be exercised unless the Participant, at the time he or she exercises this option, is, and has been at all times since the Grant Date, an employee, director or officer of, or consultant or advisor to, the Company or any other entity
the employees, officers, directors, consultants, or advisors of which are eligible to receive option grants under the Plan (an “
Eligible Participant
”).
- 2 -
(c)
Termination of Relationship with the Company
. If the Participant ceases to be an
Eligible Participant for any reason, then, except as provided in paragraphs (d) and (e) below, the right to exercise this option shall terminate three months after such cessation (but in no event after the Final Exercise Date),
provided
that
this option shall be exercisable only to the extent that the Participant was entitled to exercise this option on the date of such cessation. Notwithstanding the foregoing, if the Participant, prior to the Final Exercise Date, violates the
non-competition or confidentiality provisions of any employment contract, confidentiality and nondisclosure agreement or other agreement between the Participant and the Company, the right to exercise this option shall terminate immediately upon such
violation.
(d)
Exercise Period Upon Death or Disability
. If the Participant dies or becomes disabled (within the meaning of
Section 22(e)(3) of the Code) prior to the Final Exercise Date while he or she is an Eligible Participant and the Company has not terminated such relationship for “cause” as specified in paragraph (e) below, this option shall be
exercisable, within the period of one year following the date of death or disability of the Participant, by the Participant (or in the case of death by an authorized transferee),
provided that
this option shall be exercisable only to the
extent that this option was exercisable by the Participant on the date of his or her death or disability, and further provided that this option shall not be exercisable after the Final Exercise Date.
(e)
Termination for Cause
. If, prior to the Final Exercise Date, the Participant’s employment or other relationship with the
Company is terminated by the Company for Cause (as defined below), the right to exercise this option shall terminate immediately upon the effective date of such termination of employment or other relationship. If, prior to the Final Exercise Date,
the Participant is given notice by the Company of the termination of his or her employment by the Company for Cause, and the effective date of such employment termination is subsequent to the date of delivery of such notice, the right to exercise
this option shall be suspended from the time of the delivery of such notice until the earlier of (i) such time as it is determined or otherwise agreed that the Participant’s employment shall not be terminated for Cause as provided in such
notice or (ii) the effective date of such termination of employment (in which case the right to exercise this option shall, pursuant to the preceding sentence, terminate upon the effective date of such termination of employment). If the
Participant is party to an employment or severance agreement with the Company that contains a definition of “cause” for termination of employment, “Cause” shall have the meaning ascribed to such term in such agreement. Otherwise,
“Cause” shall mean willful misconduct by the Participant or willful failure by the Participant to perform his or her responsibilities to the Company (including, without limitation, breach by the Participant of any provision of any
employment, consulting, advisory, nondisclosure, non-competition or other similar agreement between the Participant and the Company), as determined by the Company, which determination shall be conclusive. The Participant’s employment shall be
considered to have been terminated for Cause if the Company determines, within 30 days after the Participant’s resignation, that termination for Cause was warranted.
No Shares will be issued pursuant to the exercise of this option unless
and until the Participant pays to the Company, or makes provision satisfactory to the Company for payment of, any federal, state or local withholding taxes required by law to be withheld in respect of this option.
- 3 -
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5.
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Transfer Restrictions; Clawback.
|
(a) This option may not be sold, assigned,
transferred, pledged or otherwise encumbered by the Participant, either voluntarily or by operation of law, except by will or the laws of descent and distribution, and, during the lifetime of the Participant, this option shall be exercisable only by
the Participant.
(b) In accepting this option, the Participant agrees to be bound by any clawback policy that the Company may adopt in
the future.
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6.
|
Provisions of the Plan
.
|
This option is subject to the provisions of the Plan
(including the provisions relating to amendments to the Plan), a copy of which is furnished to the Participant with this option.
- 4 -
ANNEX A
ACACIA COMMUNICATIONS, INC.
Stock Option Exercise Notice
Acacia
Communications, Inc.
Three Clock Tower Place, Suite 100
Maynard, MA 01754
Dear Sir or Madam:
I,
(the “
Participant
”), hereby irrevocably exercise the right to purchase
shares of the Common
Stock, $0.0001 par value per share (the “
Shares
”), of Acacia Communications, Inc. (the “
Company
”) at $
per share pursuant to the
Company’s 2016 Equity Incentive Plan and a stock option agreement with the Company dated
(the “
Option
Agreement
”). Enclosed herewith is a payment of $
, the aggregate purchase price for the Shares. The certificate for the Shares should be
registered in my name as it appears below or, if so indicated below, jointly in my name and the name of the person designated below, with right of survivorship.
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Signature
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Print Name:
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Address:
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Name and address of persons in whose name the Shares are to be jointly registered (if applicable):
- 5 -
EXHIBIT 10.9
ACACIA COMMUNICATIONS, INC.
RESTRICTED STOCK UNIT AGREEMENT
Acacia Communications, Inc. (the “
Company
”) hereby grants the following restricted stock units pursuant to its 2016 Equity
Incentive Plan. The terms and conditions attached hereto are also a part hereof.
Notice of Grant
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Name of recipient (the “
Participant
”):
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Grant Date:
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Number of Restricted Stock Units (“
RSUs
”)
granted:
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Number, if any, of RSUs that vest
immediately on the grant date:
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RSUs that are subject to vesting schedule:
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Vesting Start Date:
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Vesting Schedule:
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All vesting is dependent on the Participant continuing to perform services for the Company, as provided herein.
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This grant of RSUs satisfies in full all commitments that the Company has to the Participant with respect to
the issuance of stock, stock options or other equity securities.
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ACACIA COMMUNICATIONS, INC.
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Signature of Participant
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By:
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Street Address
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Name of Officer
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Title:
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City/State/Zip Code
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ACACIA COMMUNICATIONS, INC.
Restricted Stock Unit Agreement
Incorporated Terms and Conditions
For valuable consideration, receipt of which is acknowledged, the parties hereto agree as follows:
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1.
|
Award of Restricted Stock Units
.
|
In consideration of services rendered and to be
rendered to the Company, by the Participant, the Company has granted to the Participant, subject to the terms and conditions set forth in this Restricted Stock Unit Agreement (this “
Agreement
”) and in the Company’s 2016 Equity
Incentive Plan (the “
Plan
”), an award with respect to the number of restricted shares units (the “
RSUs
”) set forth in the Notice of Grant that forms part of this Agreement (the “
Notice of Grant
”).
Each RSU represents the right to receive one share of common stock, $0.0001 par value per share, of the Company (the “
Common Stock
”) upon vesting of the RSU, subject to the terms and conditions set forth herein.
The RSUs shall vest in accordance with the Vesting Schedule set forth in the
Notice of Grant (the “
Vesting Schedule
”). Upon the vesting of the RSU, the Company will deliver to the Participant, for each RSU that becomes vested, one share of Common Stock, subject to the payment of any taxes pursuant to
Section 7. The Common Stock will be delivered to the Participant as soon as practicable following each vesting date, but in any event within 30 days of such date.
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3.
|
Forfeiture of Unvested RSUs Upon Cessation of Service
.
|
In the event that the
Participant ceases to perform services to the Company for any reason or no reason, with or without cause, all of the RSUs that are unvested as of the time of such cessation shall be forfeited immediately and automatically to the Company, without the
payment of any consideration to the Participant, effective as of such cessation. The Participant shall have no further rights with respect to the unvested RSUs or any Common Stock that may have been issuable with respect thereto. If the Participant
provides services to a subsidiary of the Company, any references in this Agreement to provision of services to the Company shall instead be deemed to refer to service with such subsidiary.
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4.
|
Restrictions on Transfer
.
|
The Participant shall not sell, assign, transfer, pledge,
hypothecate or otherwise dispose of, by operation of law or otherwise (collectively “transfer”) any RSUs, or any interest therein. The Company shall not be required to treat as the owner of any RSUs or issue any Common Stock to any
transferee to whom such RSUs have been transferred in violation of any of the provisions of this Agreement.
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5.
|
Rights as a Shareholder
.
|
The Participant shall have no rights as a stockholder of the
Company with respect to any shares of Common Stock that may be issuable with respect to the RSUs until the issuance of the shares of Common Stock to the Participant following the vesting of the RSUs.
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6.
|
Provisions of the Plan
.
|
This Agreement is subject to the provisions of the Plan, a
copy of which is furnished to the Participant with this Agreement.
(a)
Acknowledgments; No Section 83(b) Election
. The
Participant acknowledges that he or she is responsible for obtaining the advice of the Participant’s own tax advisors with respect to the award of RSUs and the Participant is relying solely on such advisors and not on any statements or
representations of the Company or any of its agents with respect to the tax consequences relating to the RSUs. The Participant understands that the Participant (and not the Company) shall be responsible for the Participant’s tax liability that
may arise in connection with the acquisition, vesting and/or disposition of the RSUs. The Participant acknowledges that no election under Section 83(b) of the Internal Revenue Code, as amended, is available with respect to RSUs.
(b)
Withholding
. The Participant acknowledges and agrees that the Company has the right to deduct from payments of any kind otherwise
due to the Participant any federal, state, local or other taxes of any kind required by law to be withheld with respect to the vesting of the RSUs. At such time as the Participant is not aware of any material nonpublic information about the Company
or the Common Stock, the Participant shall execute the instructions set forth in
Schedule A
attached hereto (the “
Automatic Sale Instructions
”) as the means of satisfying such tax obligation. If the Participant does not
execute the Automatic Sale Instructions prior to an applicable vesting date, then the Participant agrees that if under applicable law the Participant will owe taxes at such vesting date on the portion of the Award then vested the Company shall be
entitled to immediate payment from the Participant of the amount of any tax required to be withheld by the Company. The Company shall not deliver any shares of Common Stock to the Participant until it is satisfied that all required withholdings have
been made.
(a)
Authority of Compensation Committee
. In making any decisions
or taking any actions with respect to the matters covered by this Agreement, the Compensation Committee shall have all of the authority and discretion, and shall be subject to all of the protections, provided for in the Plan. All decisions and
actions by the Compensation Committee with respect to this Agreement shall be made in the Compensation Committee’s discretion and shall be final and binding on the Participant.
(b)
No Right to Continued Service
. The Participant acknowledges and agrees that,
notwithstanding the fact that the vesting of the RSUs is contingent upon his or her continued service to the Company, this Agreement does not constitute an express or implied promise of continued service relationship with the Participant or confer
upon the Participant any rights with respect to a continued service relationship with the Company.
(c)
Section 409A
. The RSUs
awarded pursuant to this Agreement are intended to be exempt from or comply with the requirements of Section 409A of the Internal Revenue Code and the Treasury Regulations issued thereunder (“
Section 409A
”). The delivery of
shares of Common Stock on the vesting of the RSUs may not be accelerated or deferred unless permitted or required by Section 409A.
(d)
Participant’s Acknowledgements
. The Participant acknowledges that he or she: (i) has read this Agreement; (ii) has
been represented in the preparation, negotiation and execution of this Agreement by legal counsel of the Participant’s own choice or has voluntarily declined to seek such counsel; (iii) understands the terms and consequences of this
Agreement; and (iv) is fully aware of the legal and binding effect of this Agreement.
(e)
Governing Law
. This Agreement shall
be construed, interpreted and enforced in accordance with the internal laws of the State of Delaware without regard to any applicable conflicts of laws provisions.
I hereby acknowledge that I have read this Agreement, have received and read the Plan, and understand and agree to comply with the terms and conditions of
this Agreement and the Plan.
Schedule A
Automatic Sale Instructions
The
undersigned hereby consents and agrees that any taxes due on a vesting date as a result of the vesting of RSUs on such date shall be paid through an automatic sale of shares as follows:
(a) Upon any vesting of RSUs pursuant to Section 2 hereof, the Company shall sell, or arrange for the sale of, such number of shares of
Common Stock issuable with respect to the RSUs that vest pursuant to Section 2 as is sufficient to generate net proceeds sufficient to satisfy the Company’s minimum statutory withholding obligations with respect to the income recognized by
the Participant upon the vesting of the RSUs (based on minimum statutory withholding rates for all tax purposes, including payroll and social security taxes, that are applicable to such income), and the Company shall retain such net proceeds in
satisfaction of such tax withholding obligations.
(b) The Participant hereby appoints the President and Chief Executive Officer and
Secretary of the Company, and either of them acting alone and with full power of substitution, to serve as his or her attorneys in fact to sell the Participant’s Common Stock in accordance with this Schedule A. The Participant agrees to execute
and deliver such documents, instruments and certificates as may reasonably be required in connection with the sale of the Shares pursuant to this Schedule A.
(c) The Participant represents to the Company that, as of the date hereof, he or she is not aware of any material nonpublic information about
the Company or the Common Stock. The Participant and the Company have structured this Agreement, including this Schedule A, to constitute a “binding contract” relating to the sale of Common Stock, consistent with the affirmative defense to
liability under Section 10(b) of the Securities Exchange Act of 1934 under Rule 10b5-1(c) promulgated under such Act.
The Company
shall not deliver any shares of Common Stock to the Participant until it is satisfied that all required withholdings have been made.
EXHIBIT 10.10
ACACIA COMMUNICATIONS, INC.
2016
EMPLOYEE STOCK PURCHASE PLAN
The purpose of this 2016 Employee Stock Purchase Plan (this “Plan”) is to provide eligible
employees of Acacia Communications, Inc. (the “Company”) and certain of its subsidiaries with opportunities to purchase shares of the Company’s common stock, $0.0001 par value per share (the “Common Stock”), commencing at
the time set forth in the Plan. Subject to adjustment under Section 15 hereof, the number of shares of Common Stock that have been approved for this purpose is the sum of:
(a) 700,000 shares of Common Stock; plus
(b) an annual increase to be added on the first day of each fiscal year, commencing on January 1, 2016 and ending on
December 31, 2026, equal to the least of (i) 900,000 shares of Common Stock, (ii) 1.0% of the outstanding shares on such date and (iii) an amount determined by the Company’s Board of Directors (the “Board”).
This Plan is intended to qualify as an “employee stock purchase plan” as defined in Section 423 of the Internal Revenue Code of 1986, as
amended (the “Code”), and the regulations issued thereunder, and shall be interpreted consistent therewith.
1.
Administration
. The Plan will be administered by the Board or by a Committee appointed by the Board (the “Committee”). The Board or the Committee has authority to make rules and regulations for the administration of the Plan and its
interpretation and decisions with regard thereto shall be final and conclusive.
2.
Eligibility
. All employees of the Company and
all employees of any subsidiary of the Company (as defined in Section 424(f) of the Code) designated by the Board or the Committee from time to time (a “Designated Subsidiary”), are eligible to participate in any one or more of the
offerings of Options (as defined in Section 9) to purchase Common Stock under the Plan provided that:
(a) they are
customarily employed by the Company or a Designated Subsidiary for more than twenty (20) hours a week and for more than five (5) months in a calendar year;
(b) they have been employed by the Company or a Designated Subsidiary for at least three (3) months prior to enrolling in
the Plan; and
(c) they are employees of the Company or a Designated Subsidiary on the first day of the applicable Plan
Period (as defined below).
No employee may be granted an Option hereunder if such employee, immediately after the Option is granted,
owns 5% or more of the total combined voting power or value of the stock of the Company or any subsidiary. For purposes of the preceding sentence, the attribution rules of Section 424(d) of the Code shall apply in determining the
stock ownership of an employee, and all stock that the employee has a contractual right to purchase shall be treated as stock owned by the employee.
The Company retains the discretion to determine which eligible employees may participate in an
offering pursuant to and consistent with Treasury Regulation Sections 1.423-2(e) and (f).
3.
Offerings
. The Company will make one
or more offerings (“Offerings”) to employees to purchase stock under this Plan. Offerings will begin each May 1 and November 1, or the first business day thereafter (such dates, the “Offering Commencement Dates”). Each Offering
Commencement Date will begin a six (6) month period (a “Plan Period”) during which payroll deductions will be made and held for the purchase of Common Stock at the end of the Plan Period. The Board or the Committee may, at its
discretion, choose a different Plan Period of not more than twelve (12) months for Offerings. Notwithstanding anything to the contrary, the first Plan Period shall begin on the first date that the Common Stock is publicly traded following the
Company’s initial public offering (“IPO”) and shall end on April 30, 2016.
4.
Participation
. An employee eligible
on the Offering Commencement Date of any Offering may participate in such Offering by completing and forwarding either a written or electronic payroll deduction authorization form to the employee’s appropriate payroll office at least fifteen
(15) days prior to the applicable Offering Commencement Date. The form will authorize a regular payroll deduction from the Compensation received by the employee during the Plan Period. Unless an employee files a new form or withdraws from
the Plan, his or her deductions and purchases will continue at the same rate for future Offerings under the Plan as long as the Plan remains in effect. The term “Compensation” means the amount of money reportable on the employee’s
Federal Income Tax Withholding Statement, excluding overtime, shift premium, incentive or bonus awards, allowances and reimbursements for expenses such as relocation allowances for travel expenses, income or gains associated with the grant or
vesting of restricted stock, income or gains on the exercise of Company stock options or stock appreciation rights, and similar items, whether or not shown or separately identified on the employee’s Federal Income Tax Withholding Statement, but
including, in the case of salespersons, sales commissions to the extent determined by the Board or the Committee.
5.
Deductions
.
The Company will maintain payroll deduction accounts for all participating employees. With respect to any Offering made under this Plan, an employee may authorize a payroll deduction in any percentage amount (in whole percentages) up to a maximum of
fifteen (15)% of the Compensation he or she receives during the Plan Period or such shorter period during which deductions from payroll are made. The Board or the Committee may, at its discretion, designate a lower maximum contribution rate. The
minimum payroll deduction is such percentage of Compensation as may be established from time to time by the Board or the Committee.
6.
Deduction Changes
. An employee may decrease or discontinue his or her payroll deduction once during any Plan Period, by filing either a written or electronic new payroll deduction authorization form. However, an employee may not
increase his or her payroll deduction during a Plan Period. If an employee elects to discontinue his or her payroll deductions during a Plan Period, but does not elect to withdraw his or her funds pursuant to Section 8 hereof, funds deducted
prior to his or her election to discontinue will be applied to the purchase of Common Stock on the Exercise Date (as defined below).
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7.
Interest
. Interest will not be paid on any employee accounts, except to the extent that
the Board or the Committee, in its sole discretion, elects to credit employee accounts with interest at such rate as it may from time to time determine.
8.
Withdrawal of Funds
. An employee may at any time prior to the close of business on the fifteenth business day prior to the end of a
Plan Period and for any reason permanently draw out the balance accumulated in the employee’s account and thereby withdraw from participation in an Offering. Partial withdrawals are not permitted. The employee may not begin participation again
during the remainder of the Plan Period during which the employee withdrew his or her balance. The employee may participate in any subsequent Offering in accordance with terms and conditions established by the Board or the Committee.
9.
Purchase of Shares
.
(a)
Number of Shares
. On the Offering Commencement Date, the Company will grant to each eligible employee who is then a participant in
the Plan an option (an “Option”) to purchase on the last business day of such Plan Period (the “Exercise Date”) at the applicable purchase price (the “Option Price”) up to that number of shares of Common Stock
determined by multiplying $2,083 by the number of full months in the Plan Period and dividing the result by the closing price (as determined below) on the Offering Commencement Date; provided, however, that no employee may be granted an Option which
permits his or her rights to purchase Common Stock under this Plan and any other employee stock purchase plan (as defined in Section 423(b) of the Code) of the Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the fair
market value of such Common Stock (determined at the date such Option is granted) for each calendar year in which the Option is outstanding at any time; and, provided, further, however, that the Committee may, in its discretion, set a fixed maximum
number of shares of Common Stock that each eligible employee may purchase per Plan Period which number may not be greater than the number of shares of Common Stock determined by using the formula in the first clause of this Section 9(a) and
which number shall be subject to the second clause of this Section 9(a).
(b)
Option Price
. The Board or the Committee shall
determine the Option Price for each Plan Period, including whether such Option Price shall be determined based on the lesser of the closing price of the Common Stock on (i) the first business day of the Plan Period or (ii) the Exercise
Date, or shall be based solely on the closing price of the Common Stock on the Exercise Date; provided, however, that such Option Price shall be at least 85% of the applicable closing price. In the absence of a determination by the Board or the
Committee, the Option Price will be 85% of the lesser of the closing price of the Common Stock on (i) the first business day of the Plan Period or (ii) the Exercise Date. The closing price shall be (a) the closing price (for the
primary trading session) on any national securities exchange on which the Common Stock is listed or (b) the average of the closing bid and asked prices in the over-the-counter-market, whichever is applicable, as published in
The Wall Street
Journal
or another source selected by the Board or the Committee; provided that, with respect to the first Plan Period, the closing price on the Offering Commencement Date shall be the initial public offering price, without regard to
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any underwriters’ discount, provided for in the underwriting agreement entered into by the Company in connection with the IPO. If no sales of Common Stock were made on such a day, the price
of the Common Stock shall be the reported price for the next preceding day on which sales were made.
(c)
Exercise of Option
. Each
employee who continues to be a participant in the Plan on the Exercise Date shall be deemed to have exercised his or her Option at the Option Price on such date and shall be deemed to have purchased from the Company the number of whole shares of
Common Stock reserved for the purpose of the Plan that his or her accumulated payroll deductions on such date will pay for, but not in excess of the maximum numbers determined in the manner set forth above.
(d)
Return of Unused Payroll Deductions
. Any balance remaining in an employee’s payroll deduction account at the end of a Plan
Period will be automatically refunded to the employee, except that any balance that is less than the purchase price of one share of Common Stock will be carried forward into the employee’s payroll deduction account for the following Offering,
unless the employee elects not to participate in the following Offering under the Plan, in which case the balance in the employee’s account shall be refunded.
10.
Issuance of Certificates
. Certificates representing shares of Common Stock purchased under the Plan may be issued only in the name
of the employee, in the name of the employee and another person of legal age as joint tenants with rights of survivorship, or (in the Company’s sole discretion) in the name of a brokerage firm, bank, or other nominee holder designated by the
employee. The Company may, in its sole discretion and in compliance with applicable laws, authorize the use of book entry registration of shares in lieu of issuing stock certificates.
11.
Rights on Retirement, Death or Termination of Employment
. If a participating employee’s employment ends before the last
business day of a Plan Period, no payroll deduction shall be taken from any pay then due and owing to the employee and the balance in the employee’s account shall be paid to the employee. In the event of the employee’s death before the
last business day of a Plan Period, the Company shall, upon notification of such death, pay the balance of the employee’s account (a) to the executor or administrator of the employee’s estate or (b) if no such executor or
administrator has been appointed to the knowledge of the Company, to such other person(s) as the Company may, in its discretion, designate. If, before the last business day of the Plan Period, the Designated Subsidiary by which an employee is
employed ceases to be a subsidiary of the Company, or if the employee is transferred to a subsidiary of the Company that is not a Designated Subsidiary, the employee shall be deemed to have terminated employment for the purposes of this
Plan.
12.
Optionees Not Stockholders
. Neither the granting of an Option to an employee nor the deductions from his or her pay
shall make such employee a stockholder of the shares of Common Stock covered by an Option under this Plan until he or she has purchased and received such shares.
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13.
Options Not Transferable
. Options under this Plan are not transferable by a
participating employee other than by will or the laws of descent and distribution, and are exercisable during the employee’s lifetime only by the employee.
14.
Application of Funds
. All funds received or held by the Company under this Plan may be combined with other corporate funds and may
be used for any corporate purpose.
15.
Adjustment for Changes in Common Stock and Certain Other Events
.
(a)
Changes in Capitalization
. In the event of any stock split, reverse stock split, stock dividend, recapitalization, combination of
shares, reclassification of shares, spin-off or other similar change in capitalization or event, or any dividend or distribution to holders of Common Stock other than an ordinary cash dividend, (i) the number and class of securities available
under this Plan, (ii) the share limitations set forth in Section 9, and (iii) the Option Price shall be equitably adjusted to the extent determined by the Board or the Committee.
(b)
Reorganization Events
.
(1)
Definition
. A “Reorganization Event” shall mean: (a) any merger or consolidation of the Company with or into
another entity as a result of which all of the Common Stock of the Company is converted into or exchanged for the right to receive cash, securities or other property or is cancelled, (b) any transfer or disposition of all of the Common Stock of
the Company for cash, securities or other property pursuant to a share exchange or other transaction or (c) any liquidation or dissolution of the Company.
(2)
Consequences of a Reorganization Event on Options
. In connection with a Reorganization Event, the Board or the Committee may take
any one or more of the following actions as to outstanding Options on such terms as the Board or the Committee determines: (i) provide that Options shall be assumed, or substantially equivalent Options shall be substituted, by the acquiring or
succeeding corporation (or an affiliate thereof), (ii) upon written notice to employees, provide that all outstanding Options will be terminated immediately prior to the consummation of such Reorganization Event and that all such outstanding
Options will become exercisable to the extent of accumulated payroll deductions as of a date specified by the Board or the Committee in such notice, which date shall not be less than ten (10) days preceding the effective date of the
Reorganization Event, (iii) upon written notice to employees, provide that all outstanding Options will be cancelled as of a date prior to the effective date of the Reorganization Event and that all accumulated payroll deductions will be
returned to participating employees on such date, (iv) in the event of a Reorganization Event under the terms of which holders of Common Stock will receive upon consummation thereof a cash payment for each share surrendered in the
Reorganization Event (the “Acquisition Price”), change the last day of the Plan Period to be the date of the consummation of the Reorganization Event and make or provide for a cash payment to each employee equal to (A) (1) the
Acquisition Price times (2) the number of shares of Common Stock that the employee’s accumulated payroll deductions as of immediately prior to the Reorganization Event could purchase at the Option Price, where the Acquisition Price is
treated as the fair market value of the Common Stock on the last day of the applicable Plan Period for purposes of determining the Option Price under Section 9(b) hereof, and where the number of shares that could be purchased is subject to the
limitations set forth in
- 5 -
Section 9(a), minus (B) the result of multiplying such number of shares by such Option Price, (v) provide that, in connection with a liquidation or dissolution of the Company,
Options shall convert into the right to receive liquidation proceeds (net of the Option Price thereof) and (vi) any combination of the foregoing.
For purposes of clause (i) above, an Option shall be considered assumed if, following consummation of the Reorganization Event, the
Option confers the right to purchase, for each share of Common Stock subject to the Option immediately prior to the consummation of the Reorganization Event, the consideration (whether cash, securities or other property) received as a result of the
Reorganization Event by holders of Common Stock for each share of Common Stock held immediately prior to the consummation of the Reorganization Event (and if holders were offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); provided, however, that if the consideration received as a result of the Reorganization Event is not solely common stock of the acquiring or succeeding corporation (or an affiliate
thereof), the Company may, with the consent of the acquiring or succeeding corporation, provide for the consideration to be received upon the exercise of Options to consist solely of such number of shares of common stock of the acquiring or
succeeding corporation (or an affiliate thereof) that the Board determines to be equivalent in value (as of the date of such determination or another date specified by the Board) to the per share consideration received by holders of outstanding
shares of Common Stock as a result of the Reorganization Event.
16.
Amendment of the Plan
. The Board may at any time, and from
time to time, amend or suspend this Plan or any portion thereof, except that (a) if the approval of any such amendment by the shareholders of the Company is required by Section 423 of the Code, such amendment shall not be effected without
such approval, and (b) in no event may any amendment be made that would cause the Plan to fail to comply with Section 423 of the Code.
17.
Insufficient Shares
. If the total number of shares of Common Stock specified in elections to be purchased under any Offering plus
the number of shares purchased under previous Offerings under this Plan exceeds the maximum number of shares issuable under this Plan, the Board or the Committee will allot the shares then available on a pro-rata basis.
18.
Termination of the Plan
. This Plan may be terminated at any time by the Board. Upon termination of this Plan all amounts in the
accounts of participating employees shall be promptly refunded.
19.
Governmental Regulations
. The Company’s obligation
to sell and deliver Common Stock under this Plan is subject to listing on a national stock exchange (to the extent the Common Stock is then so listed or quoted) and the approval of all governmental authorities required in connection with the
authorization, issuance or sale of such stock.
20.
Governing Law
. The Plan shall be governed by Delaware law except to the extent
that such law is preempted by federal law.
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21.
Issuance of Shares
. Shares may be issued upon exercise of an Option from authorized
but unissued Common Stock, from shares held in the treasury of the Company, or from any other proper source.
22.
Notification upon
Sale of Shares
. Each employee agrees, by entering the Plan, to promptly give the Company notice of any disposition of shares purchased under the Plan where such disposition occurs within two years after the date of grant of the Option pursuant
to which such shares were purchased.
23.
Special Provisions for First Plan Period
. The following provisions of this
Section 23 shall apply with respect to the first Plan Period notwithstanding any provision of the Plan to the contrary:
Every
eligible employee shall automatically become a participant in the Plan for the first Plan Period at the highest percentage of Compensation permitted under Section 5. No payroll deductions shall be required for the first Plan Period; however, a
participant may, at any time after the effectiveness of the Plan’s Registration Statement on Form S-8, elect to have payroll deductions up to the aggregate amount that would have been credited to his or her account if a deduction of fifteen
percent (15%) of the Compensation that he or she received on each pay day during the first Plan Period had been made (the “Maximum Amount”) or decline to participate by filing an appropriate subscription agreement.
Upon the automatic exercise of a participant’s option on the Exercise Date for the first Plan Period, a participant shall be permitted to
purchase shares with (i) the accumulated payroll deductions in his or her account, if any, (ii) a direct payment from the participant, or (iii) a combination thereof; provided, however that the total amount applied to the purchase may
not exceed the Maximum Amount.
24.
Grants to Employees in Foreign Jurisdictions
. The Company may, to comply with the laws of a
foreign jurisdiction, grant Options to employees of the Company or a Designated Subsidiary who are citizens or residents of such foreign jurisdiction (without regard to whether they are also citizens of the United States or resident aliens (within
the meaning of Section 7701(b)(1)(A) of the Code)) with terms that are less favorable (but not more favorable) than the terms of Options granted under the Plan to employees of the Company or a Designated Subsidiary who are resident in the
United States. Notwithstanding the preceding provisions of this Plan, employees of the Company or a Designated Subsidiary who are citizens or residents of a foreign jurisdiction (without regard to whether they are also citizens of the United States
or resident aliens (within the meaning of Section 7701(b)(1)(A) of the Code)) may be excluded from eligibility under the Plan if (a) the grant of an Option under the Plan to a citizen or resident of the foreign jurisdiction is prohibited
under the laws of such jurisdiction or (b) compliance with the laws of the foreign jurisdiction would cause the Plan to violate the requirements of Section 423 of the Code. The Company may add one or more appendices to this Plan describing
the operation of the Plan in those foreign jurisdictions in which employees are excluded from participation or granted less favorable Options.
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25.
Authorization of Sub-Plans
. The Board may from time to time establish one or more
sub-plans under the Plan with respect to one or more Designated Subsidiaries, provided that such sub-plan complies with Section 423 of the Code.
26.
Withholding
. If applicable tax laws impose a tax withholding obligation, each affected employee shall, no later than the date of
the event creating the tax liability, make provision satisfactory to the Board for payment of any taxes required by law to be withheld in connection with any transaction related to Options granted to or shares acquired by such employee pursuant to
the Plan. The Company may, to the extent permitted by law, deduct any such taxes from any payment of any kind otherwise due to an employee.
27.
Effective Date and Approval of Shareholders
. The Plan shall take effect as of the effectiveness of the registration statement
relating to the Company’s initial public offering subject to approval by the shareholders of the Company as required by Section 423 of the Code, which approval must occur within twelve months of the adoption of the Plan by the Board.
Adopted by the Board of Directors on
October 23, 2015
Approved by the stockholders on
January 29, 2016
- 8 -
Exhibit 10.13
COMMERCIAL LEASE
(the “
Lease
”)
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1. PARTIES
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WELLESLEY/ROSEWOOD MAYNARD MILLS LIMITED PARTNERSHIP
,
a limited partnership established under the laws of the Commonwealth of Massachusetts, with an address of Twelve Clock Tower Place, Suite 200, Maynard, MA 01754
(“
Landlord
”), does hereby lease to
ACACIA
COMMUNICATIONS, INC.,
a Delaware corporation, with a place of business at 1000 Winter Street, Waltham, Massachusetts 02451 (“
Tenant
”), the
Premises (as defined below).
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2. PREMISES
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A portion of the building consisting of 9,730 contiguous rentable square feet located on the Second floor of the building known as 3 Clock
Tower Place, more particularly known as Suite 210, Maynard, Massachusetts, as shown on
Exhibit “A”
(the “
Premises
”) together with the right to use in common, with others entitled thereto, all common areas of
the building, including but not limited to the hallways, stairways and elevators, necessary for access to said leased premises, and lavatories nearest thereto, if any. Except as set forth herein, the Premises are to be delivered in the same
condition they are in on the date of this Lease.
The building of which the Premises
are a part of is collectively referred to herein as the “
Building
”, and the land on which the Building is located is referred to as the “
Land
”. The Land and the Building are collectively referred to as the
“
Property
”. The buildings and improvements now or hereafter located or used in connection with the Property, including the Building, currently consisting of approximately 1,084,484 rentable square feet is referred to as the
“
Project
”.
Prior to the Term Commencement Date (as defined below),
Landlord shall arrange to have the actual rentable square feet of the Premises measured. The Landlord’s gross building method shall be used to determine both rentable and usable square footages with the gross measurement to the outside of the
exterior wall. Useable to rentable factor is currently 19.5%, subject to periodic review and update.
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3. EXPANSION RIGHTS
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During the first twelve (12) months of the Term, Tenant shall have the option to expand into the remainder of the premises, approximately 4,890 contiguous rentable square feet (the “
Expansion Premises
”),
by giving Landlord sixty (60) days prior written notice. Base Rent shall run concurrently with the existing rent schedule (i.e. if the expansion term starts at the beginning of the thirteenth
(13
th
) month, then the Base Rent shall be $13.75 per rentable square feet (the “
RSF
”) for three (3) months and follow the rent schedule in section eight (8) of the Lease
thereafter).
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4. TENANT IMPROVEMENTS
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Space will be delivered in “As-Is” broom clean condition, with all systems in good and working order. In addition, the Landlord
agrees to provide a turn-key build-out per the attached plan,
Exhibit “A”,
at Landlord’s sole cost and expense. The build-out shall include: (a) new paint throughout the Premises (including the labs), to include one
base color and one accent color, (b) the VCT tiles in the labs shall be replaced with anti-static tile, (c) the vibration in the lab area shall be rectified, (d) the existing carpet shall be steam-cleaned and a new carpet shall be installed in the
new conference room, (e) the existing glass window in the new conference room shall be replaced with a solid wall (the “
Tenant Improvements
”).
All Tenant Improvements will be completed with Building standard materials.
The Tenant Improvements shall be exclusive of Tenant’s furniture, fixtures, and equipment, cabling for phone and data, any new supplemental cooling and
specialty items for “labs” (cooling, power and ceiling).
Any additional
upgrades shall be at the sole cost of the Tenant.
If a Certificate of Occupancy cannot
be issued after Tenant Improvements have been completed due to incompleteness of, or a defect in, Landlord’s work, then delivery of possession should not be deemed to have occurred until the defect has been corrected and the Certificate of
Occupancy issued.
Any structural and nonstructural Tenant Improvements are subject to
Landlord’s approval.
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5. FURNITURE
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Tenant shall have the right to use the furniture on the Premises for the full Term of the Lease. Tenant shall return said furniture to Landlord upon expiration of the Lease in the same condition delivered to Tenant, normal wear
and tear excepted.
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6. TERM
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The term of the Lease shall be for three (3) years and three (3) months. The target commencement date for the Lease shall be November 1, 2009 (the “
Term Commencement Date
”) and the Lease termination date
will be January 31, 2013 (the “
Term Expiration Date
”). If the Tenant Improvements to the Premises are not substantially completed for occupancy on or by November 1, 2009 or in the event of delays resulting from force majeure
or
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caused by Landlord, the Term Commencement Date, the Rent Commencement Date (as defined below) and the Term Expiration Date (as defined below) shall be adjusted accordingly and memorialized in writing.
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7. RENEWAL OPTION
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Provided Tenant is not in default, Tenant shall have the right to extend the term of the Lease for one (1) additional three (3) year period, by providing Landlord with twelve (12) months prior written notice. Said extension shall
be at the then fair market rate, for first class office space in the Maynard, Concord, Acton, Boxborough area; however, in no event shall such rate be less than the Base Rent Year Three (as defined below).
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8. RENT
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The Tenant shall commence paying Base Rent and any additional rent on February 1, 2010, subject to Section 6 hereof (the “
Rent
Commencement Date
”) (for the avoidance of doubt, the Rent Commencement Date shall be three (3) months after the Term Commencement Date). If the Rent Commencement Date does not occur on the first of the month, then the Rent Commencement
Date shall automatically be extended to the next first day of the following month. The interim days shall be prorated and paid with the first month’s Rent and shall be considered added days to the Lease Term. Upon determination of the actual
Rent Commencement Date subject to Section 6 and this Section 8, the Tenant and Landlord shall memorialize such date in writing.
The Tenant shall pay, without any offset or reduction, except as set forth herein, rent to Landlord at the rate of:
Base Rent Year One (1): commencing on the Rent Commencement Date and continuing to January
31, 2011, Tenant shall pay Base Rent at the rate of $13.75 per RSF on 8,510 RSF portion of the Premises, or $117,012.50 annually, in equal monthly installments of $9,751.04, each payable in advance by the first day of each month.
Base Rent Year Two (2): commencing on February 1, 2011 and continuing to January 31, 2012,
Tenant shall pay Base Rent at the rate of $14.25 per RSF on the entire 9,730 RSF of the Premises or $138,652.50 annually, in equal monthly installments of $11,554.38, each payable in advance by the first day of each month.
Base Rent Year Three (3(the “Base Rent Year Three”): commencing on February 1,
2012 and continuing to January 31, 2013, Tenant shall pay Base Rent at the rate of $15.25 per RSF on the entire 9,730 RSF of the Premises, or $148,382.50 annually, in equal monthly installments of $12,365.21, each payable in advance by the first day
of each month.
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Tenant shall pay the first month’s Base Rent upon execution of the Lease. All payments hereunder (including Rent and Additional Rent)
shall be due and payable on or before the first day of each calendar month.
If rent or
any other sum payable in this Section remains outstanding for a period of five (5) days after Landlord’s delivery of written notice that said amounts are past due, there will be a late charge for such payments, which charge shall be the lesser
of eighteen percent (18%) per year on any outstanding balance owed, or the maximum amount permitted by law. Failure to pay the late charge is a default under the terms of the Lease.
Tenant acknowledges and waives any/all rights to offset or reduce payments due under this
Lease.
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9. SECURITY DEPOSIT
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A security deposit initially in the amount of $37,095.62, equal to three times the last month’s rent, shall be paid to Landlord by Tenant upon execution of the Lease, which amount shall be held as security for Tenant’s
performance of its obligations hereunder (the “
Security Deposit
”). The Security Deposit shall be refunded to the Tenant within thirty (30) days of the end of this lease, without interest, subject to the Tenant’s
satisfactory compliance with the conditions of this Lease. Provided that Tenant is not in default, Landlord shall reduce Tenant’s Security Deposit to $24,730.42 equal to two times the last month’s rent, and refund to Tenant any balance as
a result of such reduction within thirty (30) days, on the earlier of (a) Tenant exercising its right to the Expansion Premises or (b) at the end of the twenty-seventh (27
th
) month of the term.
Upon the occurrence of a default under this Lease by Tenant, Landlord may, in its sole discretion, apply the Security Deposit to cure such default and Tenant shall restore the Security Deposit to the sum of $37,095.62 (or any such adjusted amount).
Upon a transfer of the Property by the Landlord, Tenant agrees to look solely to such transferee for the return of the Security Deposit.
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10. TAXES AND OPERATING EXPENSES
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Tenant shall pay to Landlord in advance on the first day of each month, commencing on the Term Commencement Date, as “
Additional Rent
” the Tenant’s Share (as defined below) of (i) the Taxes (as
defined below) in excess of the Taxes for the Base Year (as defined below) and (ii) Operating Expenses (as defined below) in excess of the Operating Expenses for the Base Year. If the Term Commencement Date does not occur on the first of the month,
then any Additional Rent shall automatically be prorated.
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If Landlord obtains an abatement of any excess Taxes, a proportionate share of such abatement, less reasonable fees and costs incurred in
obtaining the same, if any, shall be refunded to the Tenant. At the end of each lease year, upon written request from Tenant, Landlord shall provide Tenant with a tax statement consisting of a copy of the bill, a computation of Tenant’s share,
and the manner of calculation.
Landlord shall reconcile Operating Expenses within
ninety (90) days after the end of each year with a detailed breakdown of the costs, a computation of Tenant’s share, and the manner of calculation. Tenant shall have the right to audit such statement with prior written request to Landlord.
Tenant’s right shall expire forty-five (45) days following receipt of the reconciliation of operating costs for the previous year. If the audit reveals an overcharge, such amount shall be immediately repaid to Tenant.
“
Taxes
” shall mean all real estate taxes, personal property taxes,
assessments, water and sewer charges and all municipal charges levied or assessed or imposed on the Project.
“
Base Year
” shall mean calendar year 2010.
“
Operating Expenses
” shall mean all expenses, costs and disbursements of every kind and nature which Landlord shall pay or become obligated to
pay in connection with the Project, including without limitation, (i) insurance premiums paid in connection with the Project; (ii) all utility charges for the Project; (iii) compensation and benefits for Landlord’s employees and agents, engaged
in the operation and maintenance of the Project; (iv) worker’s compensation costs and payroll taxes for said employees and agents to be prorated when employee is not full time at the Project; (v) payments to independent contractors for
maintenance, repairs, cleaning, management, legal, accounting and maintenance of the Project including utility systems; and (vi) generally all expenses incurred by Landlord in connection with its operation of the Project.
“
Tenant’s Share
” shall mean 0.08972%. Landlord may by notice in
writing, from time to time, adjust Tenant’s Share to reflect the ratio of the actual rentable square feet of the Premises to the actual rentable square feet of the Project.
THIS LEASE IS A NET LEASE AND LANDLORD SHALL NOT BE OBLIGATED TO PAY ANY CHARGE OR
BEAR
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ANY EXPENSE WHATSOEVER AGAINST OR WITH RESPECT TO THE PREMISES EXCEPT TO THE EXTENT SPECIFICALLY SET FORTH HEREIN NOR SHALL RENT PAYABLE HEREUNDER BE SUBJECT TO ANY REDUCTION OR OFFSET WHATSOEVER,, ON ACCOUNT OF SUCH CHARGE. IN
ORDER THAT THE RENT SHALL BE ABSOLUTELY NET TO LANDLORD, TENANT COVENANTS AND AGREES TO PAY AS ADDITIONAL RENT TAXES, BETTERMENT ASSESSMENTS, INSURANCE COSTS, OPERATING EXPENSES AND UTILITY CHARGES WITH RESPECT TO THE PREMISES AS PROVIDED
HEREIN.
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11. UTILITIES
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The Tenant shall pay all bills for utilities furnished to the Premises, including, without limitation, electricity, water, sewer,
telephone and other services and excluding only heat and air conditioning.
Landlord
shall, within its control, maintain adequate connections with all utilities excluding phone and data. If utilities are interrupted and Landlord has control of such interruption, then Landlord shall attempt to remedy such interruption. If such
interruption of utilities continues for Ten (10) consecutive days, and depending on the extent of such interruption at the Project, then Landlord may relocate Tenant until such time as utilities are restored.
Tenant shall pay its proportionate share of electric usage and the Premises will be
separately metered at Landlord’s expense.
If Landlord and Tenant mutually agree
in writing not to sub-meter or check meter the Premises, Tenant will be billed monthly for its electrical energy use at a rate of $1.50 per rentable square foot per year (the “
Utility Charge
”) to be paid as Additional Rent.
Landlord shall have the right to adjust the Utility Charge from time to time in its sole discretion.
Landlord shall have no obligation to provide utilities or equipment other than the utilities and equipment within the Premises as of the Term Commencement
Date. In the event Tenant requires additional utilities or equipment, the installation and maintenance thereof shall be the Tenant’s sole obligation, provided that such installation shall be subject to the prior written consent of the Landlord,
which consent shall not be unreasonably withheld or delayed.
If the Premises contain a
server room or lab room (the
“
Lab
”)
with an existing supplemental HVAC unit, Tenant shall be responsible
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for maintenance of such existing supplementary HVAC unit. If any server room or lab room should need supplementary HVAC services and
Tenant desires to have such a unit installed, Tenant shall use Landlord’s designated HVAC contractor. Tenant shall be responsible for maintenance of said HVAC equipment. At the termination of the Lease or any following Amendment, the
supplementary HVAC equipment shall remain with the Premises and will become the property of the Landlord.
Notwithstanding anything contained in the Lease to the contrary, except as caused by Landlord’s willful or grossly negligent misconduct, (i) Landlord
shall not be responsible or liable for damages or injuries sustained by Tenant or those claiming by, through or under Tenant, and (ii) Tenant shall not be relieved from the performance of its obligations, including, but not limited to, Tenant’s
obligation to pay Base Rent and Additional Rent, because of the interruption, discontinuance, quality or quantity of any utility used in or for the Premises, whether or not supplied by Landlord, and regardless of the reason or cause of the
interruption or discontinuance.
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12. USES OF LEASED PREMISES
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Tenant’s Premises shall only be used for general office purposes, provided that such use must comply with the Zoning Bylaw of the
Town of Maynard and all other applicable Federal, State and
Municipal laws and
Landlord’s rules and regulations, adopted from time to time.
Tenant is satisfied
that the uses meet the municipal zoning ordinances and agrees to indemnify and hold harmless Landlord from and against any and all losses, claims or damages arising from Tenant’s failure to determine whether the proposed uses comply with the
provisions of this Section.
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13. COMPLIANCE WITH LAWS
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Tenant acknowledges that no trade or occupation shall be conducted in the Premises or use made thereof which will be unlawful, improper, unreasonably noisy or offensive, or contrary to any law or any municipal by-law or ordinance
in force in the city or town in which the premises are situated. Said noncompliance shall be considered a breach of this Lease. Also, Tenant acknowledges that it is Tenant’s responsibility to comply with all existing and future laws related to
Tenant’s use and operation of the Premises, which may change from time to time. However, Tenant shall not be required to make or pay for Landlord to make structural or capital alterations or repairs, unless the same are necessitated by the
Tenants specific use.
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Landlord represents that the use of “general office purposes” does not violate the forgoing prohibitions, so long as it is used
for general office purposes and normal business operations.
We make no representations
for Tenant’s business operations. Tenant shall pay for any and all costs associated with the compliance of the current or future laws.
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14. FIRE INSURANCE
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Tenant shall not permit any use of the Premises which will make void any insurance on the Project or on the contents of the Project or which shall be contrary to any law or regulation from time to time established by the New
England Fire Insurance Rating Association, or any similar body succeeding to its powers. Tenant shall upon written demand reimburse Landlord, and all other tenants, for all extra insurance premiums resulting from Tenant’s use of the
Premises.
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15. MAINTENANCE
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A. TENANT’S OBLIGATION
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Tenant agrees to maintain the Premises in good and working condition, damage by fire and other casualty and damage caused by Landlord and reasonable wear and tear excepted, and whenever necessary, to replace plate glass,
acknowledging that the Premises are now in good order and the glass whole. Tenant shall not permit the Premises to be overloaded, damaged, stripped or defaced, nor suffer any waste, nor leave the Premises unoccupied at any time, with the exception
of
non-working
hours, and not install any signs at the Project.
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B. LANDLORD’S OBLIGATION
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Landlord agrees to maintain the structure of the Building in the same condition as it is at the Term Commencement Date or as it may be put
in during the Term of and pursuant to the terms of this Lease, reasonable wear and tear, damage by fire or other casualty and damage caused by Tenant is excepted.
Tenant acknowledges that the Building is old and has been recently restored. As such, the structure may contain certain deficiencies that could lead to leaks
and other such nuisances due to wind, driving rain and other weather related items. Tenant acknowledges that with reasonable notice the Landlord will respond and make efforts to repair such problems, as seasonal or daily weather may permit. Tenant
also acknowledges they may not use any such problems, should they arise, as an excuse to break this Lease and will make reasonable efforts to cooperate and assist the Landlord.
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Landlord shall maintain, without limitation, in good order and repair (i) all building systems (including HVAC, electrical, mechanical and plumbing systems), (ii) the common facilities, and (iii) the grounds and
landscaping. Landlord shall remove the snow from the parking lot, driveways and entrances. Landlord shall use reasonable efforts to minimize any interruptions to Tenant’s enjoyment of the Premises.
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16. ALTERATIONS & ADDITIONS
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Tenant shall not make alterations or additions to the Premises without Landlord’s prior written consent, which consent shall not be unreasonably withheld, but may be conditional, and Landlord in its sole discretion
shall determine such conditions. Any and all alterations or additions must be performed by Landlord’s general contractor (the “
Alterations
”). All such allowed Alterations shall be at Tenant’s sole cost and expense
and shall be in quality at least equal or better than the present construction. Tenant shall not permit any mechanics’ liens, or similar liens, to remain upon the Premises for labor and material furnished to Tenant or claimed to have been
furnished to Tenant in connection with work of any character performed or claimed to have been performed at the direction of Tenant and shall cause any such lien to be released of record forthwith without cost to Landlord. Any Alterations made to
the Premises shall become the property of the Landlord at the termination of occupancy as provided herein, and Tenant shall not be responsible for the removal or restoration of any Alterations.
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17. ASSIGNMENT & SUBLETTING
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Tenant shall not assign or sublet the whole or any part of the Premises without Landlord’s prior written consent, which may
not be unreasonably withheld by Landlord, but maybe conditioned by Landlord or its Lender. Tenant shall tender to Landlord upon its request, a non refundable processing fee of $2,500.00 and Landlord shall have the right, at a minimum, to review
financial statements, identity and business of any prospective assignee or subtenant before making a decision to grant consent.
Landlord shall never be deemed unreasonable in denying its consent to an assignment of this Lease or a subletting of all or any portion of the Premises under
the following circumstances:
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A.
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Landlord, after reviewing the proposed subtenant or assignee’s financial statements, shall determine in its sole discretion that the net worth or financial capability of such proposed subtenant or assignee is less than the
net worth or financial capability of Tenant or adequate to fulfill the financial obligations of this Lease;
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B.
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if such assignment or subletting would require the Premises to be used for a use that is dissimilar to Tenant’s use, or in Landlord’s determination would result in a use conflict or compete with a use granted to another
tenant at the Project;
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C.
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if there is a vacancy at the Project and if the terms and conditions of the proposed sublease or assignment are less favorable than those terms and conditions on which Landlord is then offering to lease such vacant space at the
Project; or
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D.
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if Tenant is in default (beyond any applicable notice and cure period) of its obligations under this Lease.
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Notwithstanding such consent, Tenant shall remain liable to Landlord for the payment of all Base Rent and Additional Rent and for the full performance of the covenants and conditions of this Lease. For the purpose of
this Lease, any transfer of an interest in Tenant shall be deemed an assignment of this Lease, other than in connection with a bona fide equity financing of the company through Venture Capital. If Tenant requests Landlord’s consent to assign
this Lease or sublet all or any portion of the Premises, Landlord shall have the option, exercisable by written notice to Tenant given within thirty (30) days after receipt of such request, to terminate this Lease as of the date specified in such
notice. If Landlord approves a sublease and said sublease is for a total rental amount which on an annual basis is greater than the Base Rent and Additional Rent due from the Tenant to the Landlord under this Lease, Tenant shall pay to Landlord,
forthwith upon Tenant’s receipt of each installment of such excess Base Rent and Additional Rent, during the term of any approved sublease, as Additional Rent hereunder, in addition to the Base Rent and Additional Rent and other payments due
under this Lease, an amount equal to one hundred percent (100%) of the positive excess between the Base Rent and Additional Rent received by Tenant, less reasonable transaction costs, which shall include reasonable legal fees not to exceed $2,500.00
and brokerage commissions, under the sublease and the aggregate of Base Rent and Additional Rent due hereunder. Notwithstanding any provision to the contrary, there shall be no restriction on Tenant’s right to assign or transfer this Lease to
its parent or any subsidiary or affiliate, or to any party in connection with a merger or consolidation involving Tenant or a sale of all or substantially all of Tenant’s assets, provided that such successor has as high a net worth as Tenant on
(a) the Term Commencement Date or (b) the date of the transfer of this Lease, whichever date the net worth is higher. If this standard is not met, Landlord shall have the right of recapture.
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18. SUBORDINATION
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This Lease shall be subject and subordinate to any and all mortgages, deeds of trust and other instruments in the nature of a mortgage, now existing or at any time hereafter arising, a lien or liens on the property of
which the leased premises are a part. Tenant shall, when requested, promptly execute and deliver such written instruments in the lender’s form as shall be necessary to show the subordination of this Lease to said mortgages, deeds of trust or
other such instruments in the nature of a mortgage. Tenant’s failure to execute and return documents to Landlord within seventy-two (72) hours of receipt by Tenant or Tenant’s agent shall be deemed a breach of this Lease.
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19. ACCESS
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Tenant will have access to its Premises 24 hours per day, 7 days per week and 52 weeks per year.
Landlord or agents of Landlord may show the Premises to others during normal business
hours with advance notice to Tenant, and at any time before the expiration of the Term for the purpose related to the sale or refinancing of the Premises, excluding emergencies in which case Landlord may enter the Premises without any notice.
Landlord may remove placards and signs not approved and affixed as herein provided, and make repairs and alterations, provided that Landlord shall use reasonable efforts to minimize any interruptions to Tenant’s enjoyment of the Premises.
Landlord may show the Premises to prospective Tenants at normal business hours during the
last nine (9) months of the Term with advance notice to Tenant. Tenant shall provide Landlord or its agents alarm codes. Tenant’s refusal to provide Landlord or its agent’s access as stated above shall be deemed a breach of this Lease.
Notwithstanding anything to the contrary in this Lease, Landlord or agents of Landlord may
only access or show the Lab with advance notice to Tenant, during normal business hours, and only if accompanied by Tenant or agents of Tenant, excluding emergencies in which case Landlord may enter the Premises without any notice.
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20. INDEMNIFICATION AND LIABILITY
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A.
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Tenant agrees to defend (with counsel reasonably approved by Landlord), indemnify and save harmless the Landlord, the Landlord’s managing agent and any holder of a mortgage on all or any portion of the Premises from (i) any
act, omission or negligence occurring on the Premises of the Tenant, or the Tenant’s contractors, licensees, agents, servants, or employees,
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or arising from any accident, injury, or damage whatsoever caused to any person, or to the property of any person, or (ii) any violation of applicable law by Tenant or those Tenant contractors, licensees, agents, servants, or
employees, including, without limitation, any law, regulation or ordinance concerning trash, hazardous materials, or other pollutant occurring from and after the date that possession of the Premises is delivered to the Tenant and until the end of
the Term hereof in or about the Premises, or (iii) any accident, injury or damage occurring outside the Premises, where such accident, damage or violation of applicable law results in injury from a willful or grossly negligent act or omission on the
part of the Tenant or the Tenant’s agents or employees. This indemnity and hold harmless agreement shall survive termination of this Lease and 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. Landlord agrees to pursue all of its rights under Tenant’s insurance policy before seeking indemnification from Tenant, provided that Tenant’s policy is on an occurrence
basis policy with limits as required by Section 21. Landlord agrees that Tenant’s indemnity shall only apply to the extent Landlord does not recover such costs, expenses and liabilities under any such policy. Tenant agrees that Tenant’s
insurance shall be the primary insurance policy and that said policy shall be exhausted in its totality before Landlord seeks its own rights to recover under any additional policy. 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 any adjoining space or any part of the Building, or for any loss or damage resulting to
Tenant or to those claiming by, through or under Tenant, or its or their property, from the bursting, stopping or leaking of water, gas, sprinklers, sewer or steam pipes, unless such damage is caused by the gross negligence of
Landlord.
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21. TENANTS INSURANCE
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Tenant shall maintain with respect to the Premises and the project, commercial general liability insurance in the amount of three million, five hundred dollars ($3,500,000) with property damage insurance in limits of one
million dollars ($1,000,000) in responsible companies qualified to do business in Massachusetts and in good standing therein insuring the Tenant against injury to persons or damage to property as provided. Landlord shall be designated as an
additional insured on any such policy. Tenant shall deposit with the Landlord certificates of such insurance at or prior to the Term Commencement Date and thereafter within thirty
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(30) days prior to the expiration of any such policies. All such insurance certificates shall provide that such policies shall not be
altered or canceled without at least thirty (30) days prior written notice to Landlord.
During the term of the Lease, Tenant shall maintain all risk property and casualty insurance, including theft coverage, written at replacement cost value and
with replacement cost endorsement, covering all of Tenant’s personal property in the Premises (including, without limitation, inventory, trade fixtures, floor coverings, furniture and other property removable by Tenant under the provisions of
this Lease) and all leasehold improvements installed in the Premises by or on behalf of Tenant.
If available, all insurance policies carried by either party covering the Building and/or the Premises will contain a clause or endorsement expressly waiving
any right on the part of insurer to make any claim against the other party. The parties agree to use reasonable efforts to ensure that their policies will include such waiver clause or endorsement. Tenant waives all claims, causes of action and
rights of recovery against Landlord for any loss or damage to persons, property or business which occurs on or about the Premises or the Building or the Project and results from any of the perils insured under any policy of insurance maintained by
Tenant, regardless of cause. This waiver includes the negligence and intentional wrongdoing of Landlord, its agents, officers and employees, but is effective only to the extent of recovery, if any, under such policy. This waiver will be void to the
extent that any such insurance is invalidated by reason of this waiver.
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22. FIRE, CASUALTY, EMINENT DOMAIN
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Should a substantial portion of the Premises or of the Project be substantially damaged by fire or other casualty, or be taken by eminent
domain, Landlord may elect to terminate this Lease. When such fire, casualty or taking renders the Premises substantially unsuitable for their intended use, Tenant may elect to terminate this lease if:
(a) Landlord fails to deliver written notice within sixty (60) days of intention to
restore Premises, or
(b) Landlord fails to restore the Premises to a condition
substantially suitable for their intended use within one hundred eighty (180) days of (i) receipt of insurance proceeds in the case of fire or casualty or (ii) receipt of the award in the case of taking Landlord reserves and Tenant grants to
Landlord, all rights which the Tenant may have for damages or injury to the leased premises for any taking by eminent domain, except for damage to the Tenant’s fixtures, property, or equipment.
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23. DEFAULT & BANKRUPTCY
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In the event that:
(a) Tenant shall default in the payment of any installment of rent or other sum herein specified and such default shall not have been cured within five (5)
days; or
(b) Tenant shall vacate or abandon all or any part of the Premises or fail to
continuously occupy the Premises, such circumstances not having been cured within five (5) days; or
(c) Tenant shall materially default in the observance or performance of any other of Tenant’s covenants, agreements or obligations hereunder, such default
not having been cured within five 5 days of receiving written notice of such material default; or
(d) Tenant shall suffer a material adverse change in it’s business, as determined by Landlord; or
(e) Tenant shall be declared bankrupt or insolvent according to law, or, if any assignment
shall be made of Tenant’s property for the benefit of creditors, provided,
then
Landlord shall have the right to proceed with summary process to remove Tenant from the Premises. In the event of default by Tenant, Tenant shall pay to Landlord all costs and expenses incurred in enforcing the terms of this Lease, including
reasonable attorneys’ fees, whether or not legal proceedings are instituted. Tenant shall indemnify the Landlord against all loss of rent and other payments, which the Landlord may incur by reason of such termination during the balance of the
Term of this Lease.
If Tenant shall default in the observance or performance of any
conditions or covenants on Tenant’s part to be observed or performed hereunder or by virtue of any of the provisions in any article of this Lease other than Tenant’s rental payment obligations, Landlord, without being under any obligation
to do so and without thereby waiving such default, may remedy such default for the account and at the expense of the Tenant. If the Landlord makes any expenditures or incurs any obligations for the payment of money in connection therewith, including
but not limited to, all attorney’s fees in instituting, prosecuting or defending any action or proceeding, such sums paid or obligations incurred, with interest at the rate of two (2%) percent per month and costs, shall be paid to the Landlord
by the Tenant as Additional Rent upon written notice from Landlord to Tenant of such costs and expenses.
Notwithstanding anything contained in this Lease to the contrary, Landlord shall not be in default in the performance of any of Landlord’s obligations
under this Lease unless and until Landlord
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shall have failed to perform such obligations within thirty (30) days, or such additional time as is required to correct any such default, after receipt of written notice from Tenant to Landlord specifying wherein Landlord has
failed to perform any such obligation. If Tenant claims or asserts that Landlord is in default in the performance of Landlord’s obligations under this Lease, Tenant shall not be relieved of Tenant’s obligations under this Lease and
Tenant’s sole remedy shall be an action for specific performance, declaratory judgment or injunction and in no event shall Tenant be entitled to any money damages or to terminate this Lease and in no event shall Tenant claim or assert any claim
for money damages in any action or by way of set-off, defense or counterclaim and Tenant hereby specifically waives the right to any money damages, to terminate this Lease or any other remedies available at law or in equity.
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24. SURRENDER
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Tenant shall, at the expiration or other termination of this Lease, remove all Tenant’s goods and effects from the Premises (including without hereby limiting the generality of the foregoing, all signs and lettering affixed
or painted by Tenant, either inside or outside the Premises). Tenant shall deliver to Landlord the Premises and all keys, locks thereto, alarm codes and all alterations and additions made to or upon the Premises, in good condition, damage by fire or
other casualty only excepted. In the event of the Tenant’s failure to remove any of Tenant’s property from the Premises, Landlord is hereby authorized, without liability to Tenant for loss or damage thereto, and at the sole risk of Tenant,
to remove and store any of the property at Tenant’s expense, or to retain same under the Landlord’s control or to sell at public or private sale, without notice, any or all of the property not so removed and to apply the net proceeds of
such sale to the payment of any sum due hereunder, or to destroy such property.
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25. GOVERNING LAW, ETC.
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This Lease shall be governed by and construed under the laws of the Commonwealth of Massachusetts and shall take effect as a sealed instrument. All terms, covenants and obligations hereunder shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and assigns. No alterations, amendments or waivers hereunder shall be valid or enforceable absent a written instrument signed by all parties hereto. No waiver of any provision
hereunder on one occasion shall be deemed to be a waiver on future occasions. All obligations hereunder shall be obligations for each Tenant both jointly and severally. The parties hereto agree that this Lease contains the entire agreement between
the parties and that it supersedes all prior agreements and negotiations. Tenant has not relied upon any representation not contained within this Lease and acknowledges that neither
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Landlord nor its agents have made any warranties or representations of any kind or nature other than those expressly set forth herein. This Lease shall not be binding unless and until, it is executed by Landlord and
Tenant.
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26. NON-INTERFERENCE
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Tenant hereby acknowledges that after the execution date hereunder, Landlord or its affiliates may, from time to time, in connection with any space or parcel(s) (including without limitation any space or parcel(s) which abut the
Premises), seek to obtain various approvals, variances, permits, authorizations and/or special permits and the like from the local municipality and the Commonwealth of Massachusetts. Tenant hereby agrees to cooperate with Landlord in all such
efforts and agrees not to oppose or interfere with Landlord, its affiliates, agents, designees, appointees or assigns, in Landlord’s attempts to obtain any such approvals, variances, permits, authorizations and/or special permits and the like.
Tenant’s obligations under this paragraph shall be binding on Tenant’s officers, directors, shareholders and employees and shall survive the termination of the Lease. Tenant acknowledges that any interference shall be deemed a breach of
this Lease and Landlord, at its sole discretion, may terminate this Lease.
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27. BROKERAGE
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Tenant and Landlord represent and warrant that they have dealt with no brokers other than CB Richard Ellis-New England and T3 Advisors in this transaction. Each of the parties represents and warrants that there are no other
claims for brokerage commissions or finder’s fees in connection with the execution of this lease, and each of the parties agrees to indemnify the other against, hold it harmless from all liabilities arising from any such claim including without
limitation, the cost of counsel fees in connection therewith.
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28. FORCE MAJEURE
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If Landlord is delayed, hindered or prevented from the performance of an obligation because of strikes, lockouts, labor troubles, the inability to procure materials, power failure, restrictive governmental laws or regulations,
riots, insurrection, war or another reason not the fault of Landlord, then Landlord’s performance shall be excused for the period of delay.
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29. INDEPENDENT COVENANTS
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Landlord and Tenant agree that the obligations of Tenant hereunder, including, without limitation, Tenant’s obligation to pay rent and additional rent, are independent and not mutually dependent covenants, and that the
failure of Landlord to perform any obligation hereunder shall in no event justify or empower Tenant to withhold rent, additional rent or any other amount due to Landlord hereunder or to terminate the Lease. Tenant acknowledges that the foregoing is
a material inducement to Landlord to enter into this Lease.
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30. REPRESENTATIONS
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Landlord represents that (i) it has good title to the Premises and common areas in fee simple, (ii) it has full right and authority to execute the Lease, (iii) the Lease does not conflict with any other agreement to which
Landlord is bound, and (iv) the Premises and common areas are/will be free from asbestos, underground fuel tanks, and any and all hazardous substances.
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[Signatures to follow on next page.]
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IN WITNESS WHEREOF, the said parties hereunto set their hands and seals this 29th day of October, 2009
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ACACIA COMMUNICATIONS, INC.
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WELLESLEY/ROSEWOOD MAYNARD MILLS LIMITED PARTNERSHIP
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By:
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Wellesley Mills Corporation, its General Partner
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By:
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/s/ Bhupen Shah
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By:
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/s/ Sergio Brosio
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Name:
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Bhupen Shah
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Name:
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Robert Buonato Sergio Brosio Duly Authorized Representative for Wellesley Mills Corporation
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Title:
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VP of Engineering
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By:
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Name:
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Title:
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18
RIDER
TO LEASE DATED OCTOBER 29, 2009
TENANT: ACACIA COMMUNICATIONS, INC.
LANDLORD: WELLESLEY/ROSEWOOD MAYNARD MILLS LIMITED
PARTNERSHIP
A.
Rental Payments
.
All payments hereunder (including rent and additional rent) shall be due and payable on or before the first day of each calendar month. If rent or any other sum payable in this Section remains outstanding for a period of five (5) days, there
will be a late charge for such payments, which charge shall be the lesser of eighteen percent (18%) per year on any outstanding balance owed, or the maximum amount permitted by law. Failure to pay the late charge is a default under the terms of
this Lease. Tenant acknowledges and waives any and all rights to offset or reduce payments due under this Lease,
B.
Early Access
. Tenant may, in
Landlord’s sole discretion, have access to the Premises prior to the Term Commencement Date provided that Tenant shall provide the insurance required by this Lease and does not interfere with existing use of the Premises and Landlord’s
work at the Premises, if any. Tenant’s access shall be at Tenant’s sole risk.
C.
Indemnification
. Tenant further agrees to defend,
indemnify and hold Landlord harmless from and against any and all claims and damages for injury to person or damage to property, of any kind or nature, of any person or entity (including attorneys’ fees) which may arise in connection with the
Tenant’s operation of its business on the Premises.
D.
No Joint Venture
. Nothing contained in this Lease will be construed as creating a
joint venture or partnership of or between Tenant and Landlord as to create any other relationship between the parties other than as Tenant and Landlord and Tenant hereby indemnifies and agrees to hold harmless Landlord from any and all damages
resulting from such a construction of the relationship of the parties hereto.
E.
Notices
. Any notice or other communication in connection with
this Lease shall be in writing and addressed as follows:
To Landlord:
WELLESLEY/ROSEWOOD MAYNARD MILLS LIMITED PARTNERSHIP
c/o
Wellesley Management LLC
12 Clock Tower Place
Suite 200
Maynard, MA 01754 To Tenant:
ACACIA COMMUNICATIONS,
INC.
3 Clock Tower Place
Suite 210
Maynard, MA 01754
Such notice shall be delivered in hand or
deposited in the United States mail, postage prepaid by registered or certified mail, return receipt requested. Any such address may be changed to any
19
other address within the United States by written notice given in the aforesaid manner by the party desiring to effect the change. Any notice given in the aforesaid manner shall be deemed to have
been duly given and received when so hand delivered or deposited with the United States Postal Service.
F.
Authority to Execute
. Tenant and
Landlord covenant that the signatory of this Lease on behalf of each party is duly authorized to execute this Lease. Tenant shall provide at execution of this Lease a corporate resolution in the form attached as
Exhibit B
authorizing the
officers to bind the corporation or other legal document to provide such evidence.
G.
Parking
. Tenant may use the parking facility, if any,
serving the Building as designated by Landlord from time to time. Parking spaces in the parking facility, if any, are on an unreserved, unassigned basis in areas designated by Landlord from time to time. Notwithstanding the foregoing, Landlord
reserves the right at any time to assign and reserve parking spaces and areas for specific individuals and/or tenants. Landlord reserves the right to relocate Tenant’s parking to another location not on the Project.
H.
Holding Over
. In the event that Tenant or anyone claiming by, through or under Tenant shall remain on the Premises after the termination of this
Lease or any renewals, extensions or modifications thereof, Tenant shall forthwith be liable for and pay triple rent.
I.
Signage
. No signs,
billboards, posters or advertising materials of any type or description shall be erected or kept by the Tenant on the interior common areas or the exterior of the building without the prior written consent and approval of the Landlord. Tenant shall
be included in all interior Building standard sign programs at Landlord’s sole cost and expense.
J.
Additional Remedies on Default
.
Notwithstanding any termination of this Lease or any re-entry by Landlord, Tenant agrees to pay and be liable for amounts equal to the several installments of rent and any other charges herein reserved as they would, under the terms of this Lease,
become due if this Lease had not been terminated or if Landlord had not re-entered the Premises and whether the Premises be re-let or remain vacant in whole or in part or for a period less than the remainder of the Term, or for the whole thereof;
but in the event the Premises be re-let in whole or in part, by Landlord, Tenant shall be entitled to a credit in the amount of the rent received by Landlord in reletting after deduction of reasonable expenses in re-letting the Premises and in
collecting the rent in connection therewith.
K.
Estoppel Certificate
. Upon not less than five (5) days prior written request, the Tenant
agrees to execute, acknowledge, and deliver a statement in writing certifying that this Lease is unmodified and in full force and effect (or, if there have been any modifications that the same are in full force and effect as modified and stating the
modification), and the dates to which the rent hereunder and other charges have been paid and any other information reasonably requested. Any such statement delivered pursuant to this paragraph may be relied upon by any prospective purchaser,
mortgagee or lending source.
L.
Confidentiality
. Tenant agrees that the terms of this Lease shall remain confidential and that any breach of this
clause shall constitute a breach of the Lease.
Tenant acknowledges and agrees that the terms contained herein are confidential to Landlord. Tenant agrees that it
20
will keep all information confidential and will not disclose the terms of the Lease, the information provided by Landlord with respect to operating costs, taxes, base rent, additional rent,
etc. to other existing or prospective tenants except to those officers, accountants, lawyers of the Tenant. Any disclosure will be considered a breach of this Lease.
M.
Cleaning
. Tenant shall be responsible for the cost of cleaning the Premises, which shall be arranged by Tenant. Tenant must use Landlord’s
designated cleaning service, which shall be paid for by Tenant.
N.
Alterations
. Except as set forth herein, all alterations and additions to the
Premises shall be installed at Tenant’s expense only in accordance with plans and specifications which have been previously submitted to and approved in writing by Landlord, which approval may be withheld by Landlord in its sole discretion. All
work performed on the Premises shall be performed only by Landlord or by contractors and subcontractors approved in writing by Landlord or by Landlord’s general contractor. Prior to the commencement work, Tenant shall provide adequate security
to Landlord to ensure that the work will be paid for by Tenant upon completion.
O.
Relocation
. Landlord reserves the right to relocate Tenant to
other space, within the Project, provided such space shall be substantially similar and with the Tenant’s consent, which consent shall not be unreasonably withheld. Landlord shall give Tenant sixty (60) days written notice of such
intention to relocate, but in no event shall Landlord relocate Tenant during the first year of the Lease. On the date of such relocation this Lease shall be amended by deleting the description of the Premises and substituting therefore the
description of such space. Landlord agrees to pay the reasonable costs of moving Tenant to such other space within the Project, provided that Landlord shall not be obligated to expend more than rent due for three months under this Lease, and any
costs associated with moving and setting up the Lab. In no event shall Tenant be reimbursed for costs incurred due to business interruption.
P.
[Intentionally Removed.]
Q.
Condominium
. Landlord reserves the right at any time to convert the Project into a condominium in accordance with
M.G.L. c. 183A. Tenant agrees to execute all necessary documentation to effectuate said conversion.
R.
Financial Statements
. Tenant agrees to
deliver, upon request from Landlord: (1) statements of cash flows of the Tenant, (2) income statements of the Tenant, and (3) balance sheets of the Tenant, all such statements to be in reasonable detail, including all supporting
schedules and comments, the statements and balance sheets to be reviewed or audited by an independent certified public accountant, and certified by such accountants to have been prepared in accordance with GAAP and to present fairly the financial
position and results of operations of the Tenant.
All information on such statements shall be held in confidence by Landlord.
S.
No Accord and Satisfaction
. No acceptance by Landlord of a lesser sum than the rent and additional rent then due shall be deemed to be other than on
account of the earliest installment of such rent and additional rent due, nor shall any endorsement or statement on any check or any
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letter accompanying any check or payment as rent be deemed as 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.
[Signatures to follow on next page.]
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ACACIA COMMUNICATIONS, INC.
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WELLESLEY/ROSEWOOD MAYNARD MILLS LIMITED PARTNERSHIP
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By:
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Wellesley Mills Corporation, its General Partner
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By:
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/s/ Bhupen Shah
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By:
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/s/ Sergio Brosio
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Name:
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Bhupen Shah
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Name:
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Robert Buonato Sergio Brosio Duly Authorized Representative for Wellesley Mills Corporation
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Title:
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VP of Engineering
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By:
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Name:
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Title:
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23
EXHIBITS
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EXHIBIT A
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FLOOR PLAN
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EXHIBIT B
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SECRETARY’S CERTIFICATE
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EXHIBIT C
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[Intentionally Removed]
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EXHIBIT D
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RULES & REGULATIONS
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EXHIBIT A
Floor Plan
(attached)
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EXHIBIT B
SECRETARY’S CERTIFICATE
I,
Christian Rasmussen
, hereby certify that I am the duly elected and qualified President of
Acacia
, a Delaware corporation
whose principal place of business is in Maynard, Massachusetts, and that the following vote was duly adopted by its Board of Directors:
“VOTED: That ,
President/CEO and , Treasurer of ACACIA COMMUNICATIONS, INC. are authorized and directed to execute and deliver a lease with
Wellesley/Rosewood Maynard Mills Limited Partnership, in respect of the premises located at Clock Tower Place, Maynard, Massachusetts, upon the terms and conditions acceptable to President or Treasurer; and the execution of a lease by the President
or Treasurer will be conclusive evidence of the fact that the Lease was acceptable.
I further certify that the foregoing vote is in full
force and effect.
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Dated: 10-27, 2009
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Attest:
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/s/ Christian Rasmussen
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President
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(SEAL)
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EXHIBIT C
[Intentionally Removed.]
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EXHIBIT D
RULES AND REGULATIONS
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1.
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Heating, lighting and plumbing: The Landlord shall be notified at once of any accidents to or defects in plumbing, electrical fixtures, or heating and cooling apparatus so that such accidents or defects may be attended
to properly.
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2.
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Tenant shall see that all doors of the Premises are closed and securely locked and must observe strict care and caution to ensure that all of its water faucets or water apparatus are entirely shut off before Tenant or
its employees leave the Premises.
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3.
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Tenant shall not alter any lock or access device or install a new or additional lock or access device or any bolt on any door of the Premises without the prior written consent of the Landlord. If Landlord shall give its
consent, Tenant shall in each case furnish Landlord with a key or access code for any such lock.
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4.
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The sidewalks, entrances, halls and stairways shall not be obstructed by Tenant or used for any purposes other than ingress to and egress from the Premises, and no articles or rubbish shall be left herein.
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5.
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No plumbing fixture or appliance shall be used for any purpose other than that for which it is intended, and no sweepings, rubbish, rags, ashes or other substances shall be thrown herein. Damage resulting to any such
fixtures or appliances from misuse by Tenant shall be repaired and replaced at Tenant’s sole cost and expense, and Landlord shall not in any case be responsible for the same.
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6.
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Tenant shall not place a load upon any floor in the Premises exceeding the floor load per square foot of area as prescribed by Landlord, subject to change from time to time, and allowed by law. Business machines and
mechanical equipment shall be placed and maintained by Tenant at Tenant’s sole cost and expense in settings sufficient, in Landlord’s sole judgment, to absorb and prevent vibration, noise and disturbance that may be transmitted to the
Building’s structure. Tenant shall not move any safe, heavy machinery, heavy equipment, freight, bulky matter or fixtures into or out of the Building without Landlord’s prior written consent. If any such safe, machinery, equipment,
freight, bulky matter or fixtures requires special handling, Tenant agrees that any disassembly, packaging and handling of the same shall comply with applicable laws and regulations. The moving of any safe, heavy machinery, heavy equipment, freight,
bulky matter or fixtures into or out of the Building shall be at the sole risk and hazard of Tenant, and Tenant shall exonerate, indemnify and save Landlord harmless against and from any liability, loss, injury, damage, claim or suit resulting
directly or indirectly from such moving, including without limitation, relocation costs and expenses of tenants in the Building, if Landlord determines in its sole discretion that such relocation is necessary.
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7.
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Lettering on doors, tablets and the Building directory shall be subject to the approval of the Landlord; no lettering shall be allowed on outside windows. Directories will be placed by Landlord, in conspicuous places in
the Building. No other directories shall be permitted without Landlord’s prior written consent.
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8.
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No sign, poster, placard, name, advertisement, or notice, visible from the exterior of the Premises shall be inscribed, painted, affixed to glass or wall, installed or otherwise displayed by Tenant either on the
Premises or any part of the Building without the prior written consent of the Landlord.
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9.
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No wires for electric lights, messenger service or for any other purpose shall be put in the Premises without the consent of the Landlord. Tenant shall not install radio or television antenna, loudspeaker or any other
device on exterior walls or roof of the Building.
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10.
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No curtains, draperies, blinds, shutters, shades, screens or other coverings, awnings, hangings, or decorations shall be attached to, hung, or placed in, or used in connection with any window or door of the building
without the prior written consent of the Landlord.
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11.
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No animals or birds of any kind shall be kept, allowed in or about the Building any time for any reason other than those granted by law.
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12.
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Movement in or out of the Project of furniture or office equipment that requires use of hallways, stairways, or movement through the Project entrances or lobbies shall be restricted to hours designated by Landlord.
Tenant shall provide Wellesley Management at least 48 hours notice before the move date.
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All freight, furniture, etc. must
be received and delivered through entrances to the Building designated for such purpose unless otherwise authorized by the Landlord.
Moving Times are after 5 PM weekdays and 9 AM - 3 PM on Saturdays.
Tenant shall refer to the site plan for the proper loading dock and elevator to be used during its move. Wellesley Management will advise
Tenant of the proper loading dock and elevator to be used for all deliveries coming to Tenant’s office.
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13.
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Nothing shall be thrown from or taken in through the windows, nor shall anything be left outside the Building on the windowsills of the Premises, subject to the terms and provisions of this Lease.
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14.
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Tenant shall not loiter and/or congregate in the Building or on front of the Premises. No part of the Building, the Premises or grounds shall, at any time, be used for lodging or sleeping or for any immoral or illegal
purpose.
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15.
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Subject to the Lease, the Landlord, its agents and employees shall have access at reasonable times to perform their duties in the maintenance and operation of the Project.
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16.
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Tenant shall not use any method of heating other than that provided for in the Tenant’s Lease without the consent of the Landlord.
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17.
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All HVAC systems will be operational seasonally, with the exclusion of labs and server rooms, on Business Days from 7:30 AM to 7:30 PM Monday through Friday and Saturday 9:00 AM to 1:00 PM. Additional service will be
provided on an individual basis when requested by the Tenant with 24-hour notice to Landlord for Monday through Saturday use and 48 hour notice for Sunday and Holiday use, if Clock Tower Place is not open on that holiday, and any additional charges
incurred thereby, will be assessed to Tenant. There will be a Seventy Five ($75.00) per unit per hour charge, with a four (4) hour minimum for weekend use, for said requested service. Tenant will be billed, as Additional Rent, for requested
HVAC service and payment of such will be due with the next monthly rent installment. Landlord reserves the right not to allow additional services such as HVAC services.
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18.
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Tenant shall be responsible for any damage caused to the Premises or Building or the Property or to any person herein as a result of any breach of any of the Rules and Regulations by the Tenant.
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19.
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Neither Tenant nor any employee or invitee of Tenant shall go up on the roof of any building at the Project at any time.
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20.
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Landlord reserves the right to exclude or expel from Clock Tower Place any person who, in Landlord’s judgment, is intoxicated or under the influence of liquor or drugs or who is in violation of any of the rules and
regulations of Clock Tower Place.
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21.
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During the continuance of any invasion, mob, riot, public excitement or other circumstances rendering such action advisable in Landlord’s opinion, Landlord reserves the right to prevent access to the Building by
closing the doors, or otherwise, for the safety of tenants and protection of the Building and property in the Building.
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22.
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Tenant’s agents, employees, servants, patrons, customers, invitees and visitors shall not solicit business in the Building’s parking facilities or common areas nor shall Tenant distribute any handbills or
other advertising matter outside the Premises or in the parking areas.
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23.
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Building security is a cooperative venture. Tenant must assume full responsibility for protecting the Premises from theft and pilferage by keeping doors locked as well as securing other means of entry into the Premises.
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24.
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Tenant shall make reasonable efforts to conserve electricity, water, and air conditioning.
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25.
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Tenant shall obey all parking signs and marking on the pavement. Tenant shall not park in fire lanes, within ten feet of fire hydrants, in loading zones, and shall properly park within parking space lines. Tenant shall
not park any type of vehicle, whether for business use or personal use, on any parking lot or parking facility on the Project overnight without the prior consent of Landlord. Any vehicle(s) parked overnight for any extended period of time, shall be
subject to towing at the vehicle owner’s sole risk and expense.
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26.
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Parking spaces in the parking lots and facilities are on an unreserved, unassigned basis in areas designated by the Landlord from time to time. Landlord reserves the right at any time to assign and reserve parking
spaces and areas for specific individuals and/or tenants. Landlord reserves the right to relocate Tenant’s parking to another location not on the Project.
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27.
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Tenant shall not employ any of Landlord’s employees or agents for any purpose whatsoever without the prior written consent from Landlord.
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28.
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Tenant is required to use Landlord’s preferred vendors (cleaning, construction, and maintenance of base building systems) at all times, unless otherwise approved, in writing, by Landlord. This provision shall apply
to all work performed in the Building including installations of electrical devices and attachments, and installations of any nature affecting the floors, walls, woodwork, trim, windows, ceilings, or any other physical portion of the Building.
Additional services can be arranged for the Tenant by the Landlord using Landlord’s preferred vendors for such services as catering, telecommunications, copy and printing services, and furniture suppliers at preferred pricing.
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29.
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Clock Tower Place is a non-smoking environment. There shall be no smoking within the buildings. Tenant shall utilize the smoking areas provided throughout the park.
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30.
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The Landlord reserves the right to make changes or any such other and further rules and regulations as, in its sole and absolute discretion, may from time to time be necessary.
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ACACIA COMMUNICATIONS, INC.
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By:
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/s/ Bhupen Shah
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Title:
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VP of Engineering
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32
COMMONWEALTH OF MASSACHUSETTS
, ss.
On
, 2009, before me, the undersigned notary public, personally appeared,
Sergio Brosio for Robert Buonato
and
acknowledged to me that the Principal signed the preceding or attached document voluntarily for its stated purpose. The Principal proved to me through satisfactory evidence of identification that the Principal is the person whose name is signed on
the preceding or attached document. The satisfactory evidence of identification provided to me was:
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A current document issued by a federal or state government agency bearing the photographic image of the Principal’s face and signature; or
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On the oath or affirmation of a credible witness unaffected by the document or transaction who is personally known to the notary public and who personally knows the Principal; or
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Identification of the Principal based on the notary public’s personal knowledge of the identity of the Principal; or
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¨
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The following evidence of identification:
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Notary Public
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Printed Name:
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My Commission Expires:
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COMMONWEALTH OF MASSACHUSETTS
Middlesex, ss.
On
Oct 27
th
, 2009, before me, the undersigned notary public, personally appeared (the “President”) of
ACACIA
COMMUNICATIONS, INC.
acknowledged to me that the Principal signed the preceding or attached document voluntarily for its stated purpose. The Principal proved to me through satisfactory evidence of identification that the Principal is the person
whose name is signed on the preceding or attached document. The satisfactory evidence of identification provided to me was:
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x
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A current document issued by a federal or state government agency bearing the photographic image of the Principal’s face and signature; or
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On the oath or affirmation of a credible witness unaffected by the document or transaction who is personally known to the notary public and who personally knows the Principal; or
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Identification of the Principal based on the notary public’s personal knowledge of the identity of the Principal; or
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The following evidence of identification:
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/s/ Marie E. Dunham
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Notary Public
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Printed Name:
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Marie E. Dunham
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My Commission Expires:
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6/12/12
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34
November 24, 2009
ACACIA COMMUNICATIONS, INC,
3 Clock Tower Place
Suite 210
Maynard, MA 01754
This letter serves to memorialize the Term Commencement Date for the ACACIA COMMUNICATIONS, INC. Lease dated October 27, 2009, for the
“Premises” Suite 210, in Building Three Clock Tower Place, as November 23, 2009 and the Term Expiration Date as February 28, 2013. The term is three (3) years, three (3) months and seven (7) days, the Rent
Commencement date is March 1, 2010.
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Best regards,
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/s/ Melissa Kimball
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Melissa Kimball
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Managing Director
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Addison Wellesley Real Estate Advisors
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mkimball@wellesley.com
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978-823-8240
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/s/ Bhupen Shah
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Signed and Accepted
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Name:
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Bhupen Shah
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Title:
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Vice President of Engineering
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FIRST AMENDMENT TO LEASE
This First Amendment to Lease (this “Amendment”) is made this day of November 2010 and is by and between
WELLESLEY/ROSEWOOD MAYNARD MILLS LIMITED PARTNERSHIP,
a limited partnership established under the laws of the Commonwealth of Massachusetts, with a place of business at Twelve Clock Tower Place, Suite 200, Maynard, Massachusetts 01754
(“Landlord”) and
ACACIA COMMUNICATIONS, INC.,
a corporation established under the laws of the State of Delaware and authorized to do business in the Commonwealth of Massachusetts, with a place of business at Three Clock Tower Place,
Suite 210, Maynard, Massachusetts, (“Tenant”).
STATEMENT OF FACTS
Landlord and Tenant are parties to a Lease dated October 27, 2009 (the “Lease”), with respect to certain office space located
on the second floor of the building known as Three Clock Tower Place, Maynard, MA, known and numbered Suite 210, containing approximately 9,730 contiguous rentable square feet (the “Original Premises”). Term, Term Commencement Date, Term
Expiration Date and Rent Commencement Date were memorialized in that certain memorialization letter dated November 24, 2009.
Tenant
desires to exercise its option to expand into the approximately 4,890 contiguous rentable square feet on the second floor of Three Clock Tower Place (the “Expansion Premises”).
Landlord and Tenant desire to modify certain terms of the Lease. To the extent that any terms of the Lease contradict this Amendment, the
terms of this Amendment shall supersede the terms of the Lease.
TERMS OF AMENDMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree that the Lease shall be amended and modified as follows:
1.
Demise of Expansion Premises
. Commencing on November 15, 2010 (the
“Expansion Premises Term Commencement Date”) Landlord leases to Tenant and Tenant leases from Landlord the Expansion Premises. Tenant agrees to take occupancy on November 15, 2010.
2.
Premises
. Commencing on the New Premises Term Commencement Date as defined herein, delete the first paragraph of Section 2 of the Lease in its
entirety and replace it with the following:
A portion of the building consisting of 14,620 contiguous rentable square feet
(“RSF”) located on the Second Floor of the building known as Three Clock Tower Place, Maynard, Massachusetts, more particularly known as Suite 210, as shown on
Exhibit A-l
(the “Expanded Premises”), together with the right
to use in common, with others entitled thereto, all common area of the building, including but not limited to the hallways, stairways, and elevators, necessary for access to said leased premises, and lavatories nearest thereto, if any. Except as set
forth herein, the Premises are to be delivered in “AS-IS” condition as they are in on the date of this Amendment.
1
3.
Term
. Commencing on the Expansion Premises Term Commencement Date as defined herein, delete
Section 6 of the lease and replace it with the following:
Original Premises
.
With respect to the Original Premises: (i) the term shall be three (3) years, three (3) months and seven (7) days
(ii) the Term Commencement Date shall be October 27, 2009, (iii) the Term Expiration Date shall be February 28, 2013, and (iv) the Rent Commencement Date shall be March 1, 2010.
Expansion Premises
.
With
respect to the Expansion Premises: (i) the term shall be two (2) years, three (3) months and sixteen (16) days, (ii) the term shall commence on the Expansion Premises Term Commencement Date, (iii) the term shall be
co-terminus with the Term Expiration Date of the Original Premises, and (iv) the Rent Commencement Date shall be February 1, 2011.
4.
Rent
. Commencing on the Expansion Premises Term Commencement Date as defined herein, delete Section
8
of the lease in its entirety and replace it with the following:
Tenant shall pay, without any offset or reduction, except as set forth herein, base rent to Landlord at the rate of:
A Security Deposit in the amount of $37,159.17, equal to the last two (2) months rent, shall be paid to Landlord upon execution of the
Lease Amendment, minus the $37,095.62 Security Deposit currently on account with Landlord. The balance in the amount of $63.55 shall be due upon execution of the Lease Amendment. The Security Deposit shall be held as security for Tenant’s
performance of its obligations hereunder. Upon the occurrence of a default under this Lease by Tenant, Landlord may, in its sole discretion, apply the Security Deposit to cure such default and Tenant shall restore the Security Deposit to the sum of
$37,159.17. Upon a transfer of the Property by the Landlord, Tenant agrees to look solely to such transferee for the return of the Security Deposit.
5.
Taxes and Operating Expenses
. Commencing on the Expansion Premises Term Commencement Date, amend Section 10 of the tease as follows:
“Tenant’s Share” shall mean 1.3481%
6.
Furniture
.
Tenant shall have the
right to use the furniture in the Original Premises and in the Expansion Premises for the full Term of the Lease. Tenant shall return said furniture to Landlord upon expiration of the Lease in the same condition delivered to Tenant, normal wear and
tear excepted.
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7.
Early Access
.
Landlord will grant Tenant early access to the Premises during construction for the purposes of wiring for data and phones, and for any work
necessary for the set up and activation of Security Systems, all the foregoing to be at Tenant’s sole cost and expense, unless otherwise stated herein.
8.
Brokers
.
Tenant and Landlord
represent and warrant that neither has dealt with any brokers in this transaction. Each of the parties represents and warrants that there are no other claims for brokerage commissions or finders fees in connection with the execution of this First
Lease Amendment, and each of the parties agrees to indemnify the other against and hold it harmless from all liabilities arising from any such claim, including without limitation, the cost of council fees in connection therewith.
Commencing on November 1, 2010 and continuing to February 28, 2011, Tenant shall pay Base Rent at the rate of $13.75 per RSF per year
on the 8,510 RSF portion of the Original Premises, or $117,012.50 annually, in equal monthly installments of $9,751.04, each payable in advance by the first day of each month.
For the period commencing November 15, 2010 and continuing to January 31,2011, the
Expansion Premises
shall be Base Rent Free.
For the period commencing February 1, 2011 and continuing to February 28, 2011, Base Rent for the Expansion Premises shall be
$3,404.69.
Commencing on March 1, 2011 and continuing to February 28, 2012, Tenant shall pay Base Rent at the rate of $14.25 per
RSF on the
entire 14,620 RSF
or $208,335.00 annually, in equal monthly installments of $17,361.25, each payable in advance by the first day of each month.
Commencing on March 1, 2012 and continuing to February 28, 2013, Tenant shall pay Base Rent at the rate of $15.25 per RSF on the
entire
$14,620 RSF
or $222,955.00 annually, in equal monthly installments of $ $18,579.58, each payable in advance by the first day of each month.
Tenant shall pay the February 2011 Base Rent for the Expansion Premises upon execution of the Amendment. All other payments hereunder
(including Rent and Additional Rent) shall be due and payable on or before the first day of each calendar month.
If rent or any other sum
payable in this Section remains outstanding for a period of five (5) days after Landlord’s delivery of written notice that said amounts are past due, there will be a late charge for such payments, which charge shall be the lesser of
eighteen percent (18%) per year on any outstanding balance owed, or the maximum amount permitted by law. Failure to pay the late charge is a default under the terms of the Lease.
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Tenant acknowledges any/all rights to offset or reduce payments due under this Lease.
9.
Security Deposit
. Commencing on the Expansion Premises Term Commencement Date, delete Section 9 in its entirety and replace it with the
following:
10.
Expansion Right
.
Tenant shall have the option to lease additional space within 1 Clock Tower Place or 3 Clock Tower Place consisting of up to approximately
10,000 rentable square feet (the “Second Expansion Premises”) for a lease term of up to three years. The Base Rent for the Second Expansion Premises shall be $13.00 per rentable square foot per year for the initial term of that space.
11.
Default
.
If for any reason Tenant
shall fail to comply with the provisions of this Amendment, the same shall be deemed a default under the Lease, entitling Landlord to exercise all of its rights and remedies there under.
12.
Tenant Representations
.
Tenant
hereby represents and certifies that the Lease for the Premises as defined under the Lease is in full force and effect, that all obligations of Landlord under the Lease as of the date hereof have been performed by Landlord, and that, as of the date
hereof, to the best of Tenant’s knowledge, there exists no default by Landlord under the Lease and Tenant has no defenses, rights of offset, credits, deductions in rent or claims against Landlord, or its successors or assigns, of any of the
agreements, terms, covenants or conditions of the Lease.
13.
Terms
.
Capitalized terms not defined herein shall have the definition provided in the Lease.
14.
Ratification
.
The Lease, as amended
by this Amendment, is hereby ratified and confirmed in all respects, except that this Amendment shall prevail over any other provisions of the Lease which are inconsistent with this Amendment.
15.
Counterparts and Authority
.
This
Amendment may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document. Landlord and Tenant each warrant to the other that the person or persons executing
this Amendment on its behalf has or have the authority to do so and that such execution has fully obligated and bound such party to all terms and provisions of this Amendment.
EXECUTED as a sealed instrument as of the date first written above.
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ACACIA COMMUNICATIONS, INC.
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WELLESLEY ROSEWOOD MAYNARD MILLS LIMITED PARTNERSHIP
By its sole General Partner Wellesley Mills Corporation
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By:
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/s/ Murugesan Shanmugaraj
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By:
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/s/ D. Scott DiGiancomo
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Printed Name:
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Murugesan Shanmugaraj
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Name:
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D. Scott DiGiancomo
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Title:
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President & CEO
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Title:
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Duly Authorized Agent
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5
EXHIBIT A-2
FLOOR PLAN
(Attached)
6
SECOND AMENDMENT TO LEASE
This Second Amendment to Lease (this “Amendment”) is made this 13 day of February, 2012 and is by and between
WELLESLEY/ROSEWOOD
MAYNARD MILLS LIMITED PARTNERSHIP
, a limited partnership established under the laws of the Commonwealth of Massachusetts, with a place of business at Twelve Clock Tower Place, Suite 200, Maynard, Massachusetts 01754 (“Landlord”) and
ACACIA COMMUNICATIONS, INC.
, a corporation established under the laws of the State of Delaware and authorized to do business in the Commonwealth of Massachusetts, with a place of business at Three Clock Tower Place, Suite 210, Maynard,
Massachusetts, (“Tenant”).
STATEMENT OF FACTS
Landlord and Tenant are parties to a Lease dated October 27, 2009 (the “Lease”), as amended by that certain First Amendment To
Lease dated November 29, 2010 with respect to certain office space located on the second floor of the building known as Three Clock Tower Place, Maynard, MA, known and numbered Suite 210, containing approximately 14,620 contiguous rentable
square feet (the “Original Premises and Expansion Premises”).
Tenant desires to exercise its option to lease additional space.
Tenant desires to expand into the approximately 4,858 contiguous rentable square feet on the second floor of Three Clock Tower Place (the “Second Expansion Premises”).
Landlord and Tenant desire to modify certain terms of the Lease. To the extent that any terms of the Lease contradict this Amendment, the
terms of this Amendment shall supersede the terms of the Lease.
TERMS OF AMENDMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree that the Lease shall be amended and modified as follows:
1.
Demise of the Second Expansion Premises
. Commencing on February 15, 2012
(the “Second Expansion Premises Term Commencement Date”) Landlord leases to Tenant and Tenant leases from Landlord the Second Expansion Premises in “as-is” condition as of the date of this Lease Amendment. Tenant agrees to take
occupancy on February 15, 2012.
2.
Premises
. Commencing on the Second Premises Term Commencement Date, delete the first paragraph of
Section 2 of the Lease in its entirety and replace it with the following:
A portion of the building consisting of 19,478 contiguous
rentable square feet (“RSF”) located on the Second Floor of the building known as Three Clock Tower Place, Maynard, Massachusetts, consisting of 14,620 RSF and more particularly known as Suite 210 as shown on
Exhibit A-2
, and 4,858
RSF and more particularly known as Suite 200 as shown on
Exhibit A-3
, together with the right to use in common, with others entitled thereto, all common area of the building, including but not limited to the hallways, stairways, and
elevators, necessary for access to said leased premises, and lavatories nearest thereto, if any. Except as set forth herein, the Premises are to be delivered in the same “as-is” condition they are in on the date of this Amendment.
3.
Term
. Commencing on the Second Expansion Premises Term Commencement Date, amend the lease by adding the
following paragraph at the end of Section 6:
Second Expansion Premises
.
With respect to the Second Expansion Premises: (i) the term shall be one (1) year and fifteen (15) days, (ii) the term
shall commence on the Second Expansion Premises Term Commencement Date, (iii) the term shall be co-terminus with the Term Expiration Date of the Original Premises and Expansion Premises, and (iv) the Rent Commencement Date shall be
February 15, 2012.
4.
Rent
. Commencing on the Second Expansion Premises Term Commencement Date, amend the lease by adding the following at
the end of Section 8:
For the period commencing on February 15, 2012 and continuing to February 28, 2013, Tenant shall pay
Base Rent for the Second Expansion Premises at the rate of $13.00 per RSF per year, $63,154.00 annually, in equal monthly installments of $5,262.83, each payable in advance by the first day of each month.
Tenant shall pay the pro-rated February 2012 Base Rent for the Second Expansion Premises in the amount of $2,722.16 upon execution of the
Amendment. All other payments hereunder (including Rent and Additional Rent) shall be due and payable on or before the first day of each calendar month.
5.
Security Deposit for the Second Expansion Premises
. Commencing on the Second Expansion Premises Term Commencement Date, amend the lease by deleting
Section 9 in its entirety and replace it with the following:
A Security Deposit in the amount of $37,159.17 is currently on account
with the Landlord for the Original Premises and Expansion Premises.
A Security Deposit for the Second Expansion Premises in the amount of
$10,525.66, equal to the last two (2) months rent, shall be paid to landlord upon execution of this Lease Amendment.
The Security
Deposits shall be held as security for Tenant’s performance of its obligations hereunder. Upon the occurrence of a default under this Lease by Tenant, Landlord may, in its sole discretion, apply the Security Deposit to cure such default and
Tenant shall restore the Security Deposit to the sum of $37,159.17 for the Original Premises and Expansion Premises, and to the sum of $10,525.66 for the Second Expansion Premises.
Upon a transfer of the Property by the Landlord, Tenant agrees to look solely to such transferee for the return of the Security Deposits.
- 2 -
6.
Taxes and Operating Expenses
. Commencing on the Second Expansion Premises Term Commencement Date, amend
Section 10 of the Lease as follows:
“Tenant’s Share” shall mean 1.7961%.
7.
Utilities
. Amend the lease by adding the following at the end of Section 11:
Commencing on the Second Expansion Premises Term Commencement Date, Tenant will be billed monthly for electrical energy use within the Second
Expansion Premises at a rate of $1.50 per rentable square foot per year, to be paid as Additional Rent, pro-rated for any partial month.
8.
Furniture
.
Tenant shall have the right to use the furniture in the Original Premises and Expansion Premises, and in the Second
Expansion Premises, for the full Term of the Lease. Tenant shall return said furniture to Landlord upon expiration of the Lease in the same condition delivered to Tenant, normal wear and tear excepted.
9.
Early Access
.
Landlord will grant
Tenant early access to the Premises for the purposes of wiring for data and phones, and for any work necessary for the set up and activation of Security Systems, all the foregoing to be at Tenant’s sole cost and expense, unless otherwise stated
herein.
10.
Brokers
.
Tenant and
Landlord represent and warrant that neither has dealt with any brokers in this transaction. Each of the parties represents and warrants that there are no other claims for brokerage commissions or finders fees in connection with the execution of this
First Lease Amendment, and each of the parties agrees to indemnify the other against and hold it harmless from all liabilities arising from any such claim, including without limitation, the cost of council fees in connection therewith.
11.
Expansion Right
.
Tenant shall have
the option to lease additional space consisting of approximately 10,000 rentable square feet (the “Third Expansion Premises”). The Base Rent for the Third Expansion Premises shall be $13.00 per rentable square foot per year for the initial
term of that space.
12.
Default
.
If
for any reason Tenant shall fail to comply with the provisions of this Amendment, the same shall be deemed a default under the Lease, entitling Landlord to exercise all of its rights and remedies there under.
- 3 -
13.
Tenant Representations
.
Tenant hereby represents and certifies that the Lease for the Premises as defined under the Lease is in full force and effect, that all
obligations of Landlord under the Lease as of the date hereof have been performed by Landlord, and that, as of the date hereof, to the best of Tenant’s knowledge, there exists no default by Landlord under the Lease and Tenant has no defenses,
rights of offset, credits, deductions in rent or claims against Landlord, or its successors or assigns, of any of the agreements, terms, covenants or conditions of the Lease.
14.
Terms
.
Capitalized terms not defined
herein shall have the definition provided in the Lease.
15.
Ratification
.
The Lease, as amended by this Amendment, is hereby ratified and confirmed in all respects, except that this Amendment shall prevail over any
other provisions of the Lease which are inconsistent with this Amendment.
16.
Counterparts and Authority
.
This Amendment may be executed in multiple counterparts, each of which shall be deemed an original and all of which together shall constitute
one and the same document. Landlord and Tenant each warrant to the other that the person or persons executing this Amendment on its behalf has or have the authority to do so and that such execution has fully obligated and bound such party to all
terms and provisions of this Amendment.
EXECUTED as a sealed instrument as of the date first written above.
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ACACIA COMMUNICATIONS, INC.
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WELLESLEY ROSEWOOD MAYNARD
MILLS LIMITED PARTNERSHIP
By its sole General Partner Wellesley Mills Corporation
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By:
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/s/ Raj Shanmugaraj
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By:
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/s/ D. Scott DiGiacomo
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Name:
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Raj Shanmugaraj
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Name:
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D. Scott DiGiacomo
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Title:
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President & CEO
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Title:
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Duly Authorized Agent
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- 4 -
EXHIBIT A-3
FLOOR PLAN
(Attached)
- 5 -
3-200
4,858 RSF
- 6 -
THIRD AMENDMENT TO LEASE
This Third Amendment to Lease (this “Amendment”) is made this 21st day of November 2012 and is by and between WELLESLEY/ROSEWOOD
MAYNARD MILLS LIMITED PARTNERSHIP, a limited partnership established under the laws of the Commonwealth of Massachusetts, with a place of business at Two Clock Tower Place, Suite 200, Maynard, Massachusetts 01754 (“Landlord”) and ACACIA
COMMUNICATIONS, INC., a corporation established under the laws of the State of Delaware and authorized to do business in the Commonwealth of Massachusetts, with a place of business at Three Clock Tower Place, Suite 210, Maynard, Massachusetts,
(“Tenant”),
STATEMENT OF PACTS
Landlord and Tenant are parties to a Lease dated October 27, 2009 (the “Lease”), as amended by that certain First Amendment To
Lease dated November 29, 2010, and that certain Second Amendment to Lease, dated February 13, 2012, with respect to certain office space located on the second floor of the building known as Three Clock Tower Place, Maynard, MA, known and
numbered Suite 210, containing approximately 19,478 contiguous rentable square feet (the “Original Premises and Expansion Premises”).
Tenant desires to extend the term of the lease and relocate from its existing premises on the second floor of Three Clock Tower Place to the
28,249 square feet of space on the first floor of Three Clock Tower Place, the “Relocation Premises”.
Landlord and Tenant
desire to modify certain terms of the Lease. To the extent that any terms of the Lease contradict this Amendment, the terms of this Amendment shall supersede the terms of the Lease.
TERMS OF AMENDMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree that the Lease shall be amended and modified as follows:
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1.
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Demise of the Relocation Premises
. Commencing on February 1, 2013 (the “Relocation Premises Term Commencement Date”) Landlord leases to Tenant and Tenant leases from Landlord the Relocation
Premises in “as-is” condition as of the date of this Lease Amendment, however Landlord shall, at its cost, complete all of the demising and installation pursuant to the scope and floor plan attached as Exhibit A-l and to General
Specifications for Construction contained in Exhibit A-2.
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Landlord will provide tenant with a turnkey build out based upon
the attached plan and specifications in Exhibits A-l and A-2, In the event Landlord is not substantially complete with Landlord’s work by February 1st, 2013, The Term Commencement day shall be extended on a day for day basis until such
time as the Relocation Premises is substantially complete and Tenant may occupy the space. In the event that Landlord has not completed Landlord’s work by February 15th 2013 there shall be a penalty of one day of free base rent
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for each one day delay, until March 1
st
, 2013. Then starting March 1, 2013 the penalty shall be two days of free rent for each day
of delay. Tenant will also be allowed to remain in current suite until Relocation Premises is ready to occupy and will have two (2) weeks after Relocation Term Commencement Date to clear current suite of Tenant belongings. In the event Tenant
vacates the Premises within this two week period, Tenant shall have no further obligation to pay rent on this space, In the event Tenant does not vacate the Original Premises within this period Tenant shall then continue to pay rent on the Original
Premises under the Original Lease as if the Tenant had not vacated, commencing on the fifteenth (15th) day and continuing until Tenant has fully vacated.
Tenant shall continue to pay rent on the existing space under the existing structure until such time as the Relocation Space is substantially
complete and Tenant can occupy the Space.
Landlord shall commence Landlord’s work as soon as possible after execution of this
Amendment. In the event Landlord completes its work prior to February 1, 2013, Tenant shall have the right to utilize the Relocation Premises without charge. In any event Tenant shall have the right to conduct its installation work within the
Relocation Premises, prior to the Relocation Term Commencement Date, provided that such work does not interfere with Landlord’s work, in landlord’s sole judgment and discretion.
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2.
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Premises
. Commencing on the Relocation Premises Term Commencement Date, delete the first paragraph of Section 2 of the Lease in its entirety and replace it with the following:
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A portion of the building consisting of 28,249 contiguous rentable square feet (“RSF”) located on the First Floor of the building
known as Three Clock Tower Place, Maynard, Massachusetts, and more particularly known as Suite 130 as shown on
Exhibit A-1
, together with the right to use in common with others entitled thereto,
all common area of the building, including but not limited to the hallways, stairways, and elevators, necessary for access to said leased premises, and lavatories nearest thereto, if any. Except as set forth herein including the scope of work to be
performed in Exhibits A-l and A-2, the Premises are to be delivered in the same “as-is” condition they are in on the date of this Amendment
Landlord shall designate two (2) reserved parking spaces in the lower level of the parking garage for Tenant’s exclusive use, at no
additional charge. Use of such space is subject to the rules and regulations of the management company and the harmonious management of the garage, but in no case during the term will the Tenant be denied use of anything less than two
(2) tenant designated reserved parking spaces.
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3.
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Term
. Commencing on the Relocation Premises Term Commencement Date, amend the lease by adding the following paragraph at the end of Section 6:
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Relocation Premises.
With respect to the Relocation Premises: (i) the term shall be four (4) years and four (4) months, (ii) the term shall
commence on the Relocation Premises Term Commencement Date, and (iii) the Rent Commencement Date shall be April 1, 2013.
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4.
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Rent
. Commencing on the Relocation Premises Term Commencement Date, amend the lease by adding the following at the end of Section 8:
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For the period commencing on February 1, 2013 and continuing thru March 31, 2013, Tenant shall pay no Base Rent for the Relocation
Premises. Commencing on April 1, 2013 and continuing through January 31, 2014, Tenant shall pay Base Rent for 23,815 RSF of Relocation Premises at the rate of $6.805per RSF per year, in equal monthly installments of $16,206.10, each
payable in advance by the first day of each month. Commencing on February 1, 2014 and continuing through - January 31, 2016, Tenant shall pay Base Rent for the entirety (consisting of 28,249 contiguous rentable square feet) of Relocation
Premises at the rate of $15.47 per RSF per year, in equal monthly installments of $36,417;67, each payable in advance by the first day of each month. Commencing on February 1, 2016 and continuing through January 31, 2017, Tenant shall pay
Base Rent for entirety of (consisting of 28,249 contiguous rentable square feet) Relocation Premises at the rate of $17.22 per RSF per year, in equal monthly installments of $40,537.32, each payable in advance by the first day of each month.
Commencing on February 1, 2017 and continuing through April 30, 2017, Tenant shall pay Base Rent for the entirety of (consisting of 28,249 contiguous rentable square feet) Relocation Premises at the rate of $16.31 per RSF per year, in
equal monthly installments of $38,395.10, each payable in advance by the first day of each month. Commencing on May 1, 2017 and continuing thru May 31, 2017, Tenant shall pay no Base Rent.
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5.
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Security Deposit for the Relocation Premises
. Commencing on the execution of the Third Amendment, amend the lease by deleting Section 9 in its entirety and replacing it with the following:
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A Security Deposit in the amount of $68,000.00 is due and payable to the Landlord for the Relocation Premises.
A Security Deposit for the Original and the Second Expansion Premises in the amount of $47,684.83, currently held by Landlord shall be applied
to the Security Deposit Due for the Relocation Premises.
The Security Deposits shall be held as security for Tenant’s performance of
its obligations hereunder. Upon the occurrence of a default under this Lease by Tenant, Landlord may, in its sole discretion, apply the Security Deposit to cure such default and Tenant shall restore the Security Deposit to the sum of $68,000.00 for
the Relocation Premises.
Upon a transfer of the Property by the Landlord, Tenant agrees to look solely to such transferee for the return
of the Security Deposits.
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6.
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Taxes and Operating Expenses
. Commencing on the Relocation Premises Term Commencement Date, amend Section 10 of the Lease as follows:
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“Tenant’s Share” shall mean 2.6384%.
“Base Year” shall mean calendar 2013
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7.
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Utilities
. Amend the lease by adding the following at the end of Section 11:
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Commencing on the Relocation Premises Term Commencement Date, Tenant will be billed monthly for electrical energy use within the Relocation
Premises, either thru the check meter within the Relocation Premises or at a rate of $1.50 per rentable square foot per year, to be paid as Additional Rent, pro-rated for any partial month.
Tenant shall have the right to use the furniture in the Relocation Premises,
a list of such furniture attached as Exhibit B, to be finalized three (3) weeks prior to the Relocation Premises Term Commencement Date, for the full Term of the Lease. Tenant shall also have the right to relocate furniture, at its cost and
expense, from the Original and Second Expansion Premises. A list of such furniture is attached as Exhibit B-l, to be finalized three (3) weeks prior to the Relocation Premises Term Commencement Date. Tenant shall return said furniture to
Landlord upon expiration of the Lease in the same condition delivered to Tenant, normal wear and tear excepted. Tenant shall the right to utilize all existing and spare/excess cubicle panels and related hardware in the current Relocation Premises
for its use during the term.
It is the understanding of the Landlord that the cubicles and offices within the Premises are wired for voice
and data. Tenant shall verify same satisfactory for its use. Any changes additions to remedies to cubical wiring shall be tenants responsibility. Tenant will have the right to relocate its current switch to the new Premises. Tenant will be
responsible for all wiring of its voice, data, etc. requirements for the Premises.
Tenant shall be included in all building standard sign programs, including a
building standard directional sign in the hall adjacent to the center stairwell in the building, at Landlord’s cost and expense.
Tenant shall have access to their premises twenty-four (24) hours
per day; seven (7) days per week. Tenant acknowledges that there may be continued improvements to the building after Tenant’s occupancy. Tenant may install its own security system. Costs associated with security to Tenant’s Premises
shall be the responsibility of the Tenant. Landlord shall have key access to the Premises for emergency purposes only and contact information and emergency telephone for Tenant’s security company and local representative.
Landlord will grant Tenant early access to the Premises for the purposes
of wiring for data and phones, and for any work necessary for the set up and activation of Security Systems, provided such work does not interfere with Landlord’s work, all the foregoing to be at Tenant’s sole cost and expense, unless
otherwise stated herein,
4
Add the following language to sixth (6th) Section 11 of the Original
Lease, HVAC Section;
“All HVAC systems will be operational seasonally, with the exclusion of labs and server rooms, on Business Days
from 7:30 AM to 7:30 PM Monday through Friday and Saturday 9:00 AM to 1:00 PM. Additional service will be provided on an individual basis when requested by the Tenant with 24-hour notice to Landlord for Monday through Saturday use and 48 hour notice
for Sunday and Holiday use, if Clock Tower Place is not open on that holiday, and any additional charges incurred thereby will be assessed to Tenant. There will be a Seventy Five Dollar ($75.00) per unit per hour charge, with a four (4) hour
minimum for weekend use, for said requested service. Tenant will be billed, as Additional Rent, for requested HVAC service and payment of such will be due with the next monthly rent installment. Landlord reserves the right not to allow additional
services such as HVAC services.”
Tenant and Landlord represent and warrant that neither has dealt with any
brokers in this transaction other than Avison Young and Atlas Commercial Real Estate, who shall be paid a fee under separate agreement and timetable with Landlord. Each of the parties represents and warrants that there are no other claims for
brokerage commissions or finders fees in connection with the execution of the Original lease or subsequent Amendments, and each of the parties agrees to indemnify the other against and hold the other harmless from all liabilities arising from any
such claim, including without limitation, the cost of counsel fees in connection therewith.
Tenant shall have the on-going “Right of First Refusal” to
lease additional space adjacent to the Relocation Premises within the First Floor of Three Clock Tower Place. Upon receipt by Landlord of a bona-fide offer to lease the adjacent space, Landlord shall notice Tenant of such offer. Tenant shall have
Five (5) business days to either accept or reject the offer on the same terms and conditions as the third-party offer. In the event Tenant rejects said offer, Landlord shall have the right to lease the space to the third-party, without further
claim of such space by Tenant.
Provided that Tenant is not in default of the Lease, Tenant shall have
the right to renew the term of the Lease for One (1) additional Two (2) year period, with no less than twelve (12) months prior written notice. The rent for such renewal option period shall be the “market” rent for such
space at the time of commencement of the renewal option term.
5
Section 12 of the Original Lease shall be amended to include
electronics R&D Lab and Manufacturing Lab as permitted uses.
Landlord shall be responsible for the failure of glass panels,
within the Premises, unless such failure is the result of tenant’s negligence.
In the event there is a roof leak within the Lab space
of the Relocation Premises, Tenant shall immediately notify Landlord to remedy. In the event that Landlord does not respond within one (1) Hour of its receipt of such emergency notice. Tenant may remedy this emergency leak and bill Landlord for
reasonable costs associated with such repair.
If for any reason Tenant shall fail to comply with the provisions of this
Amendment, the same shall be deemed a default under the Lease, entitling Landlord to exercise all of its rights and remedies there under.
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19.
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Tenant Representations.
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Tenant hereby represents and certifies that the Lease for the
Premises as defined under the Lease is in full force and effect, that all obligations of Landlord under the Lease as of the date hereof have been performed by Landlord, and that, as of the date hereof, to the best of Tenant’s knowledge, there
exists no default by Landlord under the Lease and Tenant has no defenses, rights of offset, credits, deductions in rent or claims against Landlord, or its successors or assigns, of any of the agreements, terms, covenants or conditions of the Lease.
Capitalized terms not defined herein shall have the definition provided in the
Lease.
The Lease, as amended by this Amendment, is hereby ratified and confirmed
in all respects, except that this Amendment shall prevail over any other provisions of the Lease which are inconsistent with this Amendment.
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22.
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Counterparts and Authority.
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This Amendment may be executed in multiple counterparts,
each of which shall be deemed an original and all of which together shall constitute one and the same document. Landlord and Tenant each warrant to the other that the person or persons executing this Amendment on its behalf has or have the authority
to do so and that such execution has fully obligated and bound such party to all terms and provisions of this Amendment.
6
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23.
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Replace Section 0, Relocation, page 25 of the original lease with the following language:
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Relocation: Landlord agrees that it cannot notify tenant of a relocation during the first 14 months of their lease term. Landlord reserves the
right to relocate Tenant to other space, within the Project, provided such space shall be substantially similar and with the Tenant’s consent, which consent shall not be unreasonably withheld. Landlord shall give Tenant One (1) years
written notice of such intention to relocate. At such time of notification, Tenant shall reserve the right to terminate their lease with no additional obligations. On the date of such relocation this Lease shall be amended by deleting the
description of the Premises and substituting therefore the description of such space. Landlord agrees to pay the reasonable costs of moving Tenant to such other space within Project, provided that Landlord shall not be obligated to expend more than
rent due for the three months under this Lease, and any costs associated with moving and setting up the Lab. In no event shall tenant be reimbursed for costs incurred due to business interruption.
SIGNATURES ON FOLLOWING PAGE
EXECUTED as a
sealed instrument as of the date first written above,
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ACACIA COMMUNICATIONS, INC.
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WELLESLEY ROSEWOOD MAYNARD MILLS LIMITED PARTNERSHIP
By its sole General Partner Wellesley Mills Corporation
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By:
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/s/ Raj Shanmugaraj
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By:
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/s/ D. Scott DiGiacomo
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Name:
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Raj Shanmugaraj
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Name:
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D. Scott DiGiacomo
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Title:
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President & CEO
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Title:
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Duly Authorized Agent
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7
EXHIBIT A-l
FLOOR PLAN AND SCOPE OF WORK
(Attached)
8
EXHIBIT F
ACACIA COMMUNICATIONS
TENANT
BUILD-OUT SPEC SHEET
Wellesley Building Company
Standard Office Tenant Build-Out
Wellesley / Rosewood Maynard Mills
GENERAL
SPECIFICATIONS FOR CONSTRUCTION SUBJECT TO SUBSTITUTIONS AND/OR MODIFICATIONS ARE AT THE SOLE DISCRETION OF WELLESLEY BUILDING COMPANY AND/OR LANDLORD.
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5750-0010
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Appliances
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Page
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2
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5750-0030
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Counters and Cabinets
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Page
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3
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5750-0040
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Change Orders
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Page
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1
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5750-0050
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Cleaning and Disposal
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Page
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5
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5750-0065
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Construction Management
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Page
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fi
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5750-0080
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Demolition and Disposal
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Page
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7
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5750-0100
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Doors and Windows
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Page
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H
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5750-0120
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Drywall
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Page
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9
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5750-0130
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Electrical
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Page
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10&11
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5750-0141
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Elevator
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Page
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12
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5750-0180
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Fire Alarm
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Page
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13
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5750-0200
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Flooring
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Page
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14
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5750-0260
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Hardware
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Page
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15
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5750-0270
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HVAC
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Page
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If]
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5750-0280
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Insulation
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Page
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17
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5750-0350
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Millwork
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Page
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18
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5750-0370
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Paint
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Page
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19
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5750-0420
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Plumbing
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Page
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20
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5750-0425
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Punch-List
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Page
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21
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5750-0460
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Signage & Directories
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Page
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22
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5750-0485
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Sprinkler Systems
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Page
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23
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5750-0140
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Voice / Data / CATV
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Page
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24
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1
General Specifications for Construction
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5750-0010
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Appliances:
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Kitchen:
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Not In Contract – Supplied by Tenant
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Refrigerator
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Not In Contract – Supplied by Tenant
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Dishwasher
-
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Not In Contract – Supplied by Tenant
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Microwave
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Not In Contract – Supplied by Tenant
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2
General Specifications for Construction
5750-0030
Cabinets & Counters:
General Notes: All stock shall be approved by Wellesley Building Company, in writing, prior to installation. Job Super and all Subcontractors shall compare
specifications with kitchen plan designed by kitchen installer. Kitchen installer may use architectural plans as a guideline for design, however, final plan and prices must be from the final kitchen design plan as approved by Wellesley Building
Company and distributed to all kitchen cabinet vendors for final pricing. Inconsistencies between plans and specifications must be approved by Wellesley Building Company in writing. Subcontractors pricing shall include the cost of all materials
necessary to complete the job (unless specifically stated herein) to applicable Massachusetts building codes.
Kitchen
Cabinets:
Existing to remain.
Kitchen Counters:
Existing to remain.
3
General Specifications for Construction
5750-0040
Change Orders:
All change orders to be agreed upon in writing, on approved change order request form, between Wellesley Building Company, Tenant, and Owner.
4
General Specifications for Construction
5750-0050
Cleaning & Disposal:
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1.
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Provide dumpsters, and labor.
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2.
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All nails/screws and scrap are to be placed in proper disposal areas out of the area of pedestrian traffic and trade working areas.
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3.
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Provide walkway access to front of property, free and clear of all debris.
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4.
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Provide walkway circulation space throughout the building and the suite.
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5
General Specifications for Construction
5750-0065
Construction Management:
The responsibilities of the Wellesley Building Company Job Super include but are not limited to the following:
The Job Super is to be present during any and all inspections that occur at the site. Monitoring subcontractors’ coordination, pricing, scheduling,
quality of labor, and materials.
6
General Specifications for Construction
5750-0800
Demolition & Disposal:
General Notes:
Job Super and all subcontractors shall compare specifications with architectural plans and if discrepancy occurs, it is the
Subcontractor’s responsibility to confer with Wellesley Building Company to discuss inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company in writing prior to installation.
Demolition:
All existing doors and frames are to be removed, stored, and salvaged for reuse. Within the selected demolition areas as per the
demolition drawing, all existing walls throughout the suite, inclusive of metal studs, insulation, and drywall are to be removed completely and if deemed necessary, at the sole discretion of Wellesley Building Company, disposed of in the proper
containers. Remove and store all electrical outlets and switch covers for reuse. All lights are to be taken down and stored for retrofitting.
7
General Specifications for Construction
5750-0100
Doors & Windows:
General Notes:
Job Super and all subcontractors shall compare specifications with architectural plans and if discrepancy occurs, it is the
Subcontractor’s responsibility to confer with Wellesley Building Company to discuss inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company in writing prior to installation.
Windows:
Add three (3) interior transoms, as noted on plan, at 6’-0” A.F.F. Transoms are to be 2’-0”H ×
3’-0”W.
Interior Doors:
All interior doors shall be 36” × 80” × 1.75” solid core, with press metal,
knock down style frames. They shall have 3 hinges, a passage set, and a door stop. All bathroom doors to have a bathroom set. Reuse of existing doors is permitted as noted on the agreed upon floor plan.
All interior double doors shall be 72” × 80” × 1.75” solid core, to match existing, with press metal, knock down style frames.
Entry/Exit Doors:
Existing entry/exit doors to remain.
8
General Specifications for Construction
5750-0120
Drywall:
General Notes:
Job Super and all Subcontractors shall compare specifications with architectural plans and if discrepancy occurs, it is the
subcontractor’s responsibility to confer with Wellesley Building Company to discuss inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company in writing prior to installation. Subcontractor
pricing shall include the cost of all materials necessary to complete the job (unless specifically stated herein) applicable to Massachusetts Building Codes.
Partitions within Single Premises:
Partitions shall be constructed of metal studs as required by code with 5/8” inch sheetrock on each side
to deck (unless otherwise noted, and ceiling height to be verified by Wellesley Builders in writing) finished for paint. All sheetrock to be screwed securely to metal studs as to prevent bowing or cracking. All exposed corners to have metal corner
beads screwed tightly as required. Self-furring metal lathe on all curved surfaces. Joints taped, compounded, and sanded to smooth finish to receive primer.
Partition Walls Between Premises:
Partitions shall be constructed of metal studs as required by code with a minimum of 1 layer of 5/8” inch
sheet rock or to code on each side of the partition (to be verified by Wellesley Builders in writing prior to installation) with 3-1/2” batt insulation, finished for paint. All sheet rock to be screwed securely to metal studs as to prevent
bowing or cracking. All exposed corners to have metal corner beads screwed tightly as required. Self-furring lathe on all curved surfaces. Joints taped, compounded, and sanded to smooth finish to receive primer.
9
General Specifications for Construction
5750-0130
Electrical:
General Notes:
Job Super and all Subcontractors shall compare specifications with architectural plans and If discrepancy occurs, it is the
subcontractor’s responsibility to confer with Wellesley Building Company to discuss Inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company In writing prior to installation. Subcontractor
pricing shall Include the cost of all materials necessary to complete the job to code (unless specifically stated herein) and receive final approval from the Town’s electrical Inspector. Verify locations of all fixtures, switches, and outlets
with Wellesley Building Company In writing prior to any drilling, cutting, or installation. Subcontractor pricing shall include the price of all materials, including fixtures, necessary to complete the job (unless specifically stated herein) to code
and receive final approval from the Town’s electrical Inspector.
Service:
One (1) existing 400-Ampere panel and One (1) New
400-Ampere panel (must be verified with Wellesley Building Company in writing), individual service, location to be verified with Wellesley Building Company prior to installation. Provide interior and exterior temporary lighting as necessary for
construction purposed per Wellesley’s direction. Include all fees and permits. Electrical sub-meter installed at location to be approved by Wellesley Building Company in writing. Perform all necessary electrical installations including, but not
limited to, wiring of all fight fixtures, mechanical Installation, appliances, outlets, switches, etc.
Interior Lighting:
See Reflected
Ceiling Plan.
Lab and Surrounding Area: Furnish and install 12” x 4’, 12” x 8’, and 12” x 12’ “ice cube tray”
fixtures suspended by jack chains. Height of fixtures, number of fixtures, and location to be verified by Wellesley Building Company in writing. Wellesley Building Company will provide a lighting layout prior to installation. Modifications of said
layout, to be approved, in writing, by Wellesley Building Company, Subcontractor responsible to assemble, install, secure, and wire all fixtures as necessary. Verify locations with Wellesley Building Company in writing prior to any drilling,
cutting, or installation.
Interior Outlets / Switches:
Within the Lab & Server Room: Provide and install 670 Linear feet of reconditioned, 100Amp Bussduct in 10’ lengths with 4 power feeds, as well as
all necessary outlets and plugs to meet Massachusetts building code.
General Suite: Each new space shall be wired with one light switch at front door for
all common area space. All new offices shall have one switch per room or to code. All switches, outlets, and faceplates to be standard, color white.
Additional Outlets / Switches:
Lab: Furnish and install 2- 60Amp, 3 phase, dedicated circuits for ovens at location noted on plan. Furnish and
install: 50 Quad drop boxes – 120 VAC, 20A; 10, 125 VAC, 30A, 1 Phase; 5208 VAC, 60A, 3 Phase.
Furniture / Cubicle electrical
connections:
Any electrical connection requirements for furniture/cubicles shall be at the sole cost and responsibility of the tenant. Tenant shall pay the cost of any and all service upgrades.
10
General Specifications for Construction
Vents / Fans:
Not In Scope.
11
General Specifications for Construction
Vents / Fans:
Not In Scope.
Fire Alarm:
To be hard wire per code.
Emergency Lighting / Exit Lighting:
All emergency lighting / exit lighting to be installed to code.
HVAC:
Hard wire all HVAC units completely to tenant’s panel.
Hot Water Tank:
Not in Scope. Existing to remain.
Permits:
Provide all necessary permits and inspection fees.
Cable Tray/Whalebone:
Provide and install 690 linear feet of reconditioned “whalebone” cable tray to lab space. See layout.
Cable / Voice / Data:
Tenant is responsible for all cable / voice / data wiring. Tenant’s subcontractor must coordinate with Wellesley
Building Company. If installation of cable / voice / data is not completed prior to commencement of drywall installation, delay days and additional costs will be incurred by tenant. Verify all locations in writing with Wellesley Building Company
prior to installation. A permit for all cable / voice / data wiring is sole responsibility of tenant’s vendor.
12
General Specifications for Construction
5750-0141
Elevator:
General Notes:
Job Super and all Subcontractors shall compare specifications with architectural plans and if discrepancy occurs, it is the
subcontractor’s responsibility to confer with Wellesley Building Company to discuss inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company in writing prior to installation. Subcontractor
pricing shall include the cost of all materials necessary to complete the job (unless specifically stated herein) applicable to Massachusetts Building Codes.
Elevator:
Any tenant access requirements which involved integration with building systems or additional tenant systems shall be at the sole cost
and responsibility of the tenant.
Any construction use of the elevator shall be coordinated with Wellesley Building Company in advance to assure proper
protection of walls, doors, etc. If elevator needs to be utilized for an extended period of time, tenant or subcontractor must provide, in writing, notice to Wellesley Building Company stating the period of use and day at least 3 business days in
advance. All use of elevator by contractors shall be done in a manner as to minimize impact on other tenants and operations within the building.
13
General Specifications for Construction
5750-0180
Fire Alarm:
General Notes:
Job Super and all Subcontractors shall compare specifications with architectural plans and if discrepancy occurs, it is the
subcontractor’s responsibility to confer with Wellesley Building Company to discuss inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company in writing prior to installation. Subcontractor
pricing shall include the cost of all materials necessary to complete the job (unless specifically stated herein) applicable to Massachusetts Building Codes.
Life Safety Devices:
Add and relocate existing life safety devices as necessary to meet Massachusetts Building Code.
14
General Specifications for Construction
5750-0200
Flooring
:
General Notes:
Subcontractor pricing shall include the cost of all materials necessary to complete the job (unless specifically stated herein) to
code. Tenant to allow a minimum of 72 hours for the carpet to set.
Conference Rooms, Offices, and Common Areas:
Existing carpet to remain
within the “Yacoblan” space. Store all wall base from all demolished walls for reuse on newly constructed walls.
Carpet within the
“Earthwatch” portion of the premises is to be new, building standard, commercial grade, 26-ounce with matching 4” carpet base. Carpet samples to be provided by Wellesley Building Company. All colors to be neutral and chosen by tenant
and approved by Wellesley Building Company in writing prior to installation.
Free edges of carpet shall have edge stripping of vinyl installed in a
trip-safe manner.
Lab/Stock Room:
To have 12” x 12” VCT flooring adhered to the floor substrate. All colors (up to 2) are to be
neutral. All VCT areas are to have 4” Vinyl Cove Base. VCT floor will be delivered
un-waxed
. Purchase of wax and application are to be the sole responsibility of the Tenant.
Tenant requests the right to understand the price of ESD paint in their Lab area. Tenant would like to understand if this is a cost effective way to install
the flooring.
Installation Requirements:
Carpet; Carpet Installer shall minimize seam locations and be responsible to verify and approve with Wellesley Building Company the carpet layout and seam
locations prior to Installation. Carpet installer is to be responsible for any damage caused by installation. Floor Preparation and leveling: Substrate to be solid and free from defects.
15
General Specifications for Construction
5750-0260
Hardware:
General Notes:
Job Super and all Subcontractors shall compare specifications with architectural plans and if discrepancy occurs, it is the
subcontractor’s responsibility to confer with Wellesley Building Company to discuss inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company in writing prior to installation. Subcontractor
pricing shall include the cost of all materials necessary to complete the job (unless specifically stated herein) applicable to Massachusetts Building Codes.
Doorknobs:
All doorknobs are to match existing. They can be reused from the demolition area at the sole discretion of Wellesley Building
Company. Location to be verified with Wellesley Building Company prior to installation.
16
General Specifications for Construction
5750-0270
HVAC:
General Notes:
Job Super and all Subcontractors shall compare specifications with architectural plans and if discrepancy occurs, it is the
subcontractor’s responsibility to confer with Wellesley Building Company to discuss inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company in writing prior to installation. Subcontractor
pricing shall include the cost of all materials necessary to complete the Job (unless specifically slated herein) applicable to Massachusetts Building Codes.
Venting:
Not in Scope
Systems:
Relocate existing 7.5TON Supplemental cooling unit from Building 3, Suite 210 to the newly constructed lab. Condenser to remain in existing location. Purchase and install new 10Ton Supplemental cooling unit, condenser to be located near the existing
condenser.
The tonnage has been defined by Acacia, Wellesley Building Company, Wellesley Management, and Wellesley Rosewood Maynard Mills in no way
guarantee that the tonnage is appropriate to cover the heat load of Acacia Communications lab requirements.
Tenant requires five (5) days notice prior to relocation of HVAC unit.
Condenser:
Existing 7.5 Ton unit condenser to remain in place, re-feed to new electric panel. New 10 Ton unit condenser to be located with the
existing feed into electric panel.
Ducting:
All supply ductwork from each of the supplemental units arranged to effectively deliver cold
air to the lab space in its entirety, location at the sole discretion of the Mechanical subcontractor and to be verified by the Tenant and Wellesley Building Company prior to installation. Comfort cooling to remain in place. Supplies and returns to
be added to each newly constructed office.
Electrical:
Mechanical subcontractor to coordinate with electrician for all necessary
connections. All controls necessary for electrician to connect to disconnect box, to be supplied by HVAC contractor. It is the responsibility of the Mechanical subcontractor to verify his scope of work with Wellesley Building Company prior to
installation.
Plumbing:
Mechanical subcontractor to coordinate with plumber for ail necessary drain, traps, and hookups prior to
installation, including but not limited to condensate connections, and all water connections including connection for humidifiers, etc. to code. It is the responsibility of the Mechanical subcontractor to verify his scope of work with Wellesley
Building Company prior to installation.
17
General Specifications for Construction
5750-0280
Insulation:
General Notes:
Job Super and all Subcontractors shall compare specifications with architectural plans and if discrepancy occurs, it is the
subcontractor’s responsibility to confer with Wellesley Building Company to discuss inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company in writing prior to installation. Subcontractor
pricing shall include the cost of all materials necessary to complete the job (unless specifically stated herein) applicable to Massachusetts Building Codes.
Insulation:
Provide and install R11 insulation to all new walls as per architectural plan.
18
General Specifications for Construction
5750-0350
Millwork:
General Notes:
Job Super and all subcontractors shall compare specifications with architectural plans and if discrepancy occurs, it is the
subcontractor’s responsibility to confer with Wellesley Building Company to discuss inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company in writing.
Baseboard:
Covered in Flooring Section of specifications. Section 5750-0200
Door & Window Trim:
Not in Scope.
Cased
Openings: Not in Scope.
Interior Doors:
Covered in the Doors and Windows section of specifications. Section 5750-0100.
19
General Specifications for Construction
5750-0370
Paint:
General Notes:
All paint to be Benjamin Moore medium to top grade. Painting subcontractor shall be responsible to fill in any nail holes and
caulk all seams on interior trim, i.e. cased openings, speed base, etc. Wherever the number of coats may not be sufficient, painting contractor is required to assure full coverage with no holidays. Subcontractor pricing shall include the cost of all
materials necessary to complete the job (unless specifically stated herein) to code.
Interior Walls:
Interior paint to be flat latex on
walls, one (1) coat primer, one (1) finish coat. All colors to match existing.
20
General Specifications for Construction
5750-0420
Plumbing:
General Notes:
Job Super and all Subcontractors shall compare specifications with architectural plans and if discrepancy occurs, it is the
subcontractor’s responsibility to confer with Wellesley Building Company to discuss inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company in writing prior to installation. Subcontractor
pricing shall include the cost of all materials necessary to complete the job (unless specifically stated herein) applicable to Massachusetts Building Code and receive final approval from the Town Plumbing Inspector. Verify all locations of fixtures
with Wellesley Building Company in writing prior to any drilling, cutting, or installation.
Service:
All water supply piping to be copper.
All waste and vent piping to be PVC.
HVAC:
Coordinate with HVAC contractor.
Kitchen:
Not in Scope.
Bathroom:
Not in Scope.
Hot Water:
Not in Scope.
Permits:
Provide all necessary permits and inspection fees.
21
General Specifications for Construction
5750-0460
Signage & Directories:
Tenant signage shall be moved as necessary. Tenant suite Number to be number 130.
Any signage outside of the building standard banner, plaque, and directory and hall signage is the sole cost and responsibility of the Tenant. Tenant must
supply artwork sample to Wellesley Building Company and Wellesley Management for approval prior to installation.
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General Specifications for Construction
5750 0485
Sprinkler Systems:
General Notes:
Job Super and all Subcontractors shall compare specifications with architectural plans and if discrepancy occurs, it is the
subcontractor’s responsibility to confer with Wellesley Building Company to discuss inconsistencies between plans and specifications. Final decision must be approved by Wellesley Building Company in writing prior to installation. Subcontractor
pricing shall include the cost of all materials necessary to complete the job (unless specifically stated herein) applicable to Massachusetts Building Code and receive final approval from the Town Plumbing Inspector. Verify all locations of fixtures
with Wellesley Building Company in writing prior to any drilling, cutting, or installation.
Sprinklers:
Relocate existing sprinkler heads
and add heads as necessary.
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General Specifications for Construction
5750-0140
Voice / Data / CATV:
Included in Electrical specifications section 5750-0130.
24
EXHIBIT A-2
FLOOR PLAN SUITE #
(Attached)
9
EXHIBIT B
FURNITURE REMAINING FOR TENANTS USE (3-130)
(Attached)
10
EXHIBIT B-l
FURNITURE TO BE RELOCATED BY TENANT FROM SUITE 3-200 to SUITE 3-130
(To Be Attached Prior To Relocation Term Commencement Date)
11
FOURTH AMENDMENT TO LEASE
This Fourth Amendment to Lease (this “Amendment”) is made this 10th day of October 2013 and is by and between
WELLESLEY/ROSEWOOD
MAYNARD MILLS LIMITED PARTNERSHIP,
a limited partnership established under the laws of the Commonwealth of Massachusetts, with a place of business at Two Clock Tower Place, Suite 200, Maynard, Massachusetts 01754 (“Landlord”) and
ACACIA COMMUNICATIONS, INC.,
a corporation established under the laws of the State of Delaware and authorized to do business in the Commonwealth of Massachusetts, with a place of business at Three Clock Tower Place, Suite 130, Maynard,
Massachusetts, (“Tenant”).
STATEMENT OF FACTS
Landlord and Tenant are parties to a Lease dated October 27, 2009 (the “Lease”), as amended by that certain First Amendment To
Lease dated November 29, 2010, that certain Second Amendment to Lease, dated February 13, 2012, and Third Amendment to Lease dated November 21, 2012, with respect to certain office space located on the second floor and first floor of
the building known as Three Clock Tower Place, Maynard, MA, known and numbered Suite130 containing approximately 28,249 contiguous rentable square feet (the “Original Premises and Expansion Premises and Relocation Premises”).
Tenant desires to exercise its Right of First Refusal (ROFR) on the space adjacent to the Relocation Premises of Three Clock Tower Place and
add an additional, 7,145 rentable square feet (the “ROFR Premises”) to the 28,249 square feet of space on the first floor of Three Clock Tower Place, the “Relocation Premises” for a total of 35,394 rentable square feet.
Landlord and Tenant desire to modify certain terms of the Lease. With the exception of the terms of this Lease Amendment, to the extent that
any terms of the Lease contradict this Amendment, the terms of this Amendment shall supersede the terms of the Lease and all former Amendments.
TERMS OF AMENDMENT
NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby
agree that the Lease shall be amended and modified as follows:
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1.
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Commencing on January 1, 2014 (the “ROFR Date”) Landlord leases to Tenant and Tenant leases from Landlord the ROFR Premises in “as-is” condition as of the date of this Lease Amendment. Landlord
shall give Tenant a $20.00 per RSF, based upon the ROFR Premises RSF of 7,145. Tenants shall use this allowance towards the construction and improvement of the ROFR Premises. In the event that the ROFR space is built out and there is a remaining
balance available Tenant may utilize this portion for additional renovations to its existing Premises building improvements. Should such improvements exceed the aforementioned allowance tenant shall fund such difference prior to construction
commencement.
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1
Landlord shall commence Landlord’s work as soon as possible after execution of this
Amendment and delivery of the space plan and specification by Tenant to Landlord. In any event Tenant shall have the right to conduct its installation work within the ROFR Premises, prior to the ROFR Term Commencement Date, provided that such work
does not interfere with Landlord’s work, in landlord’s sole judgment and discretion.
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2.
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The ROFR Term.: the Term of the ROFR Premises shall be Five (5) Years and One (1) Month, commencing of the ROFR Premises Term Commencement Date
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3.
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Term
. Commencing on the ROFR Premises Term Commencement Date, amend the lease by adding the following paragraph at the end of Section 6:
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Relocation Premises
.
With respect to the ROFR Premises: (i) the term shall be Five (5) years, (ii) the term shall commence on the Relocation Premises
Term Commencement Date, and (iii) the Rent Commencement Date shall be February 1, 2014.
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4.
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Rent
. Commencing on the ROFR Premises Rent Commencement Date, amend the lease by adding the following at the end of Section 8:
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In addition to the base rent paid for the Relocation Premises Tenant shall pay rent of the ROFR Premises as follows;
For the period commencing on February 1, 2014 and continuing thru December 31, 2015, Tenant shall pay Base Rent of 5,000 RSF of the
ROFR Premises at the rate of $15.75 per RSF per year, in equal monthly installments of $6,562.50, each payable in advance by the first day of each month. Commencing on January 1, 2015 and continuing through December 31, 2015, and through
the balance of the ROFR Premises Term, Tenant shall pay Base Rent for the entirety (consisting of 7,154 contiguous rentable square feet) of ROFR Premises at the rate of $16.25 per RSF per year, in equal monthly installments of $9,675.52, each
payable in advance by the first day of each month. Commencing on January 1, 2016 and continuing through December 31, 2016, Tenant shall pay Base Rent for entirety of ROFR Premises at the rate of $16.75 per RSF per year, in equal monthly
installments of $9,973.23, each payable in advance by the first day of each month. Commencing on January 1, 2017 and continuing through December 31, 2017, Tenant shall pay Base Rent for the entirety of ROFR Premises at the rate of $17.25
per RSF per year, in equal monthly installments of $10.270.94, each payable in advance by the first day of each month. Commencing on January 1, 2018 and continuing thru January 31, 2019, Tenant shall pay Base Rent for the entirety of ROFR
Premises at the rate of $17.75 per RSF per year, in equal monthly installments of $10,568.65, each payable in advance by the first day of each month.
Security Deposit for the Relocation Premises
. Shall remain as stated in Third Amendment
2
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6.
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Taxes and Operating Expenses for the ROFR Premises
. Commencing on the ROFR Premises Term Commencement Date, is follows and shall be paid and calculated in the same manner as the Third amend to the lease:
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“Tenant’s Share” shall mean .6675% for the ROFR Premises.
“Base Year” shall mean calendar 2014 for the ROFR Premises
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7.
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Utilities
. Amend the lease by adding the following at the end of Section 11:
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Commencing on the ROFR Premises Term Commencement Date, Tenant will be billed monthly for electrical energy use within the ROFR Premises,
either thru the check meter within the Relocation Premises or at a rate of $1.50 per rentable square foot per year, to be paid as Additional Rent, pro-rated for any partial month.
Tenant and Landlord represent and warrant that neither has dealt with any
brokers in this transaction other than Avison Young and Atlas Commercial Real Estate, who shall be paid a fee under separate agreement and timetable with Landlord. Each of the parties represents and warrants that there are no other claims for
brokerage commissions or finders fees in connection with the execution of the Original lease or subsequent Amendments, and each of the parties agrees to indemnify the other against and hold the other harmless from all liabilities arising from any
such claim, including without limitation, the cost of counsel fees in connection therewith.
Tenant shall have the on-going “Right of First Refusal” to
lease additional space adjacent to the ROFR Premises within the First Floor of Three Clock Tower Place. Upon receipt by Landlord of a bona-fide offer to lease the adjacent space, Landlord shall notice Tenant of such offer. Tenant shall have Five
(5) business days to either accept or reject the offer on the same terms and conditions as the third-party offer. In the event Tenant rejects said offer, Landlord shall have the right to lease the space to the third-party, without further claim
of such space by Tenant.
Furthermore, Tenant shall have the on-going “Right of First Refusal” to lease additional space within
the first and second floors of 1 Clock Tower Place, subject to the expansion rights of existing tenants. Upon receipt by Landlord of a bona-fide offer to lease space on the first or second floors of 1 Clock Tower Place, Landlord shall notice Tenant
of such offer. Tenant shall have Five (5) business days to either accept or reject the offer on the same terms and conditions as the third-party offer. In the event Tenant rejects said offer, Landlord shall have the right to lease the space to
the third-party, without further claim of such space by Tenant.
3
If for any reason Tenant shall fail to comply with the provisions of this
Amendment, the same shall be deemed a default under the Lease, entitling Landlord to exercise all of its rights and remedies there under.
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11.
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Tenant Representations
.
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Tenant hereby represents and certifies that the Lease for the
Premises as defined under the Lease is in full force and effect, that all obligations of Landlord under the Lease as of the date hereof have been performed by Landlord, and that, as of the date hereof, to the best of Tenant’s knowledge, there
exists no default by Landlord under the Lease and Tenant has no defenses, rights of offset, credits, deductions in rent or claims against Landlord, or its successors or assigns, of any of the agreements, terms, covenants or conditions of the Lease.
Capitalized terms not defined herein shall have the definition provided in the
Lease.
The Lease, as amended by this Amendment, is hereby ratified and confirmed
in all respects, except that this Amendment shall prevail over any other provisions of the Lease which are inconsistent with this Amendment.
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14.
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Counterparts and Authority
.
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This Amendment may be executed in multiple counterparts,
each of which shall be deemed an original and all of which together shall constitute one and the same document. Landlord and Tenant each warrant to the other that the person or persons executing this Amendment on its behalf has or have the authority
to do so and that such execution has fully obligated and bound such party to all terms and provisions of this Amendment.
SIGNATURES ON
FOLLOWING PAGE
4
EXECUTED as a sealed instrument as of the date first written above.
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ACACIA COMMUNICATIONS, INC.
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WELLESLEY ROSEWOOD MAYNARD MILLS LIMITED PARTNERSHIP
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By its sole General Partner Wellesley Mills Corporation
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By:
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/s/ John F. Gavin for
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By:
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/s/ D. Scott DiGiacomo
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Name:
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Raj Shanmugaraj
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Name:
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D. Scott DiGiacomo
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Title:
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President & CEO
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Title:
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Duly Authorized Agent
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John F. Gavin, CFO
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5
EXHIBIT A-1
FLOOR PLAN
(Attached)
6
FIFTH AMENDMENT OF LEASE
THIS FIFTH AMENDMENT OF
LEASE (the “
Amendment
”) is executed this
1
st
day of June, 2015 and for all purposes under the Lease (defined below) is deemed effective as of January 1, 2015, by and between AS CLOCK TOWER OWNER,
LLC
, a Delaware limited
liability company (including its successors and assigns, “
Landlord
”) and
ACACIA COMMUNICATIONS
,
INC
., a Delaware corporation (“
Tenant
”).
RECITALS
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A.
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Landlord (successor-in-interest to Wellesley/Rosewood Maynard Mills Limited Partnership, referred to herein as the “
Prior Landlord
”) and Tenant are parties to that certain Commercial Lease dated
October 27, 2009 (the “
Original Lease
”) as amended by that certain First Amendment to Lease dated November 29, 2010 (the “
First Amendment
”), that certain Second Amendment to Lease dated February 13,
2012 (the “
Second Amendment
”), that certain Third Amendment to Lease dated November 21, 2012 (the “
Third Amendment
”) and that certain Fourth Amendment to Lease dated October 10, 2013 (the “
Fourth
Amendment
”, and together with the Original Lease, First Amendment, Second Amendment and Third Amendment, the “
Existing Lease
”). Pursuant to the Existing Lease, Tenant currently leases 35,394 rentable square feet consisting
of (i) 28,249 rsf defined as the “Relocation Premises” in the Third Amendment and (ii) 7,145 rsf defined as the “ROFR Premises” in the Fourth Amendment (collectively, the “
Existing Premises
”) all on the
first (1
st
) floor of the building commonly known as Three Clock Tower Place (the “
Building
”) in the Clock Tower Place Office Park, Maynard, Massachusetts.
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B.
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Pursuant to the terms of the Existing Lease, the term of the Relocation Premises is scheduled to expire on May 31, 2017 and the term of the ROFR Premises is scheduled to expire on January 31,2019.
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C.
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Tenant desires to expand the Existing Premises to include Suite 100 on the first (1
st
) floor of the Building consisting of approximately 6,009 rentable square
feet (as more particular shown on
Exhibit A
attached hereto, the “
Expansion Premises
”), and extend the Term of the Lease with respect to the Relocation Premises to be coterminous with the ROFR Premises and Expansion
Premises and that the Lease be appropriately amended, and Landlord is willing to do the same on the following terms and conditions.
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D.
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The Existing Lease, as amended by this Fifth Amendment of Lease, shall be referred to herein as the “
Lease
”.
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NOW, THEREFORE,
in consideration of the above recitals which by this reference are incorporated herein, the mutual covenants and
conditions contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:
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a.
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The Existing Lease is hereby amended to extend the Term of the Lease with respect to the Relocation Premises until
January 31, 2019
.
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b.
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Landlord and Tenant acknowledge and agree that (i) notwithstanding any provision of the Existing Lease to the contrary (including without limitation Section 7 of the Original Lease), Tenant has no option to
extend the term of the Lease beyond January 31, 2019 other than as set forth in Section 15 of the Third Amendment and (ii) the determination of “market” rent set forth in Section 15 of the Third Amendment shall be as
set forth in
Exhibit B
attached hereto and incorporated herein.
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a. Effective as of January 1, 2015, (i) the
Existing Premises and the Expansion Premises shall together constitute the “Premises” for all purposes under the Lease and (ii) the rentable square footage of the Premises shall be deemed to be
41,403
square feet.
b. The Expansion Premises shall be subject to all of the terms and conditions of the Existing Lease currently in effect, except as expressly
modified in this Amendment. The Expansion Premises are accepted by Tenant in their “as is” condition and configuration without any representations or warranties by Landlord, express or implied, with respect to such condition or
configuration. By taking possession of the Expansion Premises, Tenant agrees that the Expansion Premises are in acceptable order and satisfactory condition.
c. Tenant shall perform any Leasehold Improvements desired by Tenant for its initial occupancy of the Expansion Premises in compliance with the
terms and conditions of the Lease, including without limitation Section 16 of the Original Lease and Paragraph N of the Rider to the Original Lease. Tenant acknowledges and agrees that no further improvement allowances remain due and payable
from Landlord to Tenant under the Existing Lease.
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3.
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Rent; Taxes and Expenses; Security Deposit
.
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a.
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The Base Rent set forth in the Existing Lease shall be modified to provide that the monthly Base Rent for the Expansion Premises shall be as set forth in the schedule below:
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Period
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Base Rent
per RSF
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Annual Base Rent
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Monthly Base Rent
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January 1, 2015 -December 31, 2015
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$
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16.25
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$
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97,646.25
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$
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8,137.19
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January 1, 2016 -December 31, 2016
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$
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16.75
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$
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100,650.75
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$
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8,387.56
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January 1, 2017 -December 31, 2017
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$
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17.25
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$
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103,655.25
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$
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8,637.94
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January 1, 2018 -January 31, 2019
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$
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17.75
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$
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106,659.75
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$
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8,888.31
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b.
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The Base Rent set forth in the Existing Lease shall be modified to provide that the monthly Base Rent for the Relocation Premises for the period June 1, 2017 - January 31,2019 shall be as set forth in the
schedule below:
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Period
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Base Rent
per RSF
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Annual Base Rent
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Monthly Base Rent
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January 1,2017 -December 31, 2017
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$
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17.25
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$
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487,295.25
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$
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40,607.94
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January 1,2018 -December 31, 2019
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$
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17.75
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$
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501,419.75
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$
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41,784.98
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c.
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With respect to the Expansion Premises only, (i) the Base Year for both Operating Expenses and Taxes shall be
Calendar Year 2014
and (ii) Tenant’s Share shall be
0.5541%
(i.e. the 6,009
rsf of the Expansion Premises divided by the 1,084,484 rsf of the Project). The Base Years for Operating Expenses and Taxes with respect to the Relocation Premises and the ROFR Premises and Tenant’s Share with respect to the Relocation Premises
and the ROFR Premises shall remain as set forth in the Existing Lease.
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d.
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The following shall be added to the end of the third paragraph of Section 10 of the Original Lease: “If such audit reveals an undercharge, such amount shall immediately be paid to Landlord. If Tenant retains
an agent to review Landlord’s records, the agent must be with a CPA firm licensed to do business in the Commonwealth of Massachusetts, and the review shall not be on a “contingency fee” basis. Tenant shall be solely responsible for
all costs, expenses and fees incurred for the audit.”
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e.
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Landlord and Tenant hereby acknowledge and agree that the third sentence of Section 9 of the Original Lease is of no further force or effect and there shall be no further reductions of the Security Deposit.
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f.
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Tenant’s reimbursement to Landlord for electrical service to the Expansion Premises shall be as set forth in Section 7 of the Third Amendment.
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4.
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Notice Address
. Paragraph E of the Rider to the Original Lease is hereby modified by changing the address for any notices to the Landlord to the following:
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AS Clock Tower Owner, LLC
c/o
Saracen Management LLC
41 Seyon Street
Waltham, Massachusetts 02453
Attn: Lisa Arya
Tenant
acknowledges and agrees that Tenant’s notice address pursuant to the Lease shall be the Premises, as the same may be modified or relocated within the Property from time to
time, and made to the attention of the General Counsel of Tenant. In addition to the delivery of notices as set forth in Paragraph E of the Rider to the Original Lease, notices under the Lease
may be duly served if delivered to the specified address by nationally recognized overnight courier with delivery receipt and shall be deemed received on the earlier of actual receipt or rejection by addressee or the next business day after deposit
with such overnight courier.
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5.
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Cleaning of the Premises
. Any provision of the Lease to the contrary notwithstanding (including without limitation Paragraph M of the Rider to the Original Lease), Landlord shall provide Building-standard
janitorial services to the Premises on weekdays (exclusive of federal and state recognized holidays) and Tenant shall reimburse Landlord, as Additional Rent, for Landlord’s actual, out-of-pocket cost for such cleaning service to the Premises.
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6.
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Furniture
. Section 8 of the Third Amendment shall be modified by adding the following to the end thereof: “Landlord and Tenant acknowledge and agree that Landlord shall have the right, to be
exercised by Landlord in its sole discretion, to convey to Tenant some or all of the furniture, fixtures and equipment owned by Landlord and located in the Premises for consideration of $1.00 on or prior to the expiration or earlier termination of
the Lease.”
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7.
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Estoppel
. Pursuant to Paragraph K of the Rider to the Original Lease, as of the date of execution of this Amendment, Tenant hereby represents, warrants and certifies to Landlord, and Landlord’s
successors, assigns and mortgagees, the following:
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a.
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The Existing Lease has not been modified, changed, altered, amended or supplemented in any respect other than by this Fifth Amendment, and this Lease is the only lease or other agreement between Tenant and Landlord
(including Prior Landlord) affecting the Premises;
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b.
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Tenant has no right to free rent, partial rent, rebate of rental payments or any other type of rental concession;
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c.
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The security deposit held by Landlord on the date hereof is $68,000;
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d.
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Tenant is current in its payment of all Base Rent, Taxes, Operating Expenses and other charges due to be paid under the Lease, with no Rent being due and payable through the date hereof; no Rent or other sum payable
under the Lease is currently being paid by Tenant in arrears; and as of the date of execution of this Amendment no Rent or other sum payable under the Lease has been paid in advance;
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e.
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To Tenant’s knowledge, all of the obligations on the part of Landlord under the Lease have been carried out and completed in full, all allowances due from Landlord under the Lease have been paid in full, and Tenant
has no claim or knowledge of any claim against the holder of Landlord’s interest on account of any default or failure of performance by Landlord (including Prior Landlord) under the Lease;
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f.
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Tenant has received no written notice of default of any of its obligations to be paid or performed under the Lease;
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g.
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To Tenant’s knowledge, Tenant is not entitled to any offset or deduction in Rent and has no claim or defense to the performance of any obligation to be performed by it under the Lease; and
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h.
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To Tenant’s knowledge, there are no regulatory actions or other claims pending or threatened against Tenant arising out of the presence of any substances or compounds prohibited or regulated under any federal,
state or municipal laws pertaining to health or the environment in violation of applicable laws on the Premises or the Property, and Tenant has received no notice of any such violations and/or claims or actions.
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a.
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Tenant acknowledges and agrees that, any provision of the Existing Lease to the contrary notwithstanding, Tenant possesses no rights of first offer, rights of first refusal or similar expansion or vacant space notice
rights pursuant to the Lease other than those rights expressly set forth in Section 9 of the Fourth Amendment.
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b.
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Section 17 of the Third Amendment shall be modified by adding the following to the end thereof: “Tenant shall cooperate with Landlord in the event Landlord seeks to recover such costs under Landlord’s
insurance.”
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c.
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Intentionally Omitted.
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d.
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Section 19 of the Original Lease shall be modified by adding the following to the end of the second paragraph thereof: “and Landlord may enter the Premises upon reasonable prior notice and during normal
business hours (except in the event of a
bona fide
emergency, in which case such prior notice shall be given and the timing of access shall occur as is reasonable under the circumstances) to perform or facilitate the performance of repairs,
updates, alterations or additions to the base building structure and systems serving the Premises and Building (including for the purpose of updating, checking, calibrating, adjusting and balancing controls and other parts of the Building’s
systems) which are not reasonably accessible except from within the Premises”.
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e.
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This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein, and there are no additional oral or written representations or agreements regarding the matters set forth
in this Agreement which are not set forth herein. Under no circumstances shall Tenant be entitled to any abatement of Base Rent or Additional Rent, improvement allowances, leasehold improvements, or other work to the Premises, or any similar
economic incentives that may have been provided Tenant in connection with entering into the Existing Lease, unless specifically set forth in this Amendment.
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f.
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Except as herein modified or amended, the provisions, conditions and terms of the Existing Lease shall remain unchanged and in full force and effect.
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g.
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In the case of any inconsistency between the provisions of the Existing Lease and this Amendment, the provisions of this Amendment shall govern and control.
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h.
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Landlord has delivered a copy of this Amendment to Tenant for Tenant’s review only and the delivery of it does not constitute an offer to Tenant or an option. Landlord and Tenant shall not be bound by this
Amendment until Landlord and Tenant have executed and delivered the same to the other party.
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i.
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The capitalized terms used in this Amendment shall have the same definitions as set forth in the Existing Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment.
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j.
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Tenant and Landlord hereby represent to each other that Landlord and Tenant have dealt with no broker in connection with this Amendment other than Avison Young and Atlas Commercial Real Estate LLC , and Tenant and
Landlord agree to indemnify and hold each other harmless from all claims of any other brokers claiming to have represented Tenant or Landlord in connection with this Amendment.
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k.
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Each signatory of this Amendment represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.
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[SIGNATURES ARE ON FOLLOWING PAGE]
IN WITNESS WHEREOF
, Landlord and Tenant have duly executed this Fifth Amendment as of the
day and year first above written.
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LANDLORD:
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AS CLOCK TOWER OWNER
,
LLC
, a Delaware limited liability company
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By:
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/s/ Kurt W. Saraceno
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Name:
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Kurt W. Saraceno
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Title:
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Member
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TENANT:
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ACACIA COMMUNICATIONS
,
INC
., a Delaware corporation
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By:
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/s/ John Gavin
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Name:
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John Gavin
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Title:
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CFO
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Exhibit A
Expansion Premises
Exhibits
Following Landlord’s receipt of a timely delivered written notice (the “
Exercise Notice
”) that Tenant is exercising its
option to renew the term as set forth in Section 15 of the Third Amendment (the “
Renewal Term
”), Landlord shall provide to Tenant Landlord’s estimate of the Prevailing Market Rent (as hereinafter defined) for the Renewal
Term
(
“
Landlords Rent Quotation
”), which Landlord’s Rent Quotation shall be delivered to Tenant on or before the date that is the later of thirty
(30)
days following Landlord’s receipt of the Exercise
Notice and the date that is one (1) year prior to the expiration of the current term of the Lease. If at the expiration of thirty
(30)
days after the date when Landlord provides such quotation to Tenant (the “
Negotiation
Period
”), Landlord and Tenant have not reached agreement on a determination of Base Rent for the Renewal Term and executed a written instrument extending the Term of this Lease pursuant to such agreement, then Tenant shall have the right,
for forty-five (45) days following the expiration of the Negotiation Period, to initiate a broker determination (the “
Broker Determination
”) of the Prevailing Market Rent for such Renewal Term, which Broker Determination shall
be made in the manner set forth below. “
Prevailing Market Rent
” shall mean the anticipated rent for the Premises as of the commencement of the Renewal Term under market conditions then existing and taking into account all relevant
factors. If Tenant timely shall have requested a Broker Determination with respect to the Renewal Term, then the Base Rent for the Renewal Term shall be the Prevailing Market Rent as determined by the Broker Determination. If Tenant does not timely
request a Broker Determination, the Base Rent for the Renewal Term shall be the Landlord’s Rent Quotation.
Upon the first to occur
of (x) the mutual agreement by Landlord and Tenant during the Negotiation Period of the Base Rent to be payable during the Renewal Term and execution of a written instrument extending the Term of this Lease pursuant to such mutual agreement or
(y) the timely initiation of a Broker Determination by Tenant, then except as hereinafter provided, this Lease and the Term hereof shall automatically be deemed extended for the Renewal Term, without the necessity for the execution of any
additional documents, except that Landlord and Tenant agree to enter into an instrument in writing setting forth the Base Rent for the Renewal Term as determined in the relevant manner set forth in this
Exhibit B
; and in such event all
references herein to the term of this Lease shall be construed as referring to the initial term of this Lease, as so extended, unless the context clearly otherwise requires. Notwithstanding anything contained herein to the contrary, any exercise of
the Renewal Option by Tenant shall be void, in Landlord’s sole discretion, if an Event of Default is ongoing at either the time of the Exercise Notice or at the time commencement of the Extension Term.
If Tenant timely initiates the Broker Determination, then then the Prevailing Market Rent shall be determined by three
(3)
appraisers as hereafter provided, each of whom shall have at least ten
(10)
years’ experience in the office market where the Premises is located and each of whom is hereinafter referred to as “appraiser”.
Tenant and Landlord shall each appoint one such appraiser (and shall provide such appraisers with their then most recent respective estimate of the Prevailing Market Rent) and the two appraisers so appointed shall appoint the third appraiser (the
“
Neutral Appraiser
”). The cost and expenses of each appraiser appointed separately by Tenant and Landlord shall be borne by the party who appointed the appraiser. The cost and expenses of the third appraiser shall be shared equally
by Tenant and Landlord. Landlord and Tenant shall appoint
their respective appraisers no later than fifteen (15) days after the expiration of the Negotiation Period and shall designate the appraisers so appointed by notice to the other party. The
two appraisers so appointed and designated shall appoint the Neutral Appraiser no later than twenty (20) days after the end of the Negotiation Period and shall designate such appraiser by notice to Landlord and Tenant. The Neutral Appraiser
shall then choose either Landlord’s estimate of Prevailing Market Rent or Tenant’s estimate of Prevailing Market Rent as the Prevailing Market Rent of the space in question as of the commencement of the Renewal Term and shall notify
Landlord and Tenant of its determination no later than sixty (60) days after the end of the Negotiation Period. For the avoidance of doubt, the Neutral Appraiser must choose either Landlord’s estimate of the Prevailing Market Rent or
Tenant’s estimate of the Prevailing Market Rent, and the Neutral Appraiser shall have no authority to select any other amount as the Prevailing Market Rent. The Prevailing Market Rent determined in accordance with the provisions of this Exhibit
B shall be deemed binding and conclusive on Tenant and Landlord, subject to the terms hereinbefore provided. Notwithstanding the foregoing, if either party shall fail to appoint its appraiser within the period specified above (such party referred to
hereinafter as the “failing party”), the other party may serve notice on the failing party requiring the failing party to appoint its appraiser within ten (10) days of the giving of such notice and if the failing party shall not
respond by appointment of its appraiser within said (10) day period, then the appraiser appointed by the other party shall be the sole appraiser whose choice of either Landlord’s or Tenant’s estimate of Prevailing Market Rent shall be
binding and conclusive upon Tenant and Landlord.
All times set forth in this
Exhibit B
are of the essence.
SIXTH AMENDMENT OF LEASE
THIS SIXTH AMENDMENT OF LEASE
(the “
Amendment
”) is executed this
1
st
day of June, 2015 by and between AS CLOCK TOWER OWNER, LLC, a Delaware limited liability company (including its successors and assigns, “
Landlord
”) and
ACACIA
COMMUNICATIONS
,
INC.
, a Delaware corporation (“
Tenant
”).
RECITALS
|
A.
|
Landlord (successor-in-interest to Wellesley/Rosewood Maynard Mills Limited Partnership, referred to herein as the “
Prior Landlord
”) and Tenant are parties to that certain Commercial Lease dated
October 27, 2009 (the “
Original Lease
”) as amended by that certain First Amendment to Lease dated November 29, 2010 (the “
First Amendment
”), that certain Second Amendment to Lease dated February 13,
2012 (the “
Second Amendment
”), that certain Third Amendment to Lease dated November 21, 2012 (the “
Third Amendment
”) and that certain Fourth Amendment to Lease dated October 10, 2013 (the “
Fourth
Amendment
”) and that certain Fifth Amendment to Lease dated June 1, 2015 (the “
Fifth Amendment
”, and together with the Original Lease, First Amendment, Second Amendment, Third Amendment and Fourth Amendment, the
“
Existing Lease
”). Pursuant to the Existing Lease, Tenant currently leases 41,403 rentable square feet consisting of (i) 28,249 rsf defined as the “Relocation Premises” in the Third Amendment, (ii) 7,145 rsf
defined as the “ROFR Premises” in the Fourth Amendment and (hi) 6,009 rsf defined as the “Expansion Premises” in the Fifth Amendment (collectively, the “
Existing Premises
”) all on the first (1
st
) floor of the building commonly known as Three Clock Tower Place (the “
Building
”) in the Clock Tower Place Office Park, Maynard, Massachusetts.
|
|
B.
|
Tenant desires to expand the Existing Premises to include Suite 205 on the second (2
nd
) floor of the Building consisting of approximately 3,015 rentable square
feet (as more particular shown on
Exhibit A
attached hereto, the “
Suite 205 Expansion Premises
”) and that the Lease be appropriately amended, and Landlord is willing to do the same on the following terms and
conditions.
|
|
C.
|
The Existing Lease, as amended by this Sixth Amendment of Lease, shall be referred to herein as the “
Lease
”
.
|
NOW
,
THEREFORE
”, in consideration of the above recitals which by this reference are incorporated herein, the mutual
covenants and conditions contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:
|
1.
|
Suite 205 Expansion Premises
.
|
|
|
a.
|
Effective as of the date hereof (the “
Suite 205 Commencement Date
”) and continuing through the Suite 205 Expansion Premises Lease
Termination Date (as defined below), (i) the Existing Premises and the Suite 205 Expansion Premises shall together constitute the “Premises” for all purposes under the Lease and (ii) the rentable square footage of the Premises
shall be deemed to be
44,418
square feet.
|
|
|
Following the Suite 205 Expansion Premises Lease Termination Date, the Suite 205 Expansion Premises shall no longer be included in the “Premises” for any purposes under the Lease and
the rentable square footage of the Premises shall be deemed to be 41,403 square feet.
|
|
|
b.
|
The Suite 205 Expansion Premises shall be subject to all of the terms and conditions of the Existing Lease currently in effect, except as expressly modified in this Amendment. The Suite 205 Expansion Premises are
accepted by Tenant in their “as is” condition and configuration without any representations or warranties by Landlord, express or implied, with respect to such condition or configuration. By taking possession of the Suite 205 Expansion
Premises, Tenant agrees that the Suite 205 Expansion Premises are in acceptable order and satisfactory condition.
|
|
2.
|
Rent; Taxes and Expenses; Early Termination of Suite 205 Expansion Premises
.
|
|
|
a.
|
The Base Rent set forth in the Existing Lease shall be modified to provide that the monthly Base Rent for the Suite 205 Expansion Premises shall be $4,082.81 (i.e. $16.25/rsf per annum):
|
|
|
b.
|
With respect to the Suite 205 Expansion Premises only, (i) the Base Year for both Operating Expenses and Taxes shall be
Calendar Year 2015
and (ii) Tenant’s Share shall be
0.2780%
(i.e. the 3,015 rsf of the Suite 205 Expansion Premises divided by the 1,084,484 rsf of the Project). The Base Years for Operating Expenses and Taxes with respect to the Relocation Premises, the ROFR Premises and the Expansion
Premises and Tenant’s Share with respect to the Relocation Premises, the ROFR Premises and the Expansion Premises shall remain as set forth in the Existing Lease.
|
|
|
c.
|
Tenant’s reimbursement to Landlord for electrical service to the Suite 205 Expansion Premises shall be as set forth in Section 7 of the Third Amendment.
|
|
|
d.
|
Notwithstanding any other provision of the Lease to the contrary, at any time on and after November 30, 2015, either Landlord or Tenant may terminate Tenant’s lease of the Suite 205 Expansion Premises by
providing the other at least thirty (30) days prior written notice of such termination. Upon the effective date of such termination (the “
Suite 205 Expansion Premises Lease Termination Date
”), Tenant shall vacate and surrender
the Suite 205 Expansion Premises in the condition required under Section 24 of the Original Lease, and thereafter Landlord and Tenant shall have no further rights or obligations under the Lease with respect to the Suite 205 Expansion Premises
except such liabilities which would otherwise survive with respect to the expiration or earlier termination of the Lease in general (including without limitation Section 20 of the Original Lease and Paragraph H to the Rider to the Original
Lease).
|
|
|
a.
|
This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein, and there are no additional oral or
written
|
|
|
representations or agreements regarding the matters set forth in this Agreement which are not set forth herein. Under no circumstances shall Tenant be entitled to any abatement of Base Rent or
Additional Rent, improvement allowances, leasehold improvements, or other work to the Premises, or any similar economic incentives that may have been provided Tenant in connection with entering into the Existing Lease, unless specifically set forth
in this Amendment.
|
|
|
b.
|
Except as herein modified or amended, the provisions, conditions and terms of the Existing Lease shall remain unchanged and in foil force and effect.
|
|
|
c.
|
In the case of any inconsistency between the provisions of the Existing Lease and this Amendment, the provisions of this Amendment shall govern and control.
|
|
|
d.
|
Landlord has delivered a copy of this Amendment to Tenant for Tenant’s review only and the delivery of it does not constitute an offer to Tenant or an option. Landlord and Tenant shall not be bound by this
Amendment until Landlord and Tenant have executed and delivered the same to the other party.
|
|
|
e.
|
The capitalized terms used in this Amendment shall have the same definitions as set forth in the Existing Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment.
|
|
|
f.
|
Tenant and Landlord hereby represent to each other that Landlord and Tenant have dealt with no broker in connection with this Amendment other than Saracen Management, LLC and Avison Young, and Tenant and Landlord agree
to indemnify and hold each other harmless from all claims of any other brokers claiming to have represented Tenant or Landlord in connection with this Amendment.
|
|
|
g.
|
Each signatory of this Amendment represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.
|
[SIGNATURES ARE ON FOLLOWING PAGE]
IN WITNESS WHEREOF
, Landlord and Tenant have duly executed this Sixth Amendment as of the
day and year first above written.
|
|
|
|
|
LANDLORD:
|
|
|
|
AS CLOCK TOWER OWNER
,
LLC,
a Delaware limited liability company
|
|
|
|
|
By:
|
|
/s/ Kurt W. Saraceno
|
|
Name:
|
|
Kurt W. Saraceno
|
|
Title:
|
|
Member
|
|
|
|
TENANT
|
|
|
|
ACACIA COMMUNICATIONS
,
INC.,
a Delaware corporation
|
|
|
|
|
By:
|
|
/s/ John Gavin
|
|
Name:
|
|
John Gavin
|
|
Title:
|
|
CFO
|
Exhibit A
Suite 205 Expansion Premises
SEVENTH AMENDMENT OF LEASE
THIS SEVENTH AMENDMENT OF LEASE
(the “
Amendment
”) is executed this
5
th
day of January, 2016 by and between
AS CLOCK TOWER OWNER, LLC
, a Delaware limited liability company (including its successors and assigns, “
Landlord
”) and
ACACIA
COMMUNICATIONS, INC.
, a Delaware corporation (“
Tenant
”).
RECITALS
|
A.
|
Landlord (successor-in-interest to Wellesley/Rosewood Maynard Mills Limited Partnership, referred to herein as the “
Prior Landlord
”) and Tenant are parties to that certain Commercial Lease dated
October 27, 2009 (the “
Original Lease
”) as amended by that certain First Amendment to Lease dated November 29, 2010 (the “
First Amendment
”), that certain Second Amendment to Lease dated February 13,
2012 (the “
Second Amendment
”), that certain Third Amendment to Lease dated November 21, 2012 (the “
Third Amendment
”) and that certain Fourth Amendment to Lease dated October 10, 2013 (the “
Fourth
Amendment
”) and that certain Fifth Amendment to Lease dated June 1, 2015 (the “
Fifth Amendment
”) and that certain Sixth Amendment to Lease dated June 1, 2015 (the “
Sixth Amendment
”, and together
with the Original Lease, First Amendment, Second Amendment, Third Amendment, Fourth Amendment and Fifth Amendment, the “
Existing Lease
”). Pursuant to the Existing Lease, Tenant currently leases 44,418 rentable square feet consisting
of (i) 28,249 rsf defined as the “Relocation Premises” in the Third Amendment and located on the first (1
st
) floor of the building commonly known as Three Clock Tower Place
(the “
Building
”) in the Clock Tower Place Office Park, Maynard, Massachusetts, (ii) 7,145 rsf defined as the “ROFR Premises” in the Fourth Amendment and located on the first (1
st
) floor of the Building, (iii) 6,009 rsf defined as the “Expansion Premises” in the Fifth Amendment and located on the first
(1
st
) floor of the Building and (iv) 3,015 rsf defined as the “Suite 205 Expansion Premises” in the Sixth Amendment and located on the second (2
nd
) floor of the Building (collectively, the “
Existing Premises
”).
|
|
B.
|
Tenant desires to expand the Existing Premises to include a suite on the third (3
rd
) floor of the Building consisting of approximately
7,112
rentable square feet (as more particularly shown as the crosshatched space on
Exhibit A
attached hereto, the “
Third Floor Expansion Premises
”) and that the Lease be appropriately amended, and Landlord is willing to do
the same on the following terms and conditions.
|
|
C.
|
The Existing Lease, as amended by this Seventh Amendment of Lease, shall be referred to herein as the “
Lease
”.
|
NOW, THEREFORE
, in consideration of the above recitals which by this reference are incorporated herein, the mutual covenants and
conditions contained herein and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant agree as follows:
|
1.
|
Third Floor Expansion Premises
.
|
|
|
a.
|
Effective as of the date hereof (the “
Third Floor Expansion Commencement Date
”) and continuing through the Third Floor Expansion
Premises Lease Termination Date (as defined below), (i) the Existing Premises and the Third Floor Expansion Premises
|
1
|
|
shall together constitute the “Premises” for all purposes under the Lease and (ii) the rentable square footage of the Premises shall be deemed to be
51,530
square
feet (or 48,515 square feet if the Suite 205 Expansion Premises Lease Termination Date has occurred on or before such date). Following the Third Floor Expansion Premises Lease Termination Date, the Third Floor Expansion Premises shall no longer be
included in the “Premises” for any purposes under the Lease and the rentable square footage of the Premises shall be deemed to be 44,418 square feet (or 41,403 square feet if the Suite 205 Expansion Premises Lease Termination Date has
occurred on or before such date).
|
|
|
b.
|
The Third Floor Expansion Premises shall be subject to all of the terms and conditions of the Existing Lease currently in effect, except as expressly modified in this Amendment. The Third Floor Expansion Premises are
accepted by Tenant in their “as is” condition and configuration without any representations or warranties by Landlord, express or implied, with respect to such condition or configuration. By taking possession of the Third Floor Expansion
Premises, Tenant agrees that the Third Floor Expansion Premises are in acceptable order and satisfactory condition.
|
|
2.
|
Rent; Taxes and Expenses; Early Termination of Third Floor Expansion Premises
.
|
|
|
a.
|
Commencing on February 1, 2016, the Base Rent set forth in the Existing Lease shall be modified to provide that the monthly Base Rent for the Third Floor Expansion Premises shall be
$9,779.00
(i.e.
$16.50/rsf per annum); provided that (i) no Base Rent shall be due for the Third Floor Expansion Premises for the period commencing on the Third Floor Expansion Commencement Date through January 31, 2016 and (ii) Base Rent due for the
Third Floor Expansion Premises for the month of
March 2016
only shall be $4,779.00.
|
|
|
b.
|
With respect to the Third Floor Expansion Premises only, (i) the Base Year for both Operating Expenses and Taxes shall be
Calendar Year 2015
and (ii) Tenant’s Share shall be
0.6792%
(i.e. the 7,112 rsf of the Third Floor Expansion Premises divided by the current 1,047,129 rsf measurement of the Project). The Base Years for Operating Expenses and Taxes with respect to the Relocation Premises, the ROFR
Premises, the Expansion Premises and the Suite 205 Expansion Premises and Tenant’s Share with respect to the Relocation Premises, the ROFR Premises, the Expansion Premises and the Suite 205 Expansion Premises shall remain as set forth in the
Existing Lease.
|
|
|
c.
|
Tenant’s reimbursement to Landlord for electrical service to the Third Floor Expansion Premises shall be as set forth in Section 7 of the Third Amendment.
|
|
|
d.
|
Notwithstanding any other provision of the Lease to the contrary, the lease of the Third Floor Expansion Premises shall expire upon the earlier of (i) January 31, 2017 and (ii) the date Tenant takes
possession of all of floors 3, 4 and 5 of the Building pursuant to a separate lease between Landlord and Tenant. Upon the effective date of such termination (the “
Third Floor Expansion Premises Lease Termination Date
”), Tenant shall
vacate and surrender the Third Floor Expansion Premises in the condition required under Section 24 of the Original Lease, and thereafter Landlord and Tenant shall have no further rights or obligations under the Lease with respect to the Third
Floor Expansion Premises except such liabilities which would otherwise survive with respect to the expiration or earlier termination of the Lease in general (including without limitation Section 20 of the Original Lease and Paragraph H. to the
Rider to the Original Lease).
|
2
|
|
a.
|
This Amendment sets forth the entire agreement between the parties with respect to the matters set forth herein, and there are no additional oral or written representations or agreements regarding the matters set forth
in this Agreement which are not set forth herein. Under no circumstances shall Tenant be entitled to any abatement of Base Rent or Additional Rent, improvement allowances, leasehold improvements, or other work to the Premises, or any similar
economic incentives that may have been provided Tenant in connection with entering into the Existing Lease, unless specifically set forth in this Amendment.
|
|
|
b.
|
Except as herein modified or amended, the provisions, conditions and terms of the Existing Lease shall remain unchanged and in full force and effect.
|
|
|
c.
|
In the case of any inconsistency between the provisions of the Existing Lease and this Amendment, the provisions of this Amendment shall govern and control.
|
|
|
d.
|
Landlord has delivered a copy of this Amendment to Tenant for Tenant’s review only and the delivery of it does not constitute an offer to Tenant or an option. Landlord and Tenant shall not be bound by this
Amendment until Landlord and Tenant have executed and delivered the same to the other party.
|
|
|
e.
|
The capitalized terms used in this Amendment shall have the same definitions as set forth in the Existing Lease to the extent that such capitalized terms are defined therein and not redefined in this Amendment.
|
|
|
f.
|
Tenant and Landlord hereby represent to each other that Landlord and Tenant have dealt with no broker in connection with this Amendment, and Tenant and Landlord agree to indemnify and hold each other harmless from all
claims of any other brokers claiming to have represented Tenant or Landlord in connection with this Amendment.
|
|
|
g.
|
Each signatory of this Amendment represents hereby that he or she has the authority to execute and deliver the same on behalf of the party hereto for which such signatory is acting.
|
[SIGNATURES ARE ON FOLLOWING PAGE]
3
IN WITNESS WHEREOF
, Landlord and Tenant have duly executed this Seventh Amendment as of
the day and year first above written.
|
|
|
|
|
LANDLORD:
|
|
|
|
AS CLOCK TOWER OWNER
,
LLC,
a Delaware limited liability company
|
|
|
|
|
By:
|
|
/s/ Kurt W. Saraceno
|
|
Name:
|
|
Kurt W. Saraceno
|
|
Title:
|
|
Manager
|
|
|
|
TENANT:
|
|
|
|
ACACIA COMMUNICATIONS
,
INC.,
a Delaware corporation
|
|
|
|
|
By:
|
|
/s/ John Gavin
|
|
Name:
|
|
John Gavin
|
|
Title:
|
|
CFO
|
4
Exhibit A
Third Floor Expansion Premises
5
Exhibit 10.15
LOAN AND SECURITY AGREEMENT
THIS LOAN AND SECURITY AGREEMENT
(this “
Agreement
”) dated as of June 9, 2011 (the “
Effective
Date
”) between
SILICON VALLEY BANK
, a California corporation with a loan production office located at 275 Grove Street, Suite 2-200, Newton, Massachusetts 02466 (“
Bank
”), and
ACACIA COMMUNICATIONS, INC.
, a
Delaware corporation (“
Borrower
”), provides the terms on which Bank shall lend to Borrower and Borrower shall repay Bank. The parties agree as follows:
|
|
1
|
ACCOUNTING AND OTHER TERMS
|
Accounting terms not defined in this Agreement shall
be construed following GAAP. Calculations and determinations must be made following GAAP. Capitalized terms not otherwise defined in this Agreement shall have the meanings set forth in Section 13. All other terms contained in this Agreement,
unless otherwise indicated, shall have the meaning provided by the Code to the extent such terms are defined therein.
|
|
2
|
LOAN AND TERMS OF PAYMENT
|
2.1 Promise to Pay
. Borrower hereby
unconditionally promises to pay Bank the outstanding principal amount of all Credit Extensions and accrued and unpaid interest thereon as and when due in accordance with this Agreement.
2.1.1 Revolving Advances
.
(a)
Availability
. Subject to the terms and conditions of this Agreement, Bank shall make Advances not exceeding the Availability
Amount. Amounts borrowed under the Revolving Line may be repaid and, prior to the Revolving Line Maturity Date, reborrowed, subject to the applicable terms and conditions precedent herein.
(b)
Termination; Repayment
. The Revolving Line terminates on the Revolving Line Maturity Date, when the principal amount of all
Advances, the unpaid interest thereon, and all other Obligations relating to the Revolving Line shall be immediately due and payable.
2.1.2 Letters of Credit Sublimit
.
(a) As part of the Revolving Line, Bank shall issue or have issued Letters of Credit denominated in Dollars or a Foreign Currency for
Borrower’s account. The aggregate Dollar Equivalent amount utilized for the issuance of Letters of Credit shall at all times reduce the amount otherwise available for Advances under the Revolving Line. The aggregate Dollar Equivalent of the
face amount of outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve) may not exceed the lesser of (A) One Hundred Thousand Dollars ($100,000.00), minus (i) the sum of all
amounts used for Cash Management Services, and minus (ii) the FX Reduction Amount, or (B) the lesser of the Revolving Line or the Borrowing Base, minus (i) the sum of all outstanding principal amounts of any Advances (including any
amounts used for Cash Management Services), and minus (ii) the FX Reduction Amount.
(b) If, on the Revolving Line Maturity Date (or the effective date of any termination of this
Agreement), there are any outstanding Letters of Credit, then on such date Borrower shall provide to Bank cash collateral in an amount equal to 105% (if the Letter of Credit is denominated in Dollars) or 110% (if the Letter of Credit is denominated
in a Foreign Currency) of the Dollar Equivalent of the face amount of all such Letters of Credit plus all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure
all of the Obligations relating to such Letters of Credit. All Letters of Credit shall be in form and substance acceptable to Bank in its sole discretion and shall be subject to the terms and conditions of Bank’s standard Application and Letter
of Credit Agreement (the “
Letter of Credit Application
”). Borrower agrees to execute any further documentation in connection with the Letters of Credit as Bank may reasonably request. Borrower further agrees to be bound by the
regulations and interpretations of the issuer of any Letters of Credit guaranteed by Bank and opened for Borrower’s account or by Bank’s interpretations of any Letter of Credit issued by Bank for Borrower’s account, and Borrower
understands and agrees that Bank shall not be liable for any error, negligence, or mistake, whether of omission or commission, in following Borrower’s instructions or those contained in the Letters of Credit or any modifications, amendments, or
supplements thereto.
(c) The obligation of Borrower to immediately reimburse Bank for drawings made under Letters of Credit shall be
absolute, unconditional, and irrevocable, and shall be performed strictly in accordance with the terms of this Agreement, such Letters of Credit, and the Letter of Credit Application.
(d) Borrower may request that Bank issue a Letter of Credit payable in a Foreign Currency. If a demand for payment is made under any such
Letter of Credit, Bank shall treat such demand as an Advance to Borrower of the Dollar Equivalent of the amount thereof (plus fees and charges in connection therewith such as wire, cable, SWIFT or similar charges).
(e) To guard against fluctuations in currency exchange rates, upon the issuance of any Letter of Credit payable in a Foreign Currency, Bank
shall create a reserve (the “
Letter of Credit Reserve
”) under the Revolving Line in an amount equal to ten percent (10%) of the face amount of such Letter of Credit. The amount of the Letter of Credit Reserve may be adjusted by
Bank from time to time to account for fluctuations in the exchange rate. The availability of funds under the Revolving Line shall be reduced by the amount of such Letter of Credit Reserve for as long as such Letter of Credit remains outstanding.
2.1.3 Foreign Exchange Sublimit
. As part of the Revolving Line, Borrower may enter into foreign exchange contracts with Bank under
which Borrower commits to purchase from or sell to Bank a specific amount of Foreign Currency (each, a “
FX Forward Contract
”) on a specified date (the “
Settlement Date
”). FX Forward Contracts shall have a Settlement
Date of at least one (1) FX Business Day after the contract date and shall be subject to a reserve of ten percent (10%) of each outstanding FX Forward Contract (the “
FX Reserve
”). The aggregate amount of FX Forward
Contracts at any one time may not exceed ten (10) times the lesser of (A) One Hundred Thousand Dollars ($100,000.00), minus (i) the sum of all amounts used for Cash Management Services, and minus (ii) the Dollar Equivalent of the
face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), or (B) the lesser of Revolving Line or the Borrowing Base, minus (i) the sum
- 2 -
of all outstanding principal amounts of any Advances (including any amounts used for Cash Management Services), and minus (ii) the Dollar Equivalent of the face amount of any outstanding
Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve). The amount otherwise available for Credit Extensions under the Revolving Line shall be reduced by an amount equal to ten percent (10%) of
each outstanding FX Forward Contract (the “
FX Reduction Amount
”). Any amounts needed to fully reimburse Bank for any amounts not paid by Borrower in connection with FX Forward Contracts will be treated as Advances under the
Revolving Line and will accrue interest at the interest rate applicable to Advances.
2.1.4 Cash Management Services Sublimit
.
Borrower may use the Revolving Line for Bank’s cash management services, which may include merchant services, direct deposit of payroll, business credit card, and check cashing services identified in Bank’s various cash management services
agreements (collectively, the “
Cash Management Services
”), in an aggregate amount not to exceed the lesser of (A) One Hundred Thousand Dollars ($100,000.00), minus (i) the Dollar Equivalent of the face amount of any
outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), and minus (ii) the FX Reduction Amount, or (B) the lesser of Revolving Line or the Borrowing Base, minus (i) the sum
of all outstanding principal amounts of any Advances, minus (ii) the Dollar Equivalent of the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), and minus
(iii) the FX Reduction Amount. Any amounts Bank pays on behalf of Borrower for any Cash Management Services will be treated as Advances under the Revolving Line and will accrue interest at the interest rate applicable to Advances.
2.1.5 Growth Capital Advances
.
(a)
Availability
. Subject to the terms and conditions of this Agreement, during the Draw Period, Bank agrees to make up to three
(3) advances (each a “
Growth Capital Advance
” and collectively the “
Growth Capital Advances
”) available to Borrower in an amount not to exceed the Growth Capital Advance Amount. Each Growth Capital Advance must
be in an amount equal to at least One Million Dollars ($1,000,000.00). After repayment, no Growth Capital Advance may be reborrowed. Borrower may prepay any Growth Capital Advance at any time without premium or penalty.
(b)
Interest Period
. Commencing on the first Payment Date of the month following the month in which the Funding Date for the applicable
Growth Capital Advance occurs, and continuing on the Payment Date of each month thereafter, Borrower shall make monthly payments of interest, in arrears, on the principal amount of each Growth Capital Advance at the rate set forth in
Section 2.3(a)(ii).
(c)
Repayment
. Commencing on April 2, 2012 and continuing on each Payment Date thereafter, Borrower
shall repay each Growth Capital Advance in (i) thirty-six (36) equal monthly installments of principal, plus (ii) monthly payments of accrued interest at the rate set forth in Section 2.3(a)(ii). All outstanding principal and
accrued and unpaid interest under the Growth Capital Advances and all other outstanding Obligations with respect to the Growth Capital Advances, are due and payable in full on the Growth Capital Maturity Date.
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2.2 Overadvances
. If, at any time, the sum of (a) the outstanding principal amount of
any Advances (including any amounts used for Cash Management Services), plus (b) the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), plus (c) the FX
Reduction Amount exceeds the lesser of either the Revolving Line or the Borrowing Base, Borrower shall immediately pay to Bank in cash such excess.
2.3 Payment of Interest on the Credit Extensions.
(a)
Interest Rate
.
(i)
Advances
. Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at a floating per annum rate equal to one and one half of one percentage point (1.50%) above the Prime Rate, which
interest shall be payable monthly in accordance with Section 2.3(f) below.
(ii)
Growth Capital Advances
. Subject to
Section 2.3(b), the principal amount outstanding for each Growth Capital Advance shall accrue interest at a floating per annum rate equal to three percentage points (3.0%) above the Prime Rate, which interest shall be payable monthly in
accordance with Section 2.3(f) below.
(b)
Default Rate
. Immediately upon the occurrence and during the continuance of an
Event of Default, Obligations shall bear interest at a rate per annum which is five percentage points (5.00%) above the rate that is otherwise applicable thereto (the “
Default Rate
”) unless Bank otherwise elects from time to
time in its sole discretion to impose a smaller increase. Fees and expenses which are required to be paid by Borrower pursuant to the Loan Documents (including, without limitation, Bank Expenses) but which are not paid when due shall bear interest
until paid at a rate equal to the highest rate applicable to the Obligations. Payment or acceptance of the increased interest rate provided in this Section 2.3(b) is not a permitted alternative to timely payment and shall not constitute a
waiver of any Event of Default or otherwise prejudice or limit any rights or remedies of Bank.
(c)
Adjustment to Interest Rate
.
Changes to the interest rate of any Credit Extension based on changes to the Prime Rate shall be effective on the effective date of any change to the Prime Rate and to the extent of any such change.
(d)
Computation; 360-Day Year
. In computing interest, the date of the making of any Credit Extension shall be included and the date of
payment shall be excluded;
provided, however
, that if any Credit Extension is repaid on the same day on which it is made, such day shall be included in computing interest on such Credit Extension. Interest shall be computed on the basis of a
360-day year for the actual number of days elapsed.
(e)
Debit of Accounts
. Bank may debit any of Borrower’s deposit accounts,
including the Designated Deposit Account, for principal and interest payments or any other amounts Borrower owes Bank when due. These debits shall not constitute a set-off.
(f)
Interest Payment Date
. Unless otherwise provided, interest is payable monthly on the Payment Date.
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2.4 Fees
. Borrower shall pay to Bank:
(a)
Revolving Line Commitment Fee
. A fully earned, non-refundable commitment fee of Twelve Thousand Five Hundred Dollars ($12,500.00)
on the Effective Date (the “
Revolving Line Commitment Fee
”);
(b)
Growth Capital Line Commitment Fee
. A fully
earned, non-refundable commitment fee of Seven Thousand Five Hundred Dollars ($7,500.00) on the Effective Date (the “
Growth Capital Line Commitment Fee
”);
(c)
Good Faith Deposit
. Borrower has paid to Bank a deposit of Ten Thousand Dollars ($10,000.00) (the “
Good Faith
Deposit
”) to initiate Bank’s due diligence review process. Any portion of the Good Faith Deposit not utilized to pay Bank Expenses will be applied towards the Revolving Line Commitment Fee and/or the Growth Capital Line Commitment Fee;
(d)
Letter of Credit Fee
. Bank’s customary fees and expenses for the issuance or renewal of Letters of Credit, upon the
issuance of such Letter of Credit, each anniversary of the issuance during the term of such Letter of Credit, and upon the renewal of such Letter of Credit by Bank; and
(e)
Bank Expenses
. All Bank Expenses (including reasonable attorneys’ fees and expenses for documentation and negotiation of this
Agreement) incurred through and after the Effective Date, when due.
2.5 Payments
. All payments (including prepayments) to be made
by Borrower under any Loan Document shall be made in immediately available funds in U.S. Dollars, without setoff or counterclaim, before 12:00 p.m. Eastern time on the date when due. Payments of principal and/or interest received after 12:00 p.m.
Eastern time are considered received at the opening of business on the next Business Day. When a payment is due on a day that is not a Business Day, the payment shall be due the next Business Day, and additional fees or interest, as applicable,
shall continue to accrue until paid.
3.1 Conditions Precedent to Initial Credit Extension
.
Bank’s obligation to make the initial Credit Extension is subject to the condition precedent that Bank shall have received, in form and substance satisfactory to Bank, such documents, and completion of such other matters, as Bank may reasonably
deem necessary or appropriate, including, without limitation:
(a) duly executed original signatures to the Loan Documents;
(b) duly executed original signatures to the Control Agreements;
(c) Borrower’s Operating Documents and a long-form good standing certificate of Borrower certified by the Secretary of State of the State
of Delaware as of a date no earlier than thirty (30) days prior to the Effective Date;
- 5 -
(d) Secretary’s Corporate Borrowing Certificate;
(e) Certificates of Foreign Qualification of Borrower (as applicable), certified by the applicable secretary of state as of a date no earlier
than thirty (30) days prior to the Effective Date;
(f) certified copies, dated as of a recent date, of financing statement searches,
as Bank shall request, accompanied by written evidence (including any UCC termination statements) that the Liens indicated in any such financing statements either constitute Permitted Liens or have been or, in connection with the initial Credit
Extension, will be terminated or released;
(g) the Perfection Certificate of Borrower, together with the duly executed original signature
thereto;
(h) a landlord’s consent in favor of Bank for 3 Clock Tower Place, Suite 210, Maynard, Massachusetts 01754, by the
respective landlord thereof, together with the duly executed original signatures thereto;
(i) a legal opinion of Borrower’s counsel
dated as of the Effective Date together with the duly executed original signature thereto;
(j) evidence satisfactory to Bank that the
insurance policies required by Section 6.5 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; and
(k) payment of the fees and Bank Expenses then due as specified in Section 2.4 hereof.
3.2 Conditions Precedent to all Credit Extensions
. Bank’s obligations to make each Credit Extension, including the initial Credit
Extension, is subject to the following conditions precedent:
(a) except as otherwise provided in Section 3.4, timely receipt
of an executed Payment/Advance Form;
(b) the representations and warranties in this Agreement shall be true, accurate, and complete in
all material respects on the date of the Payment/Advance Form and on the Funding Date of each Credit Extension; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are
qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date, and no
Event of Default shall have occurred and be continuing or result from the Credit Extension. Each Credit Extension is Borrower’s representation and warranty on that date that the representations and warranties in this Agreement remain true,
accurate, and complete in all material respects; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that already are qualified or modified by materiality in the text thereof; and
provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such date; and
(c) in Bank’s reasonable discretion, there has not been any material impairment in the general affairs, management, results of operation,
financial condition or the prospect of repayment of the Obligations, or any material adverse deviation by Borrower from the most recent business plan of Borrower presented to and accepted by Bank.
- 6 -
3.3 Covenant to Deliver
. Borrower agrees to deliver to Bank each item required to be
delivered to Bank under this Agreement as a condition precedent to any Credit Extension. Borrower expressly agrees that a Credit Extension made prior to the receipt by Bank of any such item shall not constitute a waiver by Bank of Borrower’s
obligation to deliver such item, and the making of any Credit Extension in the absence of a required item shall be in Bank’s sole discretion.
3.4 Procedures for Borrowing.
(a)
Advances
. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this
Agreement, to obtain an Advance (other than Advances under Sections 2.1.2 or 2.1.4), Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m. Eastern time on the Funding Date of the
Advance. Together with any such electronic or facsimile notification, Borrower shall deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form executed by a Responsible Officer or his or her designee. Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Bank shall credit Advances to the Designated Deposit Account. Bank may make Advances under this Agreement based on instructions from a Responsible Officer or
his or her designee or without instructions if the Advances are necessary to meet Obligations which have become due.
(b)
Growth
Capital Advances
. Subject to the prior satisfaction of all other applicable conditions to the making of a Growth Capital Advance set forth in this Agreement, to obtain a Growth Capital Advance, Borrower must notify Bank (which notice shall be
irrevocable) by electronic mail or facsimile no later than 12:00 p.m. Eastern time three (3) Business Days before the proposed Funding Date. The notice shall be a Payment/Advance Form, must be signed by a Responsible Officer or designee. If
Borrower satisfies the conditions of each Growth Capital Advance, Bank shall disburse such Growth Capital Advance by transfer to the Designated Deposit Account.
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4
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CREATION OF SECURITY INTEREST
|
4.1 Grant of Security Interest
. Borrower
hereby grants Bank, to secure the payment and performance in full of all of the Obligations, a continuing security interest in, and pledges to Bank, the Collateral, wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof.
4.2 Priority of Security Interest
. Borrower represents, warrants, and covenants that the
security interest granted herein is and shall at all times continue to be a first priority perfected
- 7 -
security interest in the Collateral (subject only to Permitted Liens that may have superior priority to Bank’s Lien under this Agreement). If Borrower shall acquire a commercial tort claim,
Borrower shall promptly notify Bank in a writing signed by Borrower of the general details thereof and grant to Bank in such writing a security interest therein and in the proceeds thereof, all upon the terms of this Agreement, with such writing to
be in form and substance reasonably satisfactory to Bank.
If this Agreement is terminated, Bank’s Lien in the Collateral shall
continue until the Obligations (other than inchoate indemnity obligations) are repaid in full in cash. Upon payment in full in cash of the Obligations and at such time as Bank’s obligation to make Credit Extensions has terminated, Bank shall,
at Borrower’s sole cost and expense, release its Liens in the Collateral and all rights therein shall revert to Borrower.
4.3
Authorization to File Financing Statements
. Borrower hereby authorizes Bank to file financing statements, without notice to Borrower, with all appropriate jurisdictions to perfect or protect Bank’s interest or rights hereunder, including a
notice that any disposition of the Collateral, by either Borrower or any other Person, shall be deemed to violate the rights of Bank under the Code. Such financing statements may indicate the Collateral as “all assets of the Debtor” or
words of similar effect, or as being of an equal or lesser scope, or with greater detail, all in Bank’s discretion.
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5
|
REPRESENTATIONS AND WARRANTIES
|
Borrower represents and warrants as follows:
5.1 Due Organization, Authorization; Power and Authority
. Borrower and each of its Subsidiaries are duly existing and in good standing
as Registered Organizations in their respective jurisdictions of formation and are qualified and licensed to do business and are in good standing in any jurisdiction in which the conduct of their business or their ownership of property requires that
they be qualified except where the failure to do so could not reasonably be expected to have a material adverse effect on Borrower’s business. In connection with this Agreement, Borrower has delivered to Bank a completed certificate signed by
Borrower, entitled “Perfection Certificate”. Borrower represents and warrants to Bank that (a) Borrower’s exact legal name is that indicated on the Perfection Certificate and on the signature page hereof; (b) Borrower is an
organization of the type and is organized in the jurisdiction set forth in the Perfection Certificate; (c) the Perfection Certificate accurately sets forth Borrower’s organizational identification number or accurately states that Borrower
has none; (d) the Perfection Certificate accurately sets forth Borrower’s place of business, or, if more than one, its chief executive office as well as Borrower’s mailing address (if different than its chief executive office);
(e) Borrower (and each of its predecessors) has not, in the past five (5) years, changed its jurisdiction of formation, organizational structure or type, or any organizational number assigned by its jurisdiction; and (f) all other
information set forth on the Perfection Certificate pertaining to Borrower and each of its Subsidiaries is accurate and complete (it being understood and agreed that Borrower may from time to time update certain information in the Perfection
Certificate after the Effective Date to the extent permitted by one or more specific provisions in this Agreement). If Borrower is not now a Registered Organization but later becomes one, Borrower shall promptly notify Bank of such occurrence and
provide Bank with Borrower’s organizational identification number.
- 8 -
The execution, delivery and performance by Borrower of the Loan Documents to which it is a party
have been duly authorized, and do not (i) conflict with any of Borrower’s organizational documents, (ii) contravene, conflict with, constitute a default under or violate any material Requirement of Law, (iii) contravene, conflict
or violate any applicable order, writ, judgment, injunction, decree, determination or award of any Governmental Authority by which Borrower or any of its Subsidiaries or any of their property or assets may be bound or affected, (iv) require any
action by, filing, registration, or qualification with, or Governmental Approval from, any Governmental Authority (except such Governmental Approvals which have already been obtained and are in full force and effect) or (v) constitute an event
of default under any material agreement by which Borrower is bound. Borrower is not in default under any agreement to which it is a party or by which it is bound in which the default could reasonably be expected to have a material adverse effect on
Borrower’s business.
5.2 Collateral
. Borrower has good title to, has rights in, and the power to transfer each item of the
Collateral upon which it purports to grant a Lien hereunder, free and clear of any and all Liens except Permitted Liens. Borrower has no deposit accounts other than the deposit accounts with Bank, the deposit accounts, if any, described in the
Perfection Certificate delivered to Bank in connection herewith, or of which Borrower has given Bank notice and taken such actions as are necessary to give Bank a perfected security interest therein. The Accounts are bona fide, existing obligations
of the Account Debtors.
The Collateral is not in the possession of any third party bailee (such as a warehouse) except as
otherwise provided in the Perfection Certificate. None of the components of the Collateral shall be maintained at locations other than as provided in the Perfection Certificate or as permitted pursuant to Section 7.2.
All Inventory is in all material respects of good and marketable quality, free from material defects.
Borrower is the sole owner of the Intellectual Property which it owns or purports to own except for (a) non-exclusive licenses granted to
its customers in the ordinary course of business, (b) over-the-counter software that is commercially available to the public, and (c) material Intellectual Property licensed to Borrower and noted on the Perfection Certificate. Each Patent
which it owns or purports to own and which is material to Borrower’s business is valid and enforceable, and no part of the Intellectual Property which Borrower owns or purports to own and which is material to Borrower’s business has been
judged invalid or unenforceable, in whole or in part. 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 to the extent such claim would not
reasonably be expected to have a material adverse effect on Borrower’s business.
Except as noted on the Perfection Certificate,
Borrower is not a party to, nor is it bound by, any Restricted License.
- 9 -
5.3 Accounts Receivable
. For any Eligible Account in any Borrowing Base Certificate, all
statements made and all unpaid balances appearing in all invoices, instruments and other documents evidencing such Eligible Accounts are and shall be true and correct and all such invoices, instruments and other documents, and all of Borrower’s
Books are genuine and in all respects what they purport to be. Whether or not an Event of Default has occurred and is continuing, Bank may notify any Account Debtor owing Borrower money of Bank’s security interest in such funds and verify the
amount of such Eligible Account. All sales and other transactions underlying or giving rise to each Eligible Account shall comply in all material respects with all applicable laws and governmental rules and regulations. Borrower has no knowledge of
any actual or imminent Insolvency Proceeding of any Account Debtor whose accounts are Eligible Accounts in any Borrowing Base Certificate. To the best of Borrower’s knowledge, all signatures and endorsements on all documents, instruments, and
agreements relating to all Eligible Accounts are genuine, and all such documents, instruments and agreements are legally enforceable in accordance with their terms.
5.4 Litigation
. There are no actions or proceedings pending or, to the knowledge of the Responsible Officers, threatened in writing by
or against Borrower or any of its Subsidiaries involving more than, individually or in the aggregate, Fifty Thousand Dollars ($50,000.00).
5.5 Financial Statements; Financial Condition
. All consolidated financial statements for Borrower and any of its Subsidiaries delivered
to Bank fairly present in all material respects Borrower’s consolidated financial condition and Borrower’s consolidated results of operations as of the date or for the period indicated therein, subject to customary year end adjustments.
There has not been any material deterioration in Borrower’s consolidated financial condition since the date of the most recent financial statements submitted to Bank.
5.6 Solvency
. The fair salable value of Borrower’s assets (including goodwill minus disposition costs) exceeds the fair value of
its liabilities; Borrower is not left with unreasonably small capital after the transactions in this Agreement; and Borrower is able to pay its debts (including trade debts) as they mature.
5.7 Regulatory Compliance
. Borrower is not an “investment company” or a company “controlled” by an “investment
company” under the Investment Company Act of 1940, as amended. Borrower is not engaged as one of its important activities in extending credit for margin stock (under Regulations X, T and U of the Federal Reserve Board of Governors). Borrower
has complied in all material respects with the Federal Fair Labor Standards Act. Neither Borrower nor any of its Subsidiaries is a “holding company” or an “affiliate” of a “holding company” or a “subsidiary
company” of a “holding company” as each term is defined and used in the Public Utility Holding Company Act of 2005. Borrower has not violated any laws, ordinances or rules, the violation of which could reasonably be expected to have a
material adverse effect on its business. None of Borrower’s or any of its Subsidiaries’ properties or assets has been used by Borrower or any Subsidiary or, to the best of Borrower’s knowledge, by previous Persons, in disposing,
producing, storing, treating, or transporting any hazardous substance other than legally. Borrower and each of its Subsidiaries have obtained all consents, approvals and authorizations of, made all declarations or filings with, and given all notices
to, all Government Authorities that are necessary to continue their respective businesses as currently conducted, except as would not be reasonably expected to have a material adverse effect on Borrower’s business.
- 10 -
5.8 Subsidiaries; Investments
. Borrower does not own any stock, partnership interest or
other equity securities except for Permitted Investments.
5.9 Tax Returns and Payments; Pension Contributions
. Borrower has
timely filed all required tax returns and reports, and Borrower has timely paid when due and payable or duly filed all valid extensions in connection therewith all foreign, federal, state and local taxes, assessments, deposits and contributions owed
by Borrower. Borrower may defer payment of any contested taxes, provided that Borrower (a) in good faith contests its obligation to pay the taxes by appropriate proceedings promptly and diligently instituted and conducted, (b) notifies
Bank in writing of the commencement of, and any material development in, the proceedings, (c) posts bonds or takes any other steps required to prevent the governmental authority levying such contested taxes from obtaining a Lien upon any of the
Collateral that is other than a “Permitted Lien”. Borrower is unaware of any claims or adjustments proposed for any of Borrower’s prior tax years which could result in additional taxes becoming due and payable by Borrower. Borrower
has paid all amounts necessary to fund all present pension, profit sharing and deferred compensation plans in accordance with their terms, and Borrower has not withdrawn from participation in, and has not permitted partial or complete termination
of, or permitted the occurrence of any other event with respect to, any such plan which could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any
other governmental agency.
5.10 Use of Proceeds
. Borrower shall use the proceeds of the Credit Extensions as working
capital and to fund its general business requirements and not for personal, family, household or agricultural purposes.
5.11
Full Disclosure
. No written representation, warranty or other statement of Borrower in any certificate or written statement given to Bank pursuant to this Agreement, as of the date such representation, warranty, or other statement was made,
taken together with all such written certificates and written statements given to Bank, contains any untrue statement of a material fact or omits to state a material fact necessary to make the statements contained in the certificates or statements,
in light of the circumstances in which they were made, not misleading (it being recognized by Bank that the projections and forecasts provided by Borrower in good faith and based upon reasonable assumptions are not viewed as facts and that actual
results during the period or periods covered by such projections and forecasts may differ from the projected or forecasted results).
5.12 Definition of “Knowledge.”
For purposes of the Loan Documents, whenever a representation or warranty is made to
Borrower’s knowledge or awareness, to the “best of Borrower’s” knowledge, or with a similar qualification, knowledge or awareness means the actual knowledge, after reasonable investigation, of the Responsible Officers.
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Borrower shall do all of the following:
6.1 Government Compliance
. Maintain its and all its Subsidiaries’ legal existence and good standing in their respective
jurisdictions of formation and maintain qualification in each jurisdiction in which the failure to so qualify would reasonably be expected to have a material adverse effect on Borrower’s business or operations. Borrower shall comply, and have
each Subsidiary comply, with all laws, ordinances and regulations to which it is subject, noncompliance with which could have a material adverse effect on Borrower’s business.
6.2 Financial Statements, Reports, Certificates
. Deliver to Bank:
(a)
Borrowing Base Reports
. Within thirty (30) days after the last day of each month, aged listings of accounts receivable and
accounts payable (by invoice date) (the “
Borrowing Base Reports
”);
(b)
Borrowing Base Certificate
. Within thirty
(30) days after the last day of each month and together with the Borrowing Base Reports, a duly completed Borrowing Base Certificate signed by a Responsible Officer;
(c)
Monthly Financial Statements
. As soon as available, but no later than thirty (30) days after the last day of each month, a
company prepared consolidated balance sheet and income statement covering Borrower’s consolidated operations for such month certified by a Responsible Officer and in a form acceptable to Bank (the “
Monthly Financial
Statements
”);
(d)
Monthly Compliance Certificate
. Within thirty (30) days after the last day of each month and
together with the Monthly Financial Statements, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this
Agreement, and such other information as Bank may reasonably request;
(e)
Annual Audited Financial Statements
. As soon as
available, but no later than one hundred eighty (180) days after the last day of Borrower’s fiscal year, audited consolidated financial statements prepared under GAAP, consistently applied, together with an unqualified opinion on the
financial statements from an independent certified public accounting firm acceptable to Bank in its reasonable discretion (the “
Audited Financial Statements
”); provided however that Bank will waive the requirements of this
Section 6.2(e) if the Board determines, in its reasonable discretion, not to pursue an audit during any given fiscal year, and Bank will accept in place of the Audited Financial Statements unaudited financial statements as prepared by Borrower;
(f)
Other Statements
. Within ten (10) days of delivery, copies of all material statements, reports and notices made available
to Borrower’s security holders or to any holders of Subordinated Debt;
(g)
SEC Filings
. In the event that Borrower becomes
subject to the reporting requirements under the Exchange Act within five (5) days of filing, copies of all periodic and other reports, proxy statements and other materials filed by Borrower with the SEC, any Governmental Authority succeeding to
any or all of the functions of the SEC or with any national securities exchange, or distributed to its shareholders, as the case may be. Documents
- 12 -
required to be delivered pursuant to the terms hereof (to the extent any such documents are included in materials otherwise filed with the SEC) may be delivered electronically and if so
delivered, shall be deemed to have been delivered on the date on which Borrower posts such documents, or provides a link thereto, on Borrower’s website on the Internet at Borrower’s website address;
(h)
Legal Action Notice
. A prompt report of any legal actions pending or threatened in writing against Borrower or any of its
Subsidiaries that could result in damages or costs to Borrower or any of its Subsidiaries of, individually or in the aggregate, Fifty Thousand Dollars ($50,000) or more;
(i)
Board-Approved Projections
. As soon as available, but no later than the first Business Day of the calendar month following the
calendar month in which the Board approval occurred, but at least annually, and contemporaneously with any updates or changes thereto, Board-approved financial projections as to the following fiscal year, in a form of presentation reasonably
acceptable to Bank; and
(j)
Other Financial Information
. Other financial information reasonably requested by Bank.
6.3 Inventory; Returns
. Keep all Inventory in good and marketable condition, free from material defects. Returns and allowances between
Borrower and its Account Debtors shall follow Borrower’s customary practices as they exist at the Effective Date. Borrower must promptly notify Bank of all returns, recoveries, disputes and claims that involve more than Three Hundred Thousand
Dollars ($300,000).
6.4 Taxes; Pensions
. Timely file, and require each of its Subsidiaries to timely file, all required tax
returns and reports and timely pay, and require each of its Subsidiaries to timely pay, all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower and each of its Subsidiaries, except for deferred payment
of any taxes contested pursuant to the terms of Section 5.9 hereof, and shall deliver to Bank, on demand, appropriate certificates attesting to such payments, and pay all amounts necessary to fund all present pension, profit sharing and
deferred compensation plans in accordance with their terms.
6.5 Insurance
. Keep its business and the Collateral insured for
risks and in amounts standard for companies in Borrower’s industry, stage of development and location and as Bank may reasonably request. Insurance policies shall be in a form, with companies, and in customary amounts that are reasonably
satisfactory to Bank. All property policies shall have a lender’s loss payable endorsement showing Bank as lender loss payee and waive subrogation against Bank and shall provide that the insurer must give Bank at least twenty (20) days
notice before canceling, amending, or declining to renew its policy. All liability policies shall show, or have endorsements showing, Bank as an additional insured, and all such policies (or the loss payable and additional insured endorsements)
shall provide that the insurer shall give Bank at least twenty (20) days notice before canceling, amending, or declining to renew its policy. At Bank’s request, Borrower shall deliver certified copies of policies and evidence of all
premium payments. Proceeds payable under any policy shall, at Bank’s option, be payable to Bank on account of the Obligations. If Borrower fails to obtain insurance as required under this Section 6.5
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or to pay any amount or furnish any required proof of payment to third persons and Bank, Bank may make all or part of such payment or obtain such insurance policies required in this
Section 6.5, and take any action under the policies Bank deems prudent.
6.6 Operating Accounts.
(a) Maintain all of its and all of its Subsidiaries’ operating, depository, and securities accounts with Bank and Bank’s Affiliates.
(b) Provide Bank five (5) days prior written notice before establishing any Collateral Account at or with any bank or financial
institution other than Bank or Bank’s Affiliates. For each Collateral Account that Borrower at any time maintains, Borrower shall cause the applicable bank or financial institution (other than Bank) at or with which any Collateral Account is
maintained to execute and deliver a Control Agreement or other appropriate instrument with respect to such Collateral Account to perfect Bank’s Lien in such Collateral Account in accordance with the terms hereunder which Control Agreement may
not be terminated without the prior written consent of Bank. The provisions of the previous sentence shall not apply to deposit accounts exclusively used for payroll, payroll taxes and other employee wage and benefit payments to or for the benefit
of Borrower’s employees and identified to Bank by Borrower as such.
6.7 Protection of Intellectual Property Rights.
(a) (i) Protect, defend and maintain the validity and enforceability of its Intellectual Property in a manner consistent with prudent business
practices; (ii) promptly advise Bank in writing of material infringements of its Intellectual Property of which Borrower becomes aware; and (iii) not allow any Intellectual Property material to Borrower’s business to be abandoned,
forfeited or dedicated to the public without Bank’s written consent, which consent shall not be unreasonably withheld.
(b) Provide
written notice to Bank within ten (10) days of entering or becoming bound by any Restricted License (other than over-the-counter software that is commercially available to the public). Borrower shall take such steps as Bank reasonably requests
to obtain the consent of, or waiver by, any person whose consent or waiver is necessary for (i) any Restricted License to be deemed “Collateral” and for Bank to have a security interest in it that might otherwise be restricted or
prohibited by law or by the terms of any such Restricted License, whether now existing or entered into in the future, and (ii) Bank to have the ability in the event of a liquidation of any Collateral to dispose of such Collateral in accordance
with Bank’s rights and remedies under this Agreement and the other Loan Documents.
6.8 Litigation Cooperation
. From the date
hereof and continuing through the termination of this Agreement, make available to Bank, without expense to Bank, Borrower and its officers, employees and agents and Borrower’s books and records, to the extent that Bank may deem them reasonably
necessary to prosecute or defend any third-party suit or proceeding instituted by or against Bank with respect to any Collateral or relating to Borrower.
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6.9 Further Assurances
. Execute any further instruments and take further action as Bank
may reasonably request to perfect or continue Bank’s Lien in the Collateral or to effect the purposes of this Agreement.
Borrower shall not do any of the following without
Bank’s prior written consent:
7.1 Dispositions
. Convey, sell, lease, transfer, assign, or otherwise dispose of (collectively,
“
Transfer
”), or permit any of its Subsidiaries to Transfer, all or any part of its business or property, except for Transfers (a) of Inventory in the ordinary course of business; (b) of worn-out or obsolete Equipment;
(c) in connection with Permitted Liens and Permitted Investments; and (d) of non-exclusive licenses, joint ventures, strategic alliances, collaborative transactions, partnerships or similar transactions for the use of the property of
Borrower or its Subsidiaries in the ordinary course of business.
7.2 Changes in Business, Management, Ownership, or Business
Locations
. (a) Engage in or permit any of its Subsidiaries to engage in any business other than the businesses currently engaged in by Borrower and such Subsidiary, as applicable, or reasonably related thereto; (b) liquidate or
dissolve; or (c) (i) have a change in senior management; or (ii) enter into any transaction or series of related transactions in which the stockholders of Borrower who were not stockholders immediately prior to the first such
transaction own more than forty-nine percent (49%) of the voting stock of Borrower immediately after giving effect to such transaction or related series of such transactions (other than by the sale of Borrower’s equity securities in a
public offering or to venture capital investors so long as Borrower identifies to Bank the venture capital investors prior to the closing of the transaction and provides to Bank a description of the material terms of the transaction).
Borrower shall not, without at least thirty (30) days prior written notice to Bank: (1) add any new offices or business locations,
including warehouses (unless such new offices or business locations contain less than Ten Thousand Dollars ($10,000) in Borrower’s assets or property) or deliver any portion of the Collateral valued, individually or in the aggregate, in excess
of Twenty-Five Thousand Dollars ($25,000.00) to a bailee at a location other than to a bailee and at a location already disclosed in the Perfection Certificate, (2) change its jurisdiction of organization, (3) change its organizational
structure or type, (4) change its legal name, or (5) change any organizational number (if any) assigned by its jurisdiction of organization. If Borrower intends to deliver any portion of the Collateral valued, individually or in the
aggregate, in excess of Twenty-Five Thousand Dollars ($25,000.00) to a bailee, and Bank and such bailee are not already parties to a bailee agreement governing both the Collateral and the location to which Borrower intends to deliver the Collateral,
then Borrower will first receive the written consent of Bank, and such bailee shall execute and deliver a bailee agreement in form and substance satisfactory to Bank in its sole discretion.
7.3 Mergers or Acquisitions
. Merge or consolidate, or permit any of its Subsidiaries to merge or consolidate, with any other Person, or
acquire, or permit any of its Subsidiaries to acquire, all or substantially all of the capital stock or property of another Person. A Subsidiary may merge or consolidate into another Subsidiary or into Borrower.
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7.4 Indebtedness
. Create, incur, assume, or be liable for any Indebtedness, or permit any
Subsidiary to do so, other than Permitted Indebtedness.
7.5 Encumbrance
. Create, incur, allow, or suffer any Lien on any of
its property, or assign or 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, permit any Collateral not to be subject to the first priority security
interest granted herein, or enter into any agreement, document, instrument or other arrangement (except with or in favor of Bank) with any Person which directly or indirectly prohibits or has the effect of prohibiting Borrower or any Subsidiary from
assigning, mortgaging, pledging, granting a security interest in or upon, or encumbering any of Borrower’s or any Subsidiary’s Intellectual Property, except as is otherwise permitted in Section 7.1 hereof and the definition of
“Permitted Liens” herein.
7.6 Maintenance of Collateral Accounts
. Maintain any Collateral Account except pursuant
to the terms of Section 6.6(b) hereof.
7.7 Distributions; Investments
. (a) Pay any dividends or make any
distribution or payment or redeem, retire or purchase any capital stock provided that (i) Borrower may convert any of its convertible securities into other securities pursuant to the terms of such convertible securities or otherwise in exchange
thereof, (ii) Borrower may pay dividends solely in common stock, and (iii) Borrower may repurchase the stock of former employees or consultants pursuant to stock repurchase agreements so long as an Event of Default does not exist at the
time of such repurchase and would not exist after giving effect to such repurchase, provided such repurchase does not exceed in the aggregate of Two Hundred Thousand Dollars ($200,000) per fiscal year; or (b) directly or indirectly make any
Investment other than Permitted Investments, or permit any of its Subsidiaries to do so.
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.
7.9 Subordinated
Debt
. (a) Make or permit any payment on any Subordinated Debt, except under the terms of the subordination, intercreditor, or other similar agreement to which such Subordinated Debt is subject, or (b) amend any provision in any
document relating to the Subordinated Debt which would increase the amount thereof or adversely affect the subordination thereof to Obligations owed to Bank.
7.10 Compliance
. Become an “investment company” or a company controlled by an “investment company”, under the
Investment Company Act of 1940, as amended, or undertake as one of its important activities extending credit to purchase or carry margin stock (as defined in Regulation U of the Board of Governors of the Federal Reserve System), or use the proceeds
of any Credit Extension for that 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 other law or regulation, if the violation could reasonably be expected to have a material adverse effect on Borrower’s business, or permit any of its Subsidiaries to do so; withdraw or permit any Subsidiary to withdraw from
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participation in, permit partial or complete termination of, or permit the occurrence of any other event with respect to, any present pension, profit sharing and deferred compensation plan which
could reasonably be expected to result in any liability of Borrower, including any liability to the Pension Benefit Guaranty Corporation or its successors or any other governmental agency.
Any one of the following shall constitute an event of default
(an “
Event of Default
”) under this Agreement:
8.1 Payment Default
. Borrower fails to (a) make any payment of
principal or interest on any Credit Extension on its due date, or (b) pay any other Obligations within three (3) Business Days after such Obligations are due and payable (which three (3) Business Day cure period shall not apply to
payments due on the Maturity Date). During the cure period, the failure to make or pay any payment specified under clause (a) or (b) hereunder is not an Event of Default (but no Credit Extension will be made during the cure period);
8.2 Covenant Default.
(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6, or 6.7(b) or violates any covenant in Section 7;
or
(b) Borrower fails or neglects to perform, keep, or observe any other term, provision, condition, covenant or agreement contained in
this Agreement or any Loan Documents, and as to any default (other than those specified in this Section 8) under such other term, provision, condition, covenant or agreement that can be cured, has failed to cure the default within ten
(10) days after the occurrence thereof; provided, however, that if the default cannot by its nature be cured within the ten (10) day period or cannot after diligent attempts by Borrower be cured within such ten (10) day period, and
such default is likely to be cured within a reasonable time, then Borrower shall have an additional 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 cure the default shall not be deemed an Event of Default (but no Credit Extensions shall be made during such cure period). Cure periods provided under this section shall not apply, among other things, to financial covenants or any other covenants
set forth in clause (a) above;
8.3 Material Adverse Change
. A Material Adverse Change occurs;
8.4 Attachment; Levy; Restraint on Business.
(a) (i) The service of process seeking to attach, by trustee or similar process, any funds of Borrower or of any entity under the control of
Borrower (including a Subsidiary) on deposit or otherwise maintained with Bank or any Bank Affiliate, or (ii) a notice of lien or levy is filed against any of Borrower’s assets by any government agency, and the same under subclauses
(i) and (ii) hereof are not, within ten (10) days after the occurrence thereof, discharged or stayed (whether through the posting of a bond or otherwise); provided, however, no Credit Extensions shall be made during any ten
(10) day cure period; or
(b) (i) any material portion of Borrower’s assets is attached, seized, levied on, or comes into
possession of a trustee or receiver, or (ii) any court order enjoins, restrains, or prevents Borrower from conducting any material part of its business;
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8.5 Insolvency
. (a) Borrower is unable to pay its debts (including trade debts) as
they become due or otherwise becomes insolvent; (b) Borrower begins an Insolvency Proceeding; or (c) an Insolvency Proceeding is begun against Borrower and not dismissed or stayed within thirty (30) days (but no Credit Extensions
shall be made while of any of the conditions described in clause (a) exist and/or until any Insolvency Proceeding is dismissed);
8.6 Other Agreements
. There is, under any agreement to which Borrower is a party with a third party or parties, (a) any default
resulting in a right by such third party or parties, whether or not exercised, to accelerate the maturity of any Indebtedness in an amount individually or in the aggregate in excess of Fifty Thousand Dollars ($50,000); or (b) any default by
Borrower, the result of which could have a material adverse effect on Borrower’s business;
8.7 Judgments
. One or more
final judgments, orders, or decrees for the payment of money in an amount, individually or in the aggregate, of at least Fifty Thousand Dollars ($50,000) (not covered by independent third-party insurance as to which liability has been accepted by
such insurance carrier) shall be rendered against Borrower and the same are not, within ten (10) days after the entry thereof, discharged or execution thereof stayed or bonded pending appeal, or such judgments are not discharged prior to the
expiration of any such stay (provided that no Credit Extensions will be made prior to the discharge, stay, or bonding of such judgment, order, or decree);
8.8 Misrepresentations
. Borrower or any Person acting for Borrower makes any representation, warranty, or other statement now or later
in this Agreement, any Loan Document or in any writing delivered to Bank or to induce Bank to enter this Agreement or any Loan Document, and such representation, warranty, or other statement is incorrect in any material respect when made; or
8.9 Subordinated Debt
. Any document, instrument, or agreement evidencing any Subordinated Debt shall for any reason be revoked
or invalidated or otherwise cease to be in full force and effect, any Person shall be in breach thereof or contest in any manner the validity or enforceability thereof or deny that it has any further liability or obligation thereunder, or the
Obligations shall for any reason be subordinated or shall not have the priority contemplated by this Agreement.
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9
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BANK’S RIGHTS AND REMEDIES
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9.1 Rights and Remedies
. While an Event
of Default occurs and continues Bank may, without notice or demand, do any or all of the following:
(a) declare all Obligations
immediately due and payable (but if an Event of Default described in Section 8.5 occurs all Obligations are immediately due and payable without any action by Bank);
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(b) stop advancing money or extending credit for Borrower’s benefit under this Agreement or
under any other agreement between Borrower and Bank;
(c) demand that Borrower (i) deposit cash with Bank in an amount equal to 105%
(if the Letter of Credit is denominated in Dollars) or 110% (if the Letter of Credit is denominated in a Foreign Currency) of the aggregate face amount of all Letters of Credit remaining undrawn (plus all interest, fees, and costs due or to become
due in connection therewith (as estimated by Bank in its good faith business judgment)), to secure all of the Obligations relating to such Letters of Credit, as collateral security for the repayment of any future drawings under such Letters of
Credit, and Borrower shall forthwith deposit and pay such amounts, and (ii) pay in advance all letter of credit fees scheduled to be paid or payable over the remaining term of any Letters of Credit;
(d) terminate any FX Forward Contracts;
(e) settle or adjust disputes and claims directly with Account Debtors for amounts on terms and in any order that Bank considers advisable,
notify any Person owing Borrower money of Bank’s security interest in such funds, and verify the amount of such account;
(f) make
any payments and do any acts it considers necessary or reasonable to protect the Collateral and/or its security interest in the Collateral. Borrower shall assemble the Collateral if Bank requests and make it available as Bank designates. Bank may
enter premises where the Collateral is located, take and maintain possession of any part of the Collateral, and pay, purchase, contest, or compromise any Lien which appears to be prior or superior to its security interest and pay all expenses
incurred. Borrower grants Bank a license to enter and occupy any of its premises, without charge, to exercise any of Bank’s rights or remedies;
(g) apply to the Obligations any (i) balances and deposits of Borrower it holds, or (ii) any amount held by Bank owing to or for the
credit or the account of Borrower;
(h) ship, reclaim, recover, store, finish, maintain, repair, prepare for sale, advertise for sale, and
sell the Collateral. Bank is hereby granted a non-exclusive, royalty-free license or other right to use, without charge, Borrower’s labels, Patents, Copyrights, mask works, rights of use of any name, trade secrets, trade names, Trademarks, and
advertising matter, or any similar property 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,
Borrower’s rights under all licenses and all franchise agreements inure to Bank’s benefit;
(i) place a “hold” on any
account maintained with Bank and/or deliver a notice of exclusive control, any entitlement order, or other directions or instructions pursuant to any Control Agreement or similar agreements providing control of any Collateral;
(j) demand and receive possession of Borrower’s Books; and
(k) exercise all rights and remedies available to Bank under the Loan Documents or at law or equity, including all remedies provided under the
Code (including disposal of the Collateral pursuant to the terms thereof).
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9.2 Power of Attorney
. Borrower hereby irrevocably appoints Bank as its lawful
attorney-in-fact, exercisable upon the occurrence and during the continuance of an Event of Default, to: (a) endorse Borrower’s name on any checks or other forms of payment or security; (b) sign Borrower’s name on any invoice or
bill of lading for any Account or drafts against Account Debtors; (c) settle and adjust disputes and claims about the Accounts directly with Account Debtors, for amounts and on terms Bank determines reasonable; (d) make, settle, and adjust
all claims under Borrower’s insurance policies; (e) pay, contest or settle any Lien, charge, encumbrance, security interest, and adverse claim in or to the Collateral, or any judgment based thereon, or otherwise take any action to
terminate or discharge the same; and (f) transfer the Collateral into the name of Bank or a third party as the Code permits. Borrower hereby appoints Bank as its lawful attorney-in-fact to sign Borrower’s name on any documents necessary to
perfect or continue the perfection of Bank’s security interest in the Collateral regardless of whether an Event of Default has occurred until all Obligations have been satisfied in full and Bank is under no further obligation to make Credit
Extensions hereunder. Bank’s foregoing appointment as Borrower’s attorney in fact, and all of Bank’s rights and powers, coupled with an interest, are irrevocable until all Obligations have been fully repaid and performed and
Bank’s obligation to provide Credit Extensions terminates.
9.3 Protective Payments
. If Borrower fails to obtain the
insurance called for by Section 6.5 or fails to pay any premium thereon or fails to pay any other amount which Borrower is obligated to pay under this Agreement or any other Loan Document, Bank may obtain such insurance or make such payment,
and all amounts so paid by Bank are Bank Expenses and immediately due and payable, bearing interest at the then highest rate applicable to the Obligations, and secured by the Collateral. Bank will make reasonable efforts to provide Borrower with
notice of Bank obtaining such insurance at the time it is obtained or within a reasonable time thereafter. No payments by Bank are deemed an agreement to make similar payments in the future or Bank’s waiver of any Event of Default.
9.4 Application of Payments and Proceeds Upon Default
. If an Event of Default has occurred and is continuing, Bank may apply any funds
in its possession, whether from Borrower account balances, payments, proceeds realized as the result of any collection of Accounts or other disposition of the Collateral, or otherwise, to the Obligations in such order as Bank shall determine in its
sole discretion. Any surplus shall be paid to Borrower or other Persons legally entitled thereto; Borrower shall remain liable to Bank for any deficiency. If Bank, in its good faith business judgment, directly or indirectly enters into a deferred
payment or other credit transaction with any purchaser at any sale of Collateral, Bank shall have the option, exercisable at any time, of either reducing the Obligations by the principal amount of the purchase price or deferring the reduction of the
Obligations until the actual receipt by Bank of cash therefor.
9.5 Bank’s Liability for Collateral
. So long as Bank
complies with applicable law and reasonable banking practices regarding the safekeeping of the Collateral in the possession or under the control of Bank, Bank shall not be liable or responsible for: (a) the safekeeping of the
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Collateral; (b) any loss or damage to the Collateral (except for any loss or damage caused by Bank’s gross negligence or willful misconduct); (c) any diminution in the value of the
Collateral; or (d) any act or default of any carrier, warehouseman, bailee, or other Person. Borrower bears all risk of loss, damage or destruction of the Collateral.
9.6 No Waiver; Remedies Cumulative
. Bank’s failure, at any time or times, to require strict performance by Borrower of any
provision of this Agreement or any other Loan Document shall not waive, affect, or diminish any right of Bank thereafter to demand strict performance and compliance herewith or therewith. No waiver hereunder shall be effective unless signed by the
party granting the waiver and then is only effective for the specific instance and purpose for which it is given. Bank’s rights and remedies under this Agreement and the other Loan Documents are cumulative. Bank has all rights and remedies
provided under the Code, by law, or in equity. Bank’s exercise of one right or remedy is not an election and shall not preclude Bank from exercising any other remedy under this Agreement or other remedy available at law or in equity, and
Bank’s waiver of any Event of Default is not a continuing waiver. Bank’s delay in exercising any remedy is not a waiver, election, or acquiescence.
9.7 Demand Waiver
. Borrower waives demand, 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 held by Bank on which Borrower is liable.
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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Acacia Communications, Inc.
3 Clock Tower
Place, Suite 210
Maynard, Massachusetts 01754
Attn: Raj
Shanmugaraj
Fax:
Email: Raj.Shanmugaraj @acacia-inc.com
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If to Bank:
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Silicon Valley Bank
275 Grove Street, Suite
2-200
Newton, Massachusetts 02466
Attn: Mr. Dan Allred
Fax: (617) 969-439
Email: DAllred@svb.com
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with a copy to:
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Riemer & Braunstein LLP
Three Center
Plaza
Boston, Massachusetts 02108
Attn: David A. Ephraim, Esquire
Fax: (617) 880-3456
Email: DEphraim@riemerlaw.com
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11
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CHOICE OF LAW, VENUE, AND JURY TRIAL WAIVER
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Massachusetts law governs the Loan
Documents without regard to principles of conflicts of law. Borrower and Bank each submit to the exclusive jurisdiction of the State and Federal courts in Boston, Massachusetts; provided, however, that nothing in this Agreement shall be deemed to
operate to preclude Bank from bringing suit or taking other legal action in any other jurisdiction to realize on the Collateral or any other security for the Obligations, or to enforce a judgment or other court order in favor of Bank. Borrower
expressly submits and consents in advance to such jurisdiction in any action or suit commenced in any such court, and Borrower hereby waives any objection that it may have based upon lack of personal jurisdiction, improper venue, or forum non
conveniens and hereby consents to the granting of such legal or equitable relief as is deemed appropriate by such court. Borrower hereby waives personal service of the summons, complaints, and other process issued in such action or suit and agrees
that service of such summons, complaints, and other process may be made by registered or certified mail addressed to Borrower at the address set forth in Section 10 of this Agreement and that service so made shall be deemed completed upon the
earlier to occur of Borrower’s actual receipt thereof or three (3) days after deposit in the U.S. mails, proper postage prepaid.
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, BORROWER AND BANK EACH WAIVE THEIR RIGHT TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION
ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE LOAN DOCUMENTS OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. THIS WAIVER IS A MATERIAL INDUCEMENT FOR BOTH PARTIES TO ENTER INTO THIS AGREEMENT. EACH
PARTY HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.
12.1 Successors and Assigns
. This Agreement binds and
is for the benefit of the successors and permitted assigns of each party. Borrower may not assign this Agreement or any rights or obligations under it without Bank’s prior written consent (which may be granted or withheld in Bank’s
discretion). Bank has the right, without the consent of or notice to Borrower, to sell, transfer, assign, negotiate, or grant participation in all or any part of, or any interest in, Bank’s obligations, rights, and benefits under this Agreement
and the other Loan Documents (other than the Warrant, as to which assignment, transfer and other such actions are governed by the terms of the Warrant).
- 22 -
12.2 Indemnification
. Borrower agrees to indemnify, defend and hold Bank and its
directors, officers, employees, agents, attorneys, or any other Person affiliated with or representing Bank (each, an “Indemnified Person”) harmless against: (a) all obligations, demands, claims, and liabilities (collectively,
“Claims”) claimed or asserted by any other party in connection with the transactions contemplated by the Loan Documents; and (b) all losses or expenses (including Bank Expenses) in any way suffered, incurred, or paid by such
Indemnified Person as a result of, following from, consequential to, or arising from transactions between Bank and Borrower contemplated by the Loan Documents (including reasonable attorneys’ fees and expenses), except for Claims and/or losses
directly caused by such Indemnified Person’s gross negligence or willful misconduct.
12.3 Time of Essence
. Time is of
the essence for the performance of all Obligations in this Agreement.
12.4 Severability of Provisions
. Each provision of this
Agreement is severable from every other provision in determining the enforceability of any provision.
12.5 Correction of Loan
Documents
. Bank may correct patent errors and fill in any blanks in the Loan Documents consistent with the agreement of the parties.
12.6 Amendments in Writing; Waiver; Integration
. No purported amendment or modification of any Loan Document, or waiver, discharge or
termination of any obligation under any Loan Document, shall be enforceable or admissible unless, and only to the extent, expressly set forth in a writing signed by the party against which enforcement or admission is sought. Without limiting the
generality of the foregoing, no oral promise or statement, nor any action, inaction, delay, failure to require performance or course of conduct shall operate as, or evidence, an amendment, supplement or waiver or have any other effect on any Loan
Document. Any waiver granted shall be limited to the specific circumstance expressly described in it, and shall not apply to any subsequent or other circumstance, whether similar or dissimilar, or give rise to, or evidence, any obligation or
commitment to grant any further waiver. The Loan Documents represent the entire agreement about this subject matter and supersede prior negotiations or agreements. All prior agreements, understandings, representations, warranties, and negotiations
between the parties about the subject matter of the Loan Documents merge into the Loan Documents.
12.7 Counterparts
. This
Agreement may be executed in any number of counterparts and by different parties on separate counterparts, each of which, when executed and delivered, is an original, and all taken together, constitute one Agreement.
12.8 Survival
. All covenants, representations and warranties made in this Agreement continue in full force until this Agreement has
terminated pursuant to its terms and all Obligations (other than inchoate indemnity obligations and any other obligations which, by their terms, are to survive the termination of this Agreement) have been paid in full and satisfied. The obligation
of Borrower in Section 12.2 to indemnify Bank shall survive until the statute of limitations with respect to such claim or cause of action shall have run.
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12.9 Confidentiality
. In handling any confidential information, Bank shall exercise the
same degree of care that it exercises for its own proprietary information, but disclosure of information may be made: (a) to Bank’s Subsidiaries or Affiliates (such Subsidiaries and Affiliates, together with Bank, collectively, “Bank
Entities”), provided that such Bank Entities agree to be bound by the terms of this Section 12.9; (b) to prospective transferees or purchasers of any interest in the Credit Extensions (provided, however, Bank shall use its best
efforts to obtain any prospective transferee’s or purchaser’s agreement to the terms of this provision); (c) as required by law, regulation, subpoena, or other order; (d) to Bank’s regulators or as otherwise required in
connection with Bank’s examination or audit; (e) as Bank considers appropriate in exercising remedies under the Loan Documents; and (f) to third-party service providers of Bank so long as such service providers have executed a
confidentiality agreement with Bank with terms no less restrictive than those contained herein. Confidential information does not include information that is either: (i) in the public domain or in Bank’s possession when disclosed to Bank,
or becomes part of the public domain after disclosure to Bank through no fault of Bank; or (ii) disclosed to Bank by a third party if Bank does not know that the third party is prohibited from disclosing the information.
Bank Entities may use the confidential information for reporting purposes and the development and distribution of databases and market
analyses so long as such confidential information is aggregated and anonymized prior to distribution unless otherwise expressly permitted by Borrower. The provisions of the immediately preceding sentence shall survive the termination of this
Agreement.
12.10 Right of Set Off
. Borrower hereby grants to Bank, a lien, security interest and right of set off as security for
all Obligations to Bank pursuant to this Agreement, whether now existing or hereafter arising upon and against all deposits, credits, collateral and property, now or hereafter in the possession, custody, safekeeping or control of Bank or any entity
under the control of Bank (including a Bank subsidiary) or in transit to any of them. At any time after the occurrence and during the continuance of an Event of Default, without demand or notice, Bank may set off the same or any part thereof and
apply the same to any liability or obligation of Borrower even though unmatured and regardless of the adequacy of any other collateral securing the Obligations. ANY AND ALL RIGHTS TO REQUIRE BANK TO EXERCISE ITS RIGHTS OR REMEDIES WITH RESPECT TO
ANY OTHER COLLATERAL WHICH SECURES THE OBLIGATIONS, PRIOR TO EXERCISING ITS RIGHT OF SETOFF WITH RESPECT TO SUCH DEPOSITS, CREDITS OR OTHER PROPERTY OF BORROWER ARE HEREBY KNOWINGLY, VOLUNTARILY AND IRREVOCABLY WAIVED.
12.11 Electronic Execution of Documents
. The words “execution,” “signed,” “signature” and words of like
import in any Loan Document shall be deemed to include electronic signatures or the keeping of records in electronic form, each of which shall be of the same legal effect, validity and enforceability as a manually executed signature or the use of a
paper-based recordkeeping systems, as the case may be, to the extent and as provided for in any applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act.
12.12 Captions
. The headings used in this Agreement are for convenience only and shall not affect the interpretation of this
Agreement.
- 24 -
12.13 Construction of Agreement
. The parties mutually acknowledge that they and their
attorneys have participated in the preparation and negotiation of this Agreement. In cases of uncertainty this Agreement shall be construed without regard to which of the parties caused the uncertainty to exist.
12.14 Relationship
. The relationship of the parties to this Agreement is determined solely by the provisions of this Agreement. The
parties do not intend to create any agency, partnership, joint venture, trust, fiduciary or other relationship with duties or incidents different from those of parties to an arm’s-length contract.
12.15 Third Parties
. Nothing in this Agreement, whether express or implied, is intended to: (a) confer any benefits, rights or
remedies under or by reason of this Agreement on any persons other than the express parties to it and their respective permitted successors and assigns; (b) relieve or discharge the obligation or liability of any person not an express party to
this Agreement; or (c) give any person not an express party to this Agreement any right of subrogation or action against any party to this Agreement.
13.1 Definitions
. As used in the Loan Documents, the word
“shall” is mandatory, the word “may” is permissive, the word “or” is not exclusive, the words “includes” and “including” are not limiting, the singular includes the plural, and numbers denoting
amounts that are set off in brackets are negative. As used in this Agreement, the following capitalized terms have the following meanings:
“
Account
” is any “account” as defined in the Code with such additions to such term as may hereafter be made,
and includes, without limitation, all accounts receivable and other sums owing to Borrower.
“
Account
Debtor
” is any “account debtor” as defined in the Code with such additions to such term as may hereafter be made.
“
Advance
” or “
Advances
” means an advance (or advances) under the Revolving Line.
“
Affiliate
” is, with respect to any Person, each other Person that owns or controls directly or indirectly the Person,
any Person that controls or is controlled by or is under common control with the Person, and each of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company, that Person’s
managers and members.
“
Agreement
” is defined in the preamble hereof.
“
Audited Financial Statements
” is defined in Section 6.2(e) hereof.
“
Availability Amount
” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under
the Borrowing Base minus (b) the Dollar Equivalent amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) plus an amount equal to the Letter of Credit Reserve, minus (c) the FX Reduction Amount,
minus (d) any amounts used for Cash Management Services, and minus (e) the outstanding principal balance of any Advances.
- 25 -
“
Bank
” is defined in the preamble hereof.
“
Bank Entities
” is defined in Section 12.9.
“
Bank Expenses
” are all audit fees and expenses, costs, and expenses (including reasonable attorneys’ fees and expenses)
for preparing, amending, negotiating, administering, defending and enforcing the Loan Documents (including, without limitation, those incurred in connection with appeals or Insolvency Proceedings) or otherwise incurred with respect to Borrower.
“
Board
” is Borrower’s board of directors.
“
Borrower
” is defined in the preamble hereof.
“
Borrower’s Books
” are all Borrower’s books and records including ledgers, federal and state tax returns, records
regarding Borrower’s assets or liabilities, the Collateral, business operations or financial condition, and all computer programs or storage or any equipment containing such information.
“
Borrowing Base
” is (a) eighty percent (80%) of Eligible Accounts, as determined by Bank from Borrower’s most
recent Borrowing Base Certificate plus (b) the lesser of (i) One Million Dollars ($1,000,000) and (ii) fifty percent (50%) of Eligible Purchase Orders, provided, however, that Bank may decrease the foregoing percentages in its
good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect Collateral.
“
Borrowing Base Certificate
” is that certain certificate in the form attached hereto as
Exhibit C
.
“
Borrowing Base Report
” is defined in Section 6.2(a).
“
Business Day
” is any day that is not a Saturday, Sunday or a day on which Bank is closed.
“
Cash Equivalents
” means (a) marketable direct obligations issued or unconditionally guaranteed by the United States or
any agency or any State thereof having maturities of not more than one (1) year from the date of acquisition; (b) commercial paper maturing no more than one (1) year after its creation and having the highest rating from either
Standard & Poor’s Ratings Group or Moody’s Investors Service, Inc.; and (c) Bank’s certificates of deposit issued maturing no more than one (1) year after issue.
“
Cash Management Services
” is defined in Section 2.1.4.
“
Claims
” is defined in Section 12.2.
- 26 -
“
Code
” is the Uniform Commercial Code, as the same may, from time to
time, be enacted and in effect in the Commonwealth of Massachusetts; provided, that, to the extent that the Code is used to define any term herein or in any Loan Document and such term is defined differently in different Articles or Divisions of the
Code, the definition of such term contained in Article or Division 9 shall govern; provided further, that in the event that, by reason of mandatory provisions of law, any or all of the attachment, perfection, or priority of, or remedies with respect
to, Bank’s Lien on any Collateral is governed by the Uniform Commercial Code in effect in a jurisdiction other than the Commonwealth of Massachusetts, the term “
Code
” shall mean the Uniform Commercial Code as enacted and in
effect in such other jurisdiction solely for purposes of the provisions thereof relating to such attachment, perfection, priority, or remedies and for purposes of definitions relating to such provisions.
“
Collateral
” is any and all properties, rights and assets of Borrower described on
Exhibit A
.
“
Collateral Account
” is any Deposit Account, Securities Account, or Commodity Account.
“
Commodity Account
” is any “commodity account” as defined in the Code with such additions to such term as
may hereafter be made.
“
Compliance Certificate
” is that certain certificate in the form attached hereto as
Exhibit D
.
“
Contingent Obligation
” is, for any Person, any direct or indirect liability, contingent or
not, of that Person for (a) any indebtedness, lease, dividend, letter of credit or other obligation of another such as an obligation, in each case, directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse by that
Person, or for which that Person is directly or indirectly liable; (b) any obligations for undrawn letters of credit for the account of that Person; and (c) all obligations from any interest rate, currency or commodity swap agreement,
interest rate cap or collar agreement, or other agreement or arrangement designated to protect a Person against fluctuation in interest rates, currency exchange rates or commodity prices; but “Contingent Obligation” does not include
endorsements in the ordinary course of business. The amount of a Contingent Obligation is the stated or determined amount of the primary obligation for which the Contingent Obligation is made or, if not determinable, the maximum reasonably
anticipated liability for it determined by the Person in good faith; but the amount may not exceed the maximum of the obligations under any guarantee or other support arrangement.
“
Control Agreement
” is any control agreement entered into among the depository institution at which Borrower maintains
a Deposit Account or the securities intermediary or commodity intermediary at which Borrower maintains a Securities Account or a Commodity Account, Borrower, and Bank pursuant to which Bank obtains control (within the meaning of the Code) over such
Deposit Account, Securities Account, or Commodity Account.
“
Copyrights
” are any and all copyright rights,
copyright applications, copyright registrations and like protections in each work or authorship and derivative work thereof, whether published or unpublished and whether or not the same also constitutes a trade secret.
- 27 -
“
Credit Extension
” is any Advance, Growth Capital Advance, Letter of
Credit, FX Forward Contract, amount utilized for Cash Management Services, or any other extension of credit by Bank for Borrower’s benefit.
“
Danish Subsidiary
” means Acacia Communications Europe APS.
“
Default Rate
” is defined in Section 2.3(b).
“
Deferred Revenue
” is all amounts received or invoiced in advance of performance under contracts and not yet
recognized as revenue.
“
Deposit Account
” is any “deposit account” as defined in the Code with
such additions to such term as may hereafter be made.
“
Designated Deposit Account
” is Borrower’s deposit
account, account number , maintained with Bank.
“
Dollars
,” “
dollars
” or use of the sign “
$
” means only lawful money of the United
States and not any other currency, regardless of whether that currency uses the “$” sign to denote its currency or may be readily converted into lawful money of the United States.
“
Dollar Equivalent
” is, at any time, (a) with respect to any amount denominated in Dollars, such amount, and
(b) with respect to any amount denominated in a Foreign Currency, the equivalent amount therefor in Dollars as determined by Bank at such time on the basis of the then-prevailing rate of exchange in San Francisco, California, for sales of the
Foreign Currency for transfer to the country issuing such Foreign Currency.
“
Draw Period
” is the period of
time from the Effective Date through the earlier to occur of (a) March 31, 2012 or (b) an Event of Default.
“
Effective Date
” is defined in the preamble hereof.
“
Eligible Accounts
” means Accounts which arise in the ordinary course of Borrower’s business that meet all
Borrower’s representations and warranties in Section 5.3. Bank reserves the right at any time after the Effective Date to adjust any of the criteria set forth below and to establish new criteria in its good faith business judgment. Unless
Bank otherwise agrees in writing, Eligible Accounts shall not include:
(a) Accounts for which the Account Debtor is
Borrower’s Affiliate, officer, employee, or agent;
(b) Accounts that the Account Debtor has not paid within ninety (90) days of
invoice date regardless of invoice payment period terms;
(c) Accounts with credit balances over ninety (90) days from invoice date;
(d) Accounts owing from an Account Debtor, fifty percent (50%) or more of whose Accounts have not been paid within ninety
(90) days of invoice date;
- 28 -
(e) Accounts owing from an Account Debtor which does not have its principal place of business in
the United States (except for Eligible Foreign Accounts);
(f) Accounts billed and/or payable outside of the United States;
(g) Accounts owing from an Account Debtor to the extent that Borrower is indebted or obligated in any manner to the Account Debtor (as
creditor, lessor, supplier or otherwise - sometimes called “contra” accounts, accounts payable, customer deposits or credit accounts);
(h) Accounts owing from an Account Debtor which is a United States government entity or any department, agency, or instrumentality thereof
unless (i) Borrower has assigned its payment rights to Bank and the assignment has been acknowledged under the Federal Assignment of Claims Act of 1940, as amended, and (ii) Bank approves in writing, on a case by case basis in its sole and
absolute discretion;
(i) Accounts for demonstration or promotional equipment, or in which goods are consigned, or sold on a “sale
guaranteed”, “sale or return”, “sale on approval”, or other terms if Account Debtor’s payment may be conditional;
(j) Accounts owing from an Account Debtor where goods or services have not yet been rendered to the Account Debtor (sometimes called memo
billings or pre-billings);
(k) Accounts subject to contractual arrangements between Borrower and an Account Debtor where payments shall
be scheduled or due according to completion or fulfillment requirements where the Account Debtor has a right of offset for damages suffered as a result of Borrower’s failure to perform in accordance with the contract (sometimes called contracts
accounts receivable, progress billings, milestone billings, or fulfillment contracts);
(l) Accounts owing from an Account Debtor the
amount of which may be subject to withholding based on the Account Debtor’s satisfaction of Borrower’s complete performance (but only to the extent of the amount withheld; sometimes called retainage billings);
(m) Accounts subject to trust provisions, subrogation rights of a bonding company, or a statutory trust;
(n) Accounts owing from an Account Debtor that has been invoiced for goods that have not been shipped to the Account Debtor unless Bank,
Borrower, and the Account Debtor have entered into an agreement acceptable to Bank in its sole discretion wherein the Account Debtor acknowledges that (i) it has title to and has ownership of the goods wherever located, (ii) a bona fide
sale of the goods has occurred, and (iii) it owes payment for such goods in accordance with invoices from Borrower (sometimes called “bill and hold” accounts);
(o) Accounts for which the Account Debtor has not been invoiced;
(p) Accounts that represent non-trade receivables or that are derived by means other than in the ordinary course of Borrower’s business;
- 29 -
(q) Accounts for which Borrower has permitted Account Debtor’s payment to extend beyond 90
days;
(r) Accounts arising from chargebacks, debit memos, or other payment deductions taken by an Account Debtor;
(s) Accounts arising from product returns and/or exchanges (sometimes called “warranty” or “RMA” accounts);
(t) Accounts in which the Account Debtor disputes liability or makes any claim (but only up to the disputed or claimed amount), or if the
Account Debtor is subject to an Insolvency Proceeding, or becomes insolvent, or goes out of business;
(u) Accounts owing from an Account
Debtor with respect to which Borrower has received Deferred Revenue (but only to the extent of such Deferred Revenue);
(v) Accounts owing
from an Account Debtor, including Affiliates, whose total obligations to Borrower exceed twenty-five percent (25%) of all Accounts, for the amounts that exceed that percentage (except for Specified Accounts), unless Bank approves in writing on
a case by case basis in its sole and absolute discretion; and
(w) Accounts for which Bank in its good faith business judgment determines
collection to be doubtful, including, without limitation, accounts represented by “refreshed” or “recycled” invoices.
“
Eligible Foreign Accounts
” are Accounts which are otherwise Eligible Accounts but for the fact that the Account Debtor does
not have its principal place of business in the United States and that Bank approves in writing on a case by case basis in its sole and absolute discretion. As used herein, Eligible Foreign Accounts shall include the Specified Accounts
“
Eligible Purchase Orders
” are binding, non-contingent and non-cancelable purchase orders issued within the previous ninety
(90) days, for the delivery of goods by Borrower or the provision of services by Borrower, and which, but for the fact that an invoice has not been sent, are otherwise “Eligible Accounts.” Upon the issuance of an invoice in respect of
such a purchase order, such applicable purchase order shall not be deemed to be an “Eligible Purchase Order”.
“
Equipment
” is all “equipment” as defined in the Code with such additions to such term as may hereafter be made,
and includes without limitation all machinery, fixtures, goods, vehicles (including motor vehicles and trailers), and any interest in any of the foregoing.
“
ERISA
” is the Employee Retirement Income Security Act of 1974, and its regulations.
“
Event of Default
” is defined in Section 8.
“
Exchange Act
” is the Securities Exchange Act of 1934, as amended.
- 30 -
“
First Milestone Event
” is receipt by Bank of evidence, satisfactory to Bank in
its sole and absolute discretion, that Borrower has entered into a binding contract with Xtera to fulfill an order for one hundred (100) units, pursuant to which Borrower has received commitment fees in an amount of at least Eight Hundred
Thousand Dollars ($800,000).
“
Foreign Currency
” means lawful money of a country other than the United States.
“
Funding Date
” is any date on which a Credit Extension is made to or for the account of Borrower which shall be a Business
Day.
“
FX Business Day
” is any day when (a) Bank’s Foreign Exchange Department is conducting its normal
business and (b) the Foreign Currency being purchased or sold by Borrower is available to Bank from the entity from which Bank shall buy or sell such Foreign Currency.
“
FX Forward Contract
” is defined in Section 2.1.3.
“
FX Reduction Amount
” is defined in Section 2.1.3.
“
FX Reserve
” is defined in Section 2.1.3.
“
GAAP
” is generally accepted accounting principles set forth in the opinions and pronouncements of the Accounting Principles
Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other Person as may be approved by a significant segment of the
accounting profession, which are applicable to the circumstances as of the date of determination.
“
General Intangibles
”
is all “general intangibles” as defined in the Code in effect on the date hereof with such additions to such term as may hereafter be made, and includes without limitation, all Intellectual Property, claims, income and other tax refunds,
security and other deposits, payment intangibles, contract rights, options to purchase or sell real or personal property, rights in all litigation presently or hereafter pending (whether in contract, tort or otherwise), insurance policies (including
without limitation key man, property damage, and business interruption insurance), payments of insurance and rights to payment of any kind.
“
Good Faith Deposit
” is defined in Section 2.4(c).
“
Governmental Approval
” is any consent, authorization, approval, order, license, franchise, permit, certificate,
accreditation, registration, filing or notice, of, issued by, from or to, or other act by or in respect of, any Governmental Authority.
“
Governmental Authority
” is any nation or government, any state or other political subdivision thereof, any agency,
authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative functions of or pertaining to government, any securities exchange and any
self-regulatory organization.
- 31 -
“
Growth Capital Advance
” or “
Growth Capital Advances
” is
defined in Section 2.15(a) hereof.
“
Growth Capital Advance Amount
” is an amount not to exceed Three
Million Dollars ($3,000,000) in the aggregate, available as follows:
(i) from the Effective Date through the Draw Period, One
Million Dollars ($1,000,000), in the aggregate;
(ii) upon the occurrence of the First Milestone Event through the Draw Period, Two
Million Dollars ($2,000,000) in the aggregate (inclusive of the original principal amount of any Growth Capital Advances made by Bank to Borrower); and
(iii) upon the occurrence of the Second Milestone Event (but regardless of whether the First Milestone Event has occurred) through the Draw
Period, Three Million Dollars ($3,000,000) in the aggregate (inclusive of the original principal amount of any Growth Capital Advances made by Bank to Borrower).
“
Growth Capital Line Commitment Fee
” is defined in Section 2.4(b).
“
Growth Capital Maturity Date
” is March 1, 2015.
“
Indebtedness
” is (a) indebtedness for borrowed money or the deferred price of property or services, such as
reimbursement and other obligations for surety bonds and letters of credit, (b) obligations evidenced by notes, bonds, debentures or similar instruments, (c) capital lease obligations, and (d) Contingent Obligations.
“
Indemnified Person
” is defined in Section 12.2.
“
Insolvency Proceeding
” is any proceeding by or against any Person under the United States Bankruptcy Code, or any
other bankruptcy or insolvency law, including assignments for the benefit of creditors, compositions, extensions 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:
(a) its Copyrights, Trademarks and Patents;
(b) any and all trade secrets and trade secret rights, including, without limitation, any rights to unpatented inventions, know-how, operating
manuals;
(c) any and all source code;
(d) any and all design rights which may be available to a Borrower;
- 32 -
(e) any and all claims for damages by way of past, present and future infringement of any of the
foregoing, with the right, but not the obligation, to sue for and collect such damages for said use or infringement of the Intellectual Property rights identified above; and
(f) all amendments, renewals and extensions of any of the Copyrights, Trademarks or Patents.
“
Inventory
” is all “inventory” as defined in the Code in effect on the date hereof with such additions to
such term as may hereafter be made, and includes without limitation all merchandise, raw materials, parts, supplies, packing and shipping materials, work in process and finished products, including without limitation such inventory as is temporarily
out of Borrower’s custody or possession or in transit and including any returned goods and any documents of title representing any of the above.
“
Investment
” is any beneficial ownership interest in any Person (including stock, partnership interest or other
securities), and any loan, advance or capital contribution to any Person.
“
Letter of Credit
” means a
standby letter of credit issued by Bank or another institution based upon an application, guarantee, indemnity or similar agreement on the part of Bank as set forth in Section 2.1.2.
“
Letter of Credit Application
” is defined in Section 2.1.2(b).
“
Letter of Credit Reserve
” has the meaning set forth in Section 2.1.2(e).
“
Lien
” is a claim, mortgage, deed of trust, levy, charge, pledge, security interest or other encumbrance of any kind,
whether voluntarily incurred or arising by operation of law or otherwise against any property.
“
Loan
Documents
” are, collectively, this Agreement, the Warrant, the Perfection Certificate, any note, or notes or guaranties executed by Borrower, and any other present or future agreement between Borrower and/or for the benefit of Bank in
connection with this Agreement, all as amended, restated, or otherwise modified.
“
MassDev Note
” is defined
in the definition of “Permitted Indebtedness” hereof.
“
MassDev Security Agreement
” is defined in
the definition of “Permitted Indebtedness” hereof.
“
Material Adverse Change
” is (a) a material
impairment in the perfection or priority of Bank’s Lien in the Collateral or in the value of such Collateral; (b) a material adverse change in the business, operations, or condition (financial or otherwise) of Borrower; or (c) a
material impairment of the prospect of repayment of any portion of the Obligations. In determining whether a “Material Adverse Change” has occurred under clause (b) or (c) above, Bank’s primary, though not sole,
consideration will be whether Borrower has or will have sufficient cash resources to repay the Obligations as and when due. Bank recognizes that, as a pre-profit company, Borrower’s cash resources will decline over time, and Borrower will
periodically
- 33 -
require additional infusions of equity capital. The clear intention of Borrower’s investors to continue to fund Borrower in the amounts and timeframe necessary, in Bank’s good faith
judgment, to enable Borrower to satisfy the Obligations as they become due and payable is the most significant criterion Bank shall consider in making any such determination.
“
Maturity Date
” means either the Revolving Line Maturity Date or the Growth Capital Maturity Date, as applicable.
“
Monthly Financial Statements
” is defined in Section 6.2(c).
“
Obligations
” are Borrower’s obligations to pay when due any debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, whether under this Agreement, the Loan Documents (other than the Warrant), or otherwise, including, without limitation, all obligations relating to letters of credit (including reimbursement obligations for
drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to
perform Borrower’s duties under the Loan Documents (other than the Warrant).
“
Operating Documents
”
are, for any Person, such Person’s formation documents, as certified with the Secretary of State of such Person’s state of formation on a date that is no earlier than 30 days prior to the Effective Date, and, (a) if such Person is a
corporation, its bylaws in current form, (b) if such Person is a limited liability company, its limited liability company agreement (or similar agreement), and (c) if such Person is a partnership, its partnership agreement (or similar
agreement), each of the foregoing with all current amendments or modifications thereto.
“
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.
“
Payment/Advance Form
” is that certain form attached hereto as
Exhibit B
.
“
Payment Date
” is the first Business Day of each month.
“
Perfection Certificate
” is defined in Section 5.1.
“
Permitted Indebtedness
” is:
(a) Borrower’s Indebtedness to Bank under this Agreement and the other Loan Documents;
(b) Indebtedness existing on the Effective Date and shown on the Perfection Certificate;
(c) Subordinated Debt;
- 34 -
(d) unsecured Indebtedness to trade creditors incurred in the ordinary course of business;
(e) Indebtedness incurred as a result of endorsing negotiable instruments received in the ordinary course of business;
(f) Indebtedness secured by Liens permitted under clauses (a) and (c) of the definition of “Permitted Liens” hereunder;
(g) extensions, refinancings, modifications, amendments and restatements of any items of Permitted Indebtedness (a) through
(f) 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; and
(h) Indebtedness in favor of Massachusetts Development Finance Agency pursuant to that certain Security Agreement between Borrower and
Massachusetts Development Finance Agency dated as of February 25, 2011 (the “
MassDev Security Agreement
”) and that certain Promissory Note between Borrower and Massachusetts Development Finance Agency dated as of
February 25, 2011 (the “
MassDev Note
”), up to the maximum principal amount of Three Million Dollars ($3,000,000.00).
“
Permitted Investments
” are:
(a) Investments (including, without limitation, Subsidiaries) existing on the Effective Date and shown on the Perfection Certificate;
(b) (i) Investments consisting of Cash Equivalents, and (ii) any Investments permitted by Borrower’s investment policy, as amended
from time to time, provided that such investment policy (and any such amendment thereto) has been approved in writing by Bank;
(c)
Investments by Borrower in its Danish Subsidiary not to exceed Two Hundred Fifty Thousand Dollars ($250,000.00) in the aggregate in any fiscal year;
(d) (i) marketable direct obligations issued or unconditionally guaranteed by the United States or 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 a rating of at least A-2 or P-2 from either Standard
and Poor’s Corporation or Moody’s Investors Service, (iii) certificates of deposit maturing no more than one (1) year from the date of the investment therein, and (iv) money market accounts;
(e) Investments consisting of (i) travel advances and employee relocation loans and other employee loans and advances in the ordinary
course of business, 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 of
Directors;
- 35 -
(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;
(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 (g) shall not apply to Investments of Borrower in any Subsidiary; and
(h) Investments consisting of deposit accounts in which Bank has a perfected security interest.
“
Permitted Liens
” are:
(a) Liens existing on the Effective Date and shown on the Perfection Certificate or arising under this Agreement and the other Loan Documents;
(b) Liens for taxes, fees, assessments or other government charges or levies, either (i) not due and payable or (ii) being
contested in good faith and for which Borrower maintains adequate reserves on its Books, provided that no notice of any such Lien has been filed or recorded under the Internal Revenue Code of 1986, as amended, and the Treasury Regulations adopted
thereunder;
(c) purchase money Liens or capital leases (i) on Equipment acquired or held by Borrower incurred for financing the
acquisition of the Equipment securing no more than Fifty Thousand Dollars ($50,000) in the aggregate amount outstanding, or (ii) existing on Equipment when acquired, if the Lien is confined to the property and improvements and the proceeds of
the Equipment;
(d) Liens incurred in the extension, renewal or refinancing of the indebtedness secured by Liens described in
(a) through (c),
but
any extension, renewal or replacement Lien must be limited to the property encumbered by the existing Lien and the principal amount of the indebtedness may not increase;
(e) non-exclusive license of Intellectual Property granted to third parties in the ordinary course of business.; and
(f) Liens in favor of Massachusetts Development Finance Agency pursuant to the MassDev Security Agreement and the MassDev Note.
“
Person
” is any individual, sole proprietorship, partnership, limited liability company, joint venture, company,
trust, unincorporated organization, association, corporation, institution, public benefit corporation, firm, joint stock company, estate, entity or government agency.
“
Prime Rate
” is Bank’s most recently announced “prime rate,” even if it is not Bank’s lowest
rate.
- 36 -
“
Registered Organization
” is any “registered organization” as
defined in the Code with such additions to such term as may hereafter be made.
“
Requirement of Law
” is as
to any Person, the organizational or governing documents of such Person, and any law (statutory or common), treaty, rule or regulation or determination of an arbitrator or a court or other Governmental Authority, in each case applicable to or
binding upon such Person or any of its property or to which such Person or any of its property is subject.
“
Responsible Officer
” is any of the Chief Executive Officer, President, Chief Financial Officer and Controller of
Borrower.
“
Restricted License
” is any material license or other agreement with respect to which Borrower
is the licensee (a) that prohibits or otherwise restricts Borrower from granting a security interest in Borrower’s interest in such license or agreement or any other property, or (b) for which a default under or termination of could
interfere with the Bank’s right to sell any Collateral.
“
Revolving Line
” is an Advance or Advances in
an amount equal to Five Million Dollars ($5,000,000.00).
“
Revolving Line Commitment Fee
” is defined in
Section 2.4(a).
“
Revolving Line Maturity Date
” is June 8, 2012.
“
SEC
” shall mean the Securities and Exchange Commission, any successor thereto, and any analogous Governmental
Authority.
“
Second Milestone Event
” means confirmation by Bank that Borrower has shipped pre-production
units which shall be production quality and have passed a formal release process to include one thousand (1,000) hours of product testing.
“
Securities Account
” is any “securities account” as defined in the Code with such additions to such term as
may hereafter be made.
“
Settlement Date
” is defined in Section 2.1.3.
“
Specified Accounts
” are Accounts for which the Account Debtor is Tellabs, ZTE, Xtera, Juniper, and Adva.
“
Subordinated Debt
” is indebtedness incurred by Borrower subordinated to all of Borrower’s now or hereafter
indebtedness to Bank (pursuant to a subordination, intercreditor, or other similar agreement in form and substance satisfactory to Bank entered into between Bank and the other creditor), on terms acceptable to Bank.
“
Subsidiary
” is, as to any Person, a corporation, partnership, limited liability company or other entity of which shares of
stock or other ownership interests having ordinary voting power (other than stock or such other ownership interests having such power only by reason of the happening of a contingency) to elect a majority of the board of directors or other managers
of
- 37 -
such corporation, partnership or other entity are at the time owned, or the management of which is otherwise controlled, directly or indirectly through one or more intermediaries, or both, by
such Person. Unless the context otherwise requires, each reference to a Subsidiary herein shall be a reference to a Subsidiary of Borrower.
“
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.
“
Transfer
” is defined in Section 7.1.
“
Warrant
” is that certain Warrant to Purchase Stock dated as of the Effective Date executed by Borrower in favor of
Bank.
[Signature page follows.]
- 38 -
IN WITNESS WHEREOF
, the parties hereto have caused this Agreement to be executed as a
sealed instrument under the laws of the Commonwealth of Massachusetts as of the Effective Date.
|
|
|
|
|
BORROWER:
|
|
|
|
ACACIA COMMUNICATIONS, INC.
|
|
|
|
|
By
|
|
/s/ Raj Shanmugaraj
|
|
Name:
|
|
Raj Shanmugaraj
|
|
Title:
|
|
President and Chief Executive Officer
|
|
|
|
BANK:
|
|
|
|
SILICON VALLEY BANK
|
|
|
|
|
By
|
|
/s/ Bradley Holt
|
|
Name:
|
|
Bradley Holt
|
|
Title:
|
|
Relationship Manager
|
1
EXHIBIT A - COLLATERAL DESCRIPTION
The Collateral consists of all of Borrower’s right, title and interest in and to the following personal property:
All goods, Accounts (including health-care receivables), Equipment, Inventory, contract rights or rights to payment of money, leases, license
agreements, franchise agreements, General Intangibles (except as provided below), commercial tort claims, documents, instruments (including any promissory notes), chattel paper (whether tangible or electronic), cash, deposit accounts, fixtures,
letters of credit rights (whether or not the letter of credit is evidenced by a writing), securities, and
all other investment property,
supporting obligations, and financial assets, whether now owned or hereafter acquired, wherever located; and all Borrower’s Books relating to the foregoing, and any and all claims, rights and interests in any of the above and all substitutions
for, additions, attachments, accessories, accessions and improvements to and replacements, products, proceeds and insurance proceeds of any or all of the foregoing.
Notwithstanding the foregoing, the Collateral does not include any Intellectual Property; provided, however, the Collateral shall include all
Accounts and all proceeds of Intellectual Property. If a judicial authority (including a U.S. Bankruptcy Court) would hold that a security interest in the underlying Intellectual Property is necessary to have a security interest in such Accounts and
such property that are proceeds of Intellectual Property, then the Collateral shall automatically, and effective as of the Effective Date, include the Intellectual Property to the extent necessary to permit perfection of Bank’s security
interest in such Accounts and such other property of Borrower that are proceeds of the Intellectual Property.
Pursuant to
Section 7.5 of the Agreement, Borrower has agreed not to encumber any of its Intellectual Property without Bank’s prior written consent.
1
EXHIBIT B - LOAN PAYMENT/ADVANCE REQUEST FORM
D
EADLINE
FOR
SAME
DAY
PROCESSING
IS
N
OON
E
ASTERN
T
IME
|
|
|
|
|
L
OAN
P
AYMENT
:
|
|
|
|
|
|
|
|
|
ACACIA COMMUNICATIONS, INC.
|
|
|
|
|
From Account
#
|
|
To Account
#
|
|
(Deposit Account #)
|
|
(Loan Account #)
|
|
|
|
|
Principal
$
|
|
and/or Interest
$
|
|
|
|
|
Authorized
Signature:
|
|
Phone
Number:
|
|
Print
Name/Title:
|
|
|
|
|
|
|
|
L
OAN
A
DVANCE
:
|
|
|
|
|
|
Complete
Outgoing Wire Request
section below if all or a portion of the funds from this loan advance are for an outgoing wire.
|
|
|
|
|
From Account
#
|
|
To Account
#
|
|
(Loan Account #)
|
|
(Deposit Account #)
|
|
|
|
|
Amount of Advance
$
|
|
|
|
All Borrower’s representations and warranties in the
Loan and Security Agreement are true, correct and complete in all material respects on the date of the request for an advance; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such
date:
|
|
Authorized
Signature:
|
|
Phone
Number:
|
|
Print
Name/Title:
|
|
|
|
|
|
|
|
O
UTGOING
W
IRE
R
EQUEST
:
|
|
|
|
Complete only if all or a portion of funds from the loan advance above is to be wired.
Deadline for same day processing is noon, Eastern Time
|
|
|
|
|
Beneficiary
Name:
|
|
Amount of Wire:
$
|
|
Beneficiary
Name:
|
|
Account
Number:
|
|
City and
State:
|
|
|
|
|
|
|
Beneficiary Bank Transit (ABA)
#:
|
|
Beneficiary Bank Code (Swift, Sort, Chip, etc.):
|
|
|
|
(For International Wire Only)
|
|
|
|
|
Intermediary
Bank:
|
|
Transit (ABA)
#:
|
|
For Further Credit to:
|
|
|
|
Special Instructions:
|
|
By signing below, I (we) acknowledge and agree that my
(our) funds transfer request shall be processed in accordance with and subject to the terms and conditions set forth in the agreement(s) covering funds transfer service(s), which agreements(s) were previously received and executed by me
(us).
|
|
Authorized
Signature:
|
|
2nd Signature (if
required):
|
|
Print
Name/Title:
|
|
Print
Name/Title:
|
|
Telephone
#:
|
|
Telephone
#:
|
1
EXHIBIT C - BORROWING BASE CERTIFICATE
Borrower: Acacia Communications, Inc.
Lender: Silicon Valley
Bank
Commitment Amount: $5,000,000.00
|
|
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|
|
|
|
|
|
ACCOUNTS RECEIVABLE
|
|
|
1.
|
|
Accounts Receivable (invoiced) Book Value as of
|
|
$
|
|
|
|
2.
|
|
Additions (please explain on next page)
|
|
$
|
|
|
|
3.
|
|
Less: Intercompany / Employee / Non-Trade Accounts
|
|
$
|
|
|
|
4.
|
|
NET TRADE ACCOUNTS RECEIVABLE
|
|
$
|
|
|
|
|
|
|
ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
|
|
|
|
|
|
5.
|
|
90 Days Past Invoice Date
|
|
$
|
|
|
|
6.
|
|
Credit Balances over 90 Days
|
|
$
|
|
|
|
7.
|
|
Balance of 50% over 90 Day Accounts (cross-age or current affected)
|
|
$
|
|
|
|
8.
|
|
Foreign Account Debtor Accounts (except for Eligible Foreign Accounts)
|
|
$
|
|
|
|
9.
|
|
Foreign Invoiced and/or Collected Accounts
|
|
$
|
|
|
|
10.
|
|
Contra/Customer Deposit Accounts
|
|
$
|
|
|
|
11.
|
|
U.S. Government Accounts
|
|
$
|
|
|
|
12.
|
|
Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts
|
|
$
|
|
|
|
13.
|
|
Accounts with Memo or Pre-Billings
|
|
$
|
|
|
|
14.
|
|
Contract Accounts; Accounts with Progress/Milestone Billings
|
|
$
|
|
|
|
15.
|
|
Accounts for Retainage Billings
|
|
$
|
|
|
|
16.
|
|
Trust / Bonded Accounts
|
|
$
|
|
|
|
17.
|
|
Bill and Hold Accounts
|
|
$
|
|
|
|
18.
|
|
Unbilled Accounts
|
|
$
|
|
|
|
19.
|
|
Non-Trade Accounts (if not already deducted above)
|
|
$
|
|
|
|
20.
|
|
Accounts with Extended Term Invoices (Net 90+)
|
|
$
|
|
|
|
21.
|
|
Chargebacks Accounts / Debit Memos
|
|
$
|
|
|
|
22.
|
|
Product Returns/Exchanges
|
|
$
|
|
|
|
23.
|
|
Disputed Accounts; Insolvent Account Debtor Accounts
|
|
$
|
|
|
|
24.
|
|
Deferred Revenue, if applicable/Other (please explain on next page)
|
|
$
|
|
|
|
25.
|
|
Concentration Limits 25% (except for Specified Accounts)
|
|
$
|
|
|
|
26.
|
|
TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
|
|
$
|
|
|
|
27.
|
|
Eligible Accounts (#4 minus #26)
|
|
$
|
|
|
|
28.
|
|
ELIGIBLE AMOUNT OF ACCOUNTS (80% of #27)
|
|
$
|
|
|
|
ELIGIBLE PURCHASE ORDERS
|
|
|
|
|
|
29.
|
|
Eligible Purchase Orders
|
|
$
|
|
|
|
30.
|
|
ELIGIBLE AMOUNT OF PURCHASE ORDERS (the lesser of (i) $1,000,000 and (ii) 50% of #29)
|
|
$
|
|
|
|
BALANCES
|
|
|
|
|
|
31.
|
|
Maximum Loan Amount
|
|
$
|
|
|
|
32.
|
|
Total Funds Available (Lesser of #31 or (#28 plus #30))
|
|
$
|
|
|
|
33.
|
|
Present balance owing on Line of Credit
|
|
$
|
|
|
|
34.
|
|
Outstanding under Sublimits
|
|
$
|
|
|
|
35.
|
|
RESERVE POSITION (#32 minus #33 and #34)
|
|
$
|
|
|
[Continued on following page.]
1
Explanatory comments from previous page:
The undersigned represents and warrants that this is true, complete and correct, and that the information in this Borrowing
Base Certificate complies with the representations and warranties in the Loan and Security Agreement between the undersigned and Silicon Valley Bank.
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|
COMMENTS:
|
|
|
|
|
By:
|
|
|
|
|
|
Authorized Signer
|
|
|
|
|
Date:
|
|
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|
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|
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|
|
|
BANK USE ONLY
|
|
|
|
|
Received by:
|
|
|
|
|
|
AUTHORIZED SIGNER
|
|
|
|
|
|
Date
|
|
|
|
Verified:
|
|
|
|
|
|
AUTHORIZED SIGNER
|
|
|
|
|
Date:
|
|
|
|
Compliance Status:
|
|
Yes No
|
2
EXHIBIT D
COMPLIANCE CERTIFICATE
|
|
|
|
|
|
|
TO:
|
|
SILICON VALLEY BANK
|
|
Date:
|
|
FROM:
|
|
ACACIA COMMUNICATIONS, INC.
|
|
|
The undersigned authorized officer of Acacia Communications, Inc. (“Borrower”) certifies that under
the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”):
(1) Borrower is in
complete compliance for the period ending with all required covenants except as noted below; (2) there are no Events of
Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material
respects as of such date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed
by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits
of which Borrower has not previously provided written notification to Bank.
Attached are the required documents supporting the
certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may
be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not
otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under
“Complies” column.
|
|
|
|
|
|
|
Reporting Covenant
|
|
Required
|
|
Complies
|
|
|
|
|
|
Monthly financial statements with Compliance Certificate
|
|
Monthly within 30 days
|
|
Yes No
|
|
Annual financial statement (CPA Audited)
|
|
FYE within 180 days
|
|
Yes No
|
|
10-Q, 10-K and 8-K
|
|
Within 5 days after filing with SEC
|
|
Yes No
|
|
Borrowing Base Certificate A/R & A/P Agings
|
|
Monthly within 30 days
|
|
Yes No
|
|
Board-approved Projections
|
|
First Business Day of month following Board approval; at least annually
|
|
Yes No
|
1
The following are the exceptions with respect to the certification above. (If no exceptions
exist, state “No exceptions to note.”)
|
|
|
|
|
Acacia Communications, Inc.
|
|
|
|
|
By:
|
|
|
|
Name:
|
|
|
|
Date:
|
|
|
|
|
|
|
|
|
|
BANK USE ONLY
|
|
|
|
|
Received by:
|
|
|
|
|
|
AUTHORIZED SIGNER
|
|
|
|
|
Date
|
|
|
|
|
|
|
Verified:
|
|
|
|
|
|
AUTHORIZED SIGNER
|
|
|
|
|
Date:
|
|
|
|
|
|
|
Compliance Status:
|
|
Yes No
|
2
FIRST LOAN MODIFICATION AGREEMENT
This First Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of March 13, 2012, by and
between
SILICON VALLEY BANK
, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove Street, Suite 2-200, Newton, Massachusetts
02466 (“Bank”) and
ACACIA COMMUNICATIONS, INC.
, a Delaware corporation (“Borrower”).
1.
DESCRIPTION OF EXISTING
INDEBTEDNESS AND OBLIGATIONS
. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of June 9, 2011, evidenced by, among other documents, a
certain Loan and Security Agreement dated as of June 9, 2011, between Borrower and Bank (as amended, the “Loan Agreement”). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.
2.
DESCRIPTION OF COLLATERAL
. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any
other collateral security granted to Bank, the “Security Documents”). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan
Documents”.
3.
DESCRIPTION OF CHANGE IN TERMS
.
|
|
A.
|
Modifications to Loan Agreement.
|
|
|
1
|
The Loan Agreement shall be amended by deleting the text appearing in each of (i) Section 2.1.2 (entitled “Letters of Credit Sublimit”), (ii) Section 2.1.3 (entitled “Foreign Exchange
Sublimit”), and (iii) Section 2.1.4 (entitled “Cash Management Services Sublimit”) in their entirety and inserting in lieu of each of the foregoing “Intentionally Omitted”.
|
|
|
2
|
The Loan Agreement shall be amended by deleting the following text appearing in Section 2.1.5(a) (Growth Capital Advances) thereof:
|
“Subject to the terms and conditions of this Agreement, during the Draw Period, Bank agrees to make up to three (3) advances (each a
“
Growth Capital Advance
” and collectively the
“Growth Capital Advances
”) available to Borrower in an amount not to exceed the Growth Capital Advance Amount.”
and inserting in lieu thereof the following:
“Subject to the terms and conditions of this Agreement, during the Draw Period, Bank agrees to make up to two (2) advances (each a
“
Growth Capital Advance
” and collectively the “
Growth Capital Advances
”) available to Borrower in an amount not to exceed the Growth Capital Advance Amount.”
|
|
3
|
The Loan Agreement shall be amended by deleting the text appearing in Section 2.1.5(c) (Repayment) thereof:
|
“Commencing on April 2, 2012 and continuing on each Payment Date thereafter, Borrower shall repay each Growth Capital Advance in
(i) thirty-six (36) equal monthly installments of principal, plus (ii) monthly payments of accrued interest at the rate set forth in Section 2.3(a)(ii).”
and inserting in lieu thereof the following:
“Commencing on July 2, 2012 and continuing on each Payment Date thereafter, Borrower shall repay each Growth Capital Advance in
(i) thirty-six (36) equal monthly installments of principal, plus (ii) monthly payments of accrued interest at the rate set forth in Section 2.3(a)(ii).”
|
|
4
|
The Loan Agreement shall be amended by deleting the following provision appearing as Section 2.2 (Overadvances) thereof:
|
“
2.2 Overadvances
. If, at any time, the sum of (a) the outstanding principal amount of any Advances (including any amounts
used for Cash Management Services), plus (b) the face amount of any outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit and any Letter of Credit Reserve), plus (c) the FX Reduction Amount exceeds the lesser of
either the Revolving Line or the Borrowing Base, Borrower shall immediately pay to Bank in cash such excess.”
and inserting in lieu
thereof the following:
“
2.2 Overadvances
. If, at any time, the outstanding principal amount of any Advances exceeds the
lesser of either the Revolving Line or the Borrowing Base, Borrower shall immediately pay to Bank in cash such excess.”
|
|
5
|
The Loan Agreement shall be amended by deleting the following appearing as Section 2.3(a)(i) (Interest Rate) thereof:
|
“(i)
Advances
. Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at
a floating per annum rate equal to one and one half of one percentage point (1.50%) above the Prime Rate, which interest shall be payable monthly in accordance with Section 2.3(f) below.”
and inserting in lieu thereof the following:
“(i)
Advances
. Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at
a floating per annum rate equal to (a) prior to the 2012 Effective Date, one and one half of one percentage point (1.50%) above the Prime Rate, and (b) on and after the 2012 Effective Date, two percentage points (2.0%) above the
Prime Rate, which interest, in each case, shall be payable monthly in accordance with Section 2.3(f) below.”
|
|
6
|
The Loan Agreement shall be amended by deleting the following provision appearing as Section 2.4(d) (Letter of Credit Fee) thereof:
|
“(d)
Letter of Credit Fee
. Bank’s customary fees and expenses for the issuance or renewal of Letters of Credit, upon the
issuance of such Letter of Credit, each anniversary of the issuance during the term of such Letter of Credit, and upon the renewal of such Letter of Credit by Bank; and”
and inserting in lieu thereof the following:
“(d)
Intentionally Omitted
.; and”
|
|
7
|
The Loan Agreement shall be amended by deleting the following provision appearing as Section 3.4(a) (Procedures for Borrowing) thereof:
|
“(a)
Advances
. Subject to the prior satisfaction of all other applicable conditions to the making of an Advance set forth in this
Agreement, to obtain an Advance (other than Advances under Sections 2.1.2 or 2.1.4), Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or telephone by 12:00 p.m. Eastern time on the Funding Date of the
Advance. Together with any such electronic or facsimile notification, Borrower shall deliver to Bank by electronic mail or facsimile a completed Payment/Advance Form executed by a Responsible Officer or his or her designee. Bank may rely on any
telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Bank shall credit Advances to the Designated Deposit Account. Bank may make Advances under this Agreement based on instructions from a Responsible Officer or
his or her designee or without instructions if the Advances are necessary to meet Obligations which have become due.”
and inserting
in lieu thereof the following:
“(a)
Advances
. Subject to the prior satisfaction of all other applicable conditions to the
making of an Advance set forth in this Agreement, to obtain an Advance, Borrower shall notify Bank (which notice shall be irrevocable) by electronic mail, facsimile, or
telephone by 12:00 p.m. Eastern time on the Funding Date of the Advance. Together with any such electronic or facsimile notification, Borrower shall deliver to Bank by electronic mail or
facsimile a completed Payment/Advance Form executed by a Responsible Officer or his or her designee. Bank may rely on any telephone notice given by a person whom Bank believes is a Responsible Officer or designee. Bank shall credit Advances to the
Designated Deposit Account. Bank may make Advances under this Agreement based on instructions from a Responsible Officer or his or her designee or without instructions if the Advances are necessary to meet Obligations which have become due.”
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8
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The Loan Agreement shall be amended by inserting the following text to appear at the end of Section 4.1 (Grant of Security Interest) thereof:
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“Borrower acknowledges that it previously has entered, and/or may in the future enter, into Bank Services Agreements with Bank.
Regardless of the terms of any Bank Services Agreement, Borrower agrees that any amounts Borrower owes Bank thereunder shall be deemed to be Obligations hereunder and that it is the intent of Borrower and Bank to have all such Obligations secured by
the first priority perfected security interest in the Collateral granted herein (subject only to Permitted Liens that expressly have superior priority to Bank’s Lien in this Agreement). In the event (a) all Obligations (other than inchoate
indemnity obligations), except for Bank Services, are satisfied in full, and (b) this Agreement is terminated, Bank shall terminate the security interest granted herein upon Borrower providing cash collateral acceptable to Bank in its good
faith business judgment for Bank Services, if any. In the event such Bank Services consist of outstanding Letters of Credit, then on such date Borrower shall provide to Bank cash collateral in an amount equal to (i) one hundred five percent
(105.0%) of the face amount of all such Letters of Credit denominated in Dollars and (ii) one hundred ten percent (110.0%) of the Dollar Equivalent of the face amount of all such Letters of Credit denominated in a Foreign Currency
plus, in each case, all interest, fees, and costs due or to become due in connection therewith (as estimated by Bank in its good faith business judgment), to secure all of the Obligations relating to such Letters of Credit.”
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9
|
The Loan Agreement shall be amended by inserting the following provision to appear as Section 6.10 (Access to Collateral; Books and Records) thereof:
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“
6.10 Access to Collateral; Books and Records
. Allow Bank, or its agents, to inspect the Collateral and audit and copy
Borrower’s Books. Such inspections or audits shall be conducted no more often than once every twelve (12) months unless an Event of Default has occurred and is continuing. The foregoing
inspections and audits shall be at Borrower’s expense. Borrower acknowledges, confirms, and agrees that the Initial Audit shall occur within ninety (90) days of the 2012 Effective Date.”
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10
|
The Loan Agreement shall be amended by inserting the following text at the end of Section 12.8 (Survival) thereof:
|
“Without limiting the foregoing, except as otherwise provided in Section 4.1, the grant of security interest by Borrower in
Section 4.1 shall survive until the termination of all Bank Services Agreements.”
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11
|
The Loan Agreement shall be amended by deleting the following definitions appearing in 13.1 thereof:
|
““
Availability Amount
” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the
Borrowing Base minus (b) the Dollar Equivalent amount of all outstanding Letters of Credit (including drawn but unreimbursed Letters of Credit) plus an amount equal to the Letter of Credit Reserve, minus (c) the FX Reduction Amount, minus
(d) any amounts used for Cash Management Services, and minus (e) the outstanding principal balance of any Advances.”
““
Borrowing Base
” is (a) eighty percent (80%) of Eligible Accounts, as determined by Bank from Borrower’s
most recent Borrowing Base Certificate plus (b) the lesser of (i) One Million Dollars ($1,000,000) and (ii) fifty percent (50%) of Eligible Purchase Orders, provided, however, that Bank may decrease the foregoing percentages in
its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect Collateral.”
““
Credit Extension
” is any Advance, Growth Capital Advance, Letter of Credit, FX Forward Contract, amount utilized for
Cash Management Services, or any other extension of credit by Bank for Borrower’s benefit.”
““
Draw
Period
” is the period of time from the Effective Date through the earlier to occur of (a) March 31, 2012 or (b) an Event of Default.”
““
FX Forward Contract
” is defined in Section 2.1.3.”
““
Growth Capital Advance Amount
” is an amount not to exceed Three Million
Dollars ($3,000,000) in the aggregate, available as follows:
(i) from the Effective Date through the Draw Period, One Million Dollars
($1,000,000), in the aggregate;
(ii) upon the occurrence of the First Milestone Event through the Draw Period, Two Million Dollars
($2,000,000) in the aggregate (inclusive of the original principal amount of any Growth Capital Advances made by Bank to Borrower); and
(iii) upon the occurrence of the Second Milestone Event (but regardless of whether the First Milestone Event has occurred) through the Draw
Period, Three Million Dollars ($3,000,000) in the aggregate (inclusive of the original principal amount of any Growth Capital Advances made by Bank to Borrower).”
“
Growth Capital Maturity Date
” is March 1, 2015.””
““
Letter of Credit
” means a standby letter of credit issued by Bank or another institution based upon an application,
guarantee, indemnity or similar agreement on the part of Bank as set forth in Section 2.1.2.”
““
Loan
Documents
” are, collectively, this Agreement, the Warrant, the Perfection Certificate, any note, or notes or guaranties executed by Borrower, and any other present or future agreement between Borrower and/or for the benefit of Bank in
connection with this Agreement, all as amended, restated, or otherwise modified.”
““
Obligations
” are
Borrower’s obligations to pay when due any debts, principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan Documents (other than the Warrant), or otherwise, including, without
limitation, all obligations relating to letters of credit (including reimbursement obligations for drawn and undrawn letters of credit), cash management services, and foreign exchange contracts, if any, and including interest accruing after
Insolvency Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan Documents (other than the Warrant).”
““
Revolving Line
” is an Advance or Advances in an amount equal to Five Million Dollars ($5,000,000.00).”
and inserting in lieu thereof the following:
““
Availability Amount
” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the
Borrowing Base minus (b) the outstanding principal balance of any Advances.”
““
Borrowing Base
” is
(a) eighty percent (80%) of Eligible Accounts, as determined by Bank from Borrower’s most recent Borrowing Base Certificate plus (b) the lesser of (i) Two Million Dollars ($2,000,000) and (ii) fifty percent
(50.0%) of Eligible Purchase Orders and fifty percent (50.0%) of Eligible Inventory, provided, however, that Bank may decrease the foregoing amounts in its good faith business judgment based on events, conditions, contingencies, or risks
which, as determined by Bank, may adversely affect Collateral.”
““
Credit Extension
” is any Advance, Growth
Capital Advance, or any other extension of credit by Bank for Borrower’s benefit.”
““
Draw Period
” is the
period of time from the Effective Date through the earlier to occur of (a) June 30, 2012 or (b) an Event of Default.”
““
FX Forward Contract
” is any foreign exchange contract by and between Borrower and Bank under which Borrower commits to
purchase from or sell to Bank a specific amount of Foreign Currency on a specified date.”
““
Growth Capital Advance
Amount
” is an amount not to exceed Two Million Dollars ($2,000,000) in the aggregate, available as follows:
(i) from the
Effective Date throughout the Draw Period, One Million Dollars ($1,000,000), in the aggregate; and
(ii) upon the occurrence of the Second
Milestone Event throughout the Draw Period, Two Million Dollars ($2,000,000) in the aggregate (inclusive of the original principal amount of any Growth Capital Advances made by Bank to Borrower).”
““
Growth Capital Maturity Date
” is June 1, 2015.”
““
Letter of Credit
” is a standby or commercial letter of credit issued by Bank upon request of Borrower based upon an
application, guarantee, indemnity or similar agreement.”
““
Loan Documents
” are, collectively, this Agreement,
the Warrant, the Perfection Certificate, any Bank Services Agreement, any subordination agreement, any note, or notes or guaranties executed by Borrower, and any other present or future agreement between Borrower and/or for the benefit of Bank, all
as amended, restated, or otherwise modified.”
““
Obligations
” are Borrower’s obligations to pay when due any debts,
principal, interest, Bank Expenses and other amounts Borrower owes Bank now or later, whether under this Agreement, the Loan Documents (other than the Warrant), or otherwise, including, without limitation, any interest accruing after Insolvency
Proceedings begin and debts, liabilities, or obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan Documents (other than the Warrant).”
““
Revolving Line
” is an Advance or Advances in an amount equal to Six Million Dollars ($6,000,000.00).”
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12
|
The Loan Agreement shall be amended by inserting the following new definitions to appear alphabetically in Section 13.1 thereof:
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““
2012 Effective Date
” is March 13, 2012.”
““
Bank Services
” are any products, credit services, and/or financial accommodations previously, now, or hereafter
provided to Borrower or any of its Subsidiaries by Bank or any Bank Affiliate, including, without limitation, any letters of credit, cash management services (including, without limitation, merchant services, direct deposit of payroll, business
credit cards, and check cashing services), interest rate swap arrangements, and foreign exchange services as any such products or services may be identified in Bank’s various agreements related thereto (each, a “
Bank Services
Agreement
”).”
““
Bank Services Agreement
” is defined in the definition entitled “Bank
Services” appearing alphabetically in this Section 13.1.”
““
Eligible Inventory
” means, at any time, the
aggregate of Borrower’s Inventory that (a) consists of finished goods and raw materials located in the United States in good, new, and salable condition, which are not comprised of slow moving, obsolete, work in progress or demo inventory;
(b) meets all applicable governmental standards; (c) has been manufactured in compliance with the Fair Labor Standards Act; (d) is not subject to any Liens, except the first priority Liens granted or in favor of Bank under this
Agreement or any of the other Loan Documents; (e) is located at Borrower’s principal place of business (or any location permitted under Section 5.2 and subject to a landlord’s consent or bailee waiver, as applicable, in form and
substance acceptable to Bank, in its sole discretion); (f) is destined for locations in the United States of purchasers organized in the United States; and (g) is otherwise acceptable to Bank in all respects.”
““
Initial Audit
” is Bank’s inspection of Borrower’s Accounts,
the Collateral, and Borrower’s Books with results satisfactory to Bank in its sole and absolute discretion.”
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13
|
The Borrowing Base Certificate appearing as
Exhibit D
to the Loan Agreement is hereby replaced with the Borrowing Base Certificate attached as
Schedule 1
hereto.
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4.
FEES
. Borrower shall pay to Bank a modification fee equal to Three Thousand Dollars ($3,000), which fee shall be due on the date hereof and shall be
deemed fully earned as of the date hereof. Borrower shall also reimburse Bank for all legal fees and expenses incurred in connection with this amendment to the Existing Loan Documents.
5.
RATIFICATION OF PERFECTION CERTIFICATE
. Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in a
certain Perfection Certificate dated as of June 9, 2011 between Borrower and Bank, and acknowledges, confirms and agrees the disclosures and information above Borrower provided to Bank in the Perfection Certificate has not changed, as of the
date hereof.
6.
CONSISTENT CHANGES
. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
7.
RATIFICATION OF LOAN DOCUMENTS
. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of all security or other collateral
granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
8.
NO DEFENSES OF BORROWER
.
Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or
counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.
9.
CONTINUING VALIDITY
. Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrower’s
representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and
effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by
virtue of this Loan Modification Agreement.
10.
COUNTERSIGNATURE
. This Loan Modification Agreement shall become effective only when it shall have been
executed by Borrower and Bank.
[
The remainder of this page is intentionally left blank
]
This Loan Modification Agreement is executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first written above.
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BORROWER:
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BANK:
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ACACIA COMMUNICATIONS, INC.
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SILICON VALLEY BANK
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By:
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/s/ Raj Shanmugaraj
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By:
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/s/ Dan Allred
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Name:
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Raj Shanmugaraj
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Name:
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Dan Allred
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Title:
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President and CEO
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Title:
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Sr. Relationship Manager
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Schedule 1
EXHIBIT C - BORROWING BASE CERTIFICATE
Borrower: Acacia Communications, Inc.
Lender: Silicon Valley
Bank
Commitment Amount: $6,000,000.00
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ACCOUNTS RECEIVABLE
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1.
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Accounts Receivable (invoiced) Book Value as of
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$
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2.
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Additions (please explain on next page)
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$
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3.
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Less: Intercompany / Employee / Non-Trade Accounts
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$
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4.
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NET TRADE ACCOUNTS RECEIVABLE
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$
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ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
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5.
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90 Days Past Invoice Date
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$
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6.
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Credit Balances over 90 Days
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$
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7.
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Balance of 50% over 90 Day Accounts (cross-age or current affected)
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$
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8.
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Foreign Account Debtor Accounts (except for Eligible Foreign Accounts)
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$
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9.
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Foreign Invoiced and/or Collected Accounts
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$
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10.
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Contra/Customer Deposit Accounts
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$
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11.
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U.S. Government Accounts
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$
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12.
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Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts
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$
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13.
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Accounts with Memo or Pre-Billings
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$
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14.
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Contract Accounts; Accounts with Progress/Milestone Billings
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$
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15.
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Accounts for Retainage Billings
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$
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16.
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Trust / Bonded Accounts
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$
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17.
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Bill and Hold Accounts
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$
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18.
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Unbilled Accounts
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$
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19.
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Non-Trade Accounts (if not already deducted above)
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$
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20.
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Accounts with Extended Term Invoices (Net 90+)
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$
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21.
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Chargebacks Accounts / Debit Memos
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$
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22.
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Product Returns/Exchanges
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$
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23.
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Disputed Accounts; Insolvent Account Debtor Accounts
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$
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24.
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Deferred Revenue, if applicable/Other (please explain on next page)
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$
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25.
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Concentration Limits 25% (except for Specified Accounts)
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$
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26.
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TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
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$
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27.
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Eligible Accounts (#4 minus #26)
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$
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28.
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ELIGIBLE AMOUNT OF ACCOUNTS (80% of #27)
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$
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29.
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ELIGIBLE PURCHASE ORDERS
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$
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30.
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ELIGIBLE INVENTORY
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$
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31.
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ELIGIBLE AMOUNT OF PURCHASE ORDERS AND INVENTORY (50% OF #29 AND #30, NOT TO EXCEED $2,000,000)
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$
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BALANCES
|
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32.
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Maximum Loan Amount
|
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$
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33.
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Total Funds Available (Lesser of #32 or (#28 plus #31))
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$
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34.
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Present balance owing on Line of Credit
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$
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35.
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RESERVE POSITION (#32 minus #33 and #34)
|
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$
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[Continued on following page.]
Explanatory comments from previous page:
The undersigned represents and warrants that this is true, complete and correct, and that the information in this Borrowing
Base Certificate complies with the representations and warranties in the Loan and Security Agreement between the undersigned and Silicon Valley Bank.
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COMMENTS:
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By:
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Authorized Signer
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Date:
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BANK USE ONLY
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Received by:
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AUTHORIZED SIGNER
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Date
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Verified:
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AUTHORIZED SIGNER
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Date:
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Compliance Status:
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Yes No
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SECOND LOAN MODIFICATION AGREEMENT
This Second Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of June 8, 2012, by and between
SILICON VALLEY BANK
, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove Street, Suite 2-200, Newton, Massachusetts 02466
(“Bank”) and
ACACIA COMMUNICATIONS, INC
., a Delaware corporation (“Borrower”).
1.
DESCRIPTION OF EXISTING INDEBTEDNESS AND
OBLIGATIONS
. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of June 9, 2011, evidenced by, among other documents, a certain Loan and
Security Agreement dated as of June 9, 2011, between Borrower and Bank, as amended by that certain First Loan Modification Agreement dated as of March 13, 2012, between Borrower and Bank (as amended, the “Loan Agreement”).
Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.
2.
DESCRIPTION OF COLLATERAL
.
Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any other collateral security granted to Bank, the “Security Documents”). Hereinafter, the Security Documents, together with all
other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.
3.
DESCRIPTION OF CHANGE IN
TERMS
.
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|
A.
|
Modifications to Loan Agreement.
|
|
|
1
|
The Loan Agreement shall be amended by deleting the following definitions appearing in 13.1 thereof:
|
““
Revolving Line Maturity Date
” is June 8, 2012.”
and inserting in lieu thereof the following:
““
Revolving Line Maturity Date
” is July 8, 2012.”
4.
FEES
. Borrower shall pay to Bank a modification fee equal to One Thousand Dollars ($1,000), which fee shall be due on the date hereof and shall be
deemed fully earned as of the date hereof. Borrower shall also reimburse Bank for all legal fees and expenses incurred in connection with this amendment to the Existing Loan Documents.
5.
RATIFICATION OF PERFECTION CERTIFICATE
. Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in a
certain Perfection Certificate dated as of June 9, 2011 between Borrower and Bank, and acknowledges, confirms and agrees the disclosures and information above Borrower provided to Bank in the Perfection Certificate has not changed, as of the
date hereof; provided, however, that the Perfection Certificate shall be deemed updated to reflect Borrower’s lease of real property
located at 1715 Route 35 N, Suite 207 Middletown, NJ 07748, including the maintenance of books, records, equipment and inventory at such location and the transaction of business and qualification
to transact business in the State of New Jersey.
6.
CONSISTENT CHANGES
. The Existing Loan Documents are hereby amended wherever necessary to
reflect the changes described above.
7.
RATIFICATION OF LOAN DOCUMENTS
. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions
of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
8.
NO DEFENSES OF BORROWER
. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and
Borrower hereby RELEASES Bank from any liability thereunder.
9.
CONTINUING VALIDITY
. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing
Loan Documents remain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly
released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.
10.
COUNTERSIGNATURE
. This Loan Modification
Agreement shall become effective only when it shall have been executed by Borrower and Bank.
[
The remainder of this page is
intentionally left blank
]
- 2 -
This Loan Modification Agreement is executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first written above.
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BORROWER:
|
|
|
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BANK:
|
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|
|
|
|
ACACIA COMMUNICATIONS, INC.
|
|
|
|
SILICON VALLEY BANK
|
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|
|
|
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By:
|
|
/s/ Raj Shanmugaraj
|
|
|
|
By:
|
|
/s/ Glen R. Mello
|
|
|
|
|
|
|
|
Name:
|
|
Raj Shanmugaraj
|
|
|
|
Name:
|
|
Glen R. Mello
|
|
|
|
|
|
|
|
Title:
|
|
President and CEO
|
|
|
|
Title:
|
|
DTL
|
- 3 -
THIRD LOAN MODIFICATION AGREEMENT
This Third Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of July 10, 2012, but is
effective as of July 8, 2012, by and between
SILICON VALLEY BANK
, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove
Street, Suite 2-200, Newton, Massachusetts 02466 (“Bank”) and
ACACIA COMMUNICATIONS, INC.
, a Delaware corporation (“Borrower”).
1.
DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS
. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of June 9, 2011, evidenced by, among other documents, a certain Loan and Security Agreement dated as of June 9, 2011, between Borrower and Bank, as amended by that certain First Loan
Modification Agreement dated as of March 13, 2012, between Borrower and Bank, and as further amended by that certain Second Loan Modification Agreement dated as of June 8, 2012, between Borrower and Bank (as amended, the “Loan
Agreement”). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.
2.
DESCRIPTION OF
COLLATERAL
. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any other collateral security granted to Bank, the “Security Documents”). Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.
3.
DESCRIPTION OF CHANGE IN TERMS
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A.
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Modifications to Loan Agreement.
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1
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The Loan Agreement shall be amended by deleting the following definition appearing in 13.1 thereof:
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““
Revolving Line Maturity Date
” is July 8, 2012.”
and inserting in lieu thereof the following:
““
Revolving Line Maturity Date
” is August 7, 2012.”
4.
FEES
. Borrower shall reimburse Bank for all legal fees and expenses incurred in connection with this amendment to the Existing Loan Documents.
5.
RATIFICATION OF PERFECTION CERTIFICATE
. Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in a
certain Perfection Certificate dated as of June 9, 2011 between Borrower and Bank, and acknowledges, confirms and agrees the disclosures and information above Borrower provided to Bank in the Perfection Certificate has not changed, as of the
date hereof.
6.
CONSISTENT CHANGES
. The Existing Loan Documents are hereby amended wherever necessary to reflect the
changes described above.
7.
RATIFICATION OF LOAN DOCUMENTS
. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of all
security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
8.
NO DEFENSES OF BORROWER
. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any
offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.
9.
CONTINUING VALIDITY
. Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrower’s
representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and
effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by
virtue of this Loan Modification Agreement.
10.
COUNTERSIGNATURE
. This Loan Modification Agreement shall become effective only when it shall have
been executed by Borrower and Bank.
[
The remainder of this page is intentionally left blank
]
- 2 -
This Loan Modification Agreement is executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first written above.
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BORROWER:
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BANK:
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ACACIA COMMUNICATIONS, INC.
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SILICON VALLEY BANK
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By:
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/s/ Raj Shanmugaraj
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By:
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/s/ Dan Allred
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Name:
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Raj Shanmugaraj
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Name:
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Dan Allred
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Title:
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President and CEO
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Title:
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Senior Relationship Manager
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- 3 -
FOURTH LOAN MODIFICATION AGREEMENT
This Fourth Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of September 20, 2012, but is
effective as of August 7, 2012, by and between
SILICON VALLEY BANK
, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove
Street, Suite 2-200, Newton, Massachusetts 02466 (“Bank”) and
ACACIA COMMUNICATIONS, INC.
, a Delaware corporation (“Borrower”).
1.
DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS
. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of June 9, 2011, evidenced by, among other documents, a certain Loan and Security Agreement dated as of June 9, 2011, between Borrower and Bank, as amended by that certain First Loan
Modification Agreement dated as of March 13, 2012, between Borrower and Bank, as amended by that certain Second Loan Modification Agreement dated as of June 8, 2012, between Borrower and Bank, and as further amended by that certain Third
Loan Modification Agreement dated as of July 10, 2012, between Borrower and Bank (as amended, the “Loan Agreement”). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.
2.
DESCRIPTION OF COLLATERAL
. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the “Security Documents”). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.
3.
DESCRIPTION OF CHANGE IN TERMS
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A.
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Modifications to Loan Agreement.
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1.
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The Loan Agreement shall be amended by deleting the following text appearing in Section 2.1.5(a) (Availability) thereof:
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“Borrower may prepay any Growth Capital Advance at any time without premium or penalty.”
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2.
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The Loan Agreement shall be amended by deleting the following text appearing in Section 2.1.5(c) (Repayment) thereof:
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“Commencing on July 2, 2012 and continuing on each Payment Date thereafter, Borrower shall repay each Growth Capital Advance in
(i) thirty-six (36) equal monthly installments of principal, plus (ii) monthly payments of accrued interest at the rate set forth in Section 2.3(a)(ii).”
and inserting in lieu thereof the following:
“Commencing on April 1, 2013 and continuing on each Payment Date thereafter, Borrower shall repay each Growth Capital Advance in
(i) thirty-six (36) equal monthly installments of principal, plus (ii) monthly payments of accrued interest at the rate set forth in Section 2.3(a)(ii).”
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3.
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The Loan Agreement shall be amended by deleting the following provision appearing as Section 6.2(d) (Monthly Compliance Certificate) thereof:
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“(d)
Monthly Compliance Certificate
. Within thirty (30) days after the last day of each month and together with the Monthly
Financial Statements, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and such other
information as Bank may reasonably request;”
and inserting in lieu thereof the following:
“(d)
Monthly Compliance Certificate
. Within thirty (30) days after the last day of each month and together with the Monthly
Financial Statements, a duly completed Compliance Certificate signed by a Responsible Officer, certifying that as of the end of such month, Borrower was in full compliance with all of the terms and conditions of this Agreement, and setting forth
calculations showing compliance with the financial covenant set forth in this Agreement and such other information as Bank may reasonably request;”
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4.
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The Loan Agreement shall be amended by deleting the following text appearing in Section 6.10 (Access to Collateral; Books and Records) thereof:
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“Borrower acknowledges, confirms, and agrees that the Initial Audit shall occur within ninety (90) days of the 2012 Effective
Date.”
and inserting in lieu thereof the following:
“Borrower acknowledges, confirms, and agrees that the Initial Audit shall occur within ninety (90) days of the Fourth Amendment
Effective Date.”
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5.
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The Loan Agreement shall be amended by inserting the following new provision, appearing as Section 6.11 (Financial Covenant) thereof:
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“
6.11 Financial Covenant
. Maintain at all times, once a Growth Capital Advance is requested, to be tested as of the last day of
each month, calculated on a consolidated basis with respect to Borrower and its Subsidiaries, a Tangible Net Worth of at least Seven Million Five Hundred Thousand Dollars ($7,500,000.00).”
2
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6.
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The Loan Agreement shall be amended by deleting the following provision appearing as Section 8.2(a) (Covenant Default) thereof:
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“(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6, or 6.7(b) or violates any covenant in
Section 7; or”
and inserting in lieu thereof the following:
“(a) Borrower fails or neglects to perform any obligation in Sections 6.2, 6.4, 6.5, 6.6, 6.7(b), or 6.11, or violates any covenant in
Section 7; or”
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7.
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The Loan Agreement shall be amended by inserting the following text to appear as subsection (d) of the definition entitled “Material Adverse Change” appearing in Section 13.1 thereof:
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“or (d) Bank determines, based upon information available to it and in its reasonable judgment, that there is a
reasonable likelihood that Borrower shall fail to comply with one or more of the financial covenants in Section 6 during the next succeeding financial reporting period.”
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8.
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The Loan Agreement shall be amended by deleting the following provision appearing as subsection (v) of the definition entitled “Eligible Accounts” appearing in Section 13.1 thereof:
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“(v) Accounts owing from an Account Debtor, including Affiliates, whose total obligations to Borrower exceed
twenty-five percent (25%) of all Accounts, for the amounts that exceed that percentage (except for Specified Accounts), unless Bank approves in writing on a case by case basis in its sole and absolute discretion; and”
and inserting in lieu thereof the following:
“(v) Accounts owing from an Account Debtor, including Affiliates, whose total obligations to Borrower exceed twenty-five percent
(25%) of all Accounts, for the amounts that exceed that percentage (except for Specified Accounts, for which such percentage is fifty percent (50%)), unless Bank approves in writing on a case by case basis in its sole and absolute discretion;
and”
3
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9.
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The Loan Agreement shall be amended by deleting the following definitions appearing in 13.1 thereof:
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““
Borrowing Base
” is (a) eighty percent (80%) of Eligible Accounts, as determined by Bank from Borrower’s
most recent Borrowing Base Certificate plus (b) the lesser of (i) Two Million Dollars ($2,000,000) and (ii) fifty percent (50.0%) of Eligible Purchase Orders and fifty percent (50.0%) of Eligible Inventory, provided,
however, that Bank may decrease the foregoing amounts in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect Collateral.”
““
Draw Period
” is the period of time from the Effective Date through the earlier to occur of (a) June 30, 2012
or (b) an Event of Default.”
““
Growth Capital Advance Amount
” is an amount not to exceed Two Million
Dollars ($2,000,000) in the aggregate, available as follows:
(i) from the Effective Date throughout the Draw Period, One Million Dollars
($1,000,000), in the aggregate; and
(ii) upon the occurrence of the Second Milestone Event throughout the Draw Period, Two Million
Dollars ($2,000,000) in the aggregate (inclusive of the original principal amount of any Growth Capital Advances made by Bank to Borrower).”
““
Growth Capital Maturity Date
” is June 1, 2015.”
““
Obligations
” are Borrower’s obligations to pay when due any debts, principal, interest, Bank Expenses and other
amounts Borrower owes Bank now or later, whether under this Agreement, the Loan Documents (other than the Warrant), or otherwise, including, without limitation, any interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan Documents (other than the Warrant).”
““
Revolving Line
” is an Advance or Advances in an amount equal to Six Million Dollars ($6,000,000.00).”
““
Revolving Line Maturity Date
” is August 7, 2012.”
““
Warrant
” is that certain Warrant to Purchase Stock dated as of the Effective Date executed by Borrower in favor of
Bank.”
4
and inserting in lieu thereof the following:
““
Borrowing Base
” is (a) eighty percent (80%) of Eligible Accounts, as determined by Bank from Borrower’s
most recent Borrowing Base Certificate plus (b) the lesser of (i) Two Million Dollars ($2,000,000.00) and (ii) fifty percent (50.0%) of Eligible Purchase Orders and fifty percent (50.0%) of Eligible Inventory, in each case
as determined by Bank from Borrower’s most recent Borrowing Base Certificate plus (c) only for times that Borrower has achieved the AQR Threshold, the lesser of (i) One Million Dollars ($1,000,000.00) and (ii) fifty percent
(50.0%) of Eligible Purchase Orders and fifty percent (50.0%) of Eligible Inventory, in each case as determined by Bank from Borrower’s most recent Borrowing Base Certificate, provided, however, that Bank may decrease the foregoing
amounts in its good faith business judgment based on events, conditions, contingencies, or risks which, as determined by Bank, may adversely affect Collateral.”
““
Draw Period
” is the period of time from the Effective Date through the earlier to occur of (a) March 31,
2013 or (b) an Event of Default.”
““
Growth Capital Advance Amount
” is an amount not to exceed Two Million
Dollars ($2,000,000.00) in the aggregate.”
““
Growth Capital Maturity Date
” is March 1, 2016.”
““
Obligations
” are Borrower’s obligations to pay when due any debts, principal, interest, Bank Expenses, and other
amounts Borrower owes Bank now or later, whether under this Agreement, the Loan Documents (other than the Warrant), or otherwise, including, without limitation, any interest accruing after Insolvency Proceedings begin and debts, liabilities, or
obligations of Borrower assigned to Bank, and to perform Borrower’s duties under the Loan Documents (other than the Warrant).”
““
Revolving Line
” is an Advance or Advances in an amount equal to Eight Million Dollars ($8,000,000.00).”
““
Revolving Line Maturity Dat
e
” is August 6, 2013.”
““
Warrant
” is that (a) certain Warrant to Purchase Stock dated as of the Effective Date executed by Borrower in
favor of Bank, and (b) certain Warrant to Purchase Stock dated as of the Fourth Amendment Effective Date executed by Borrower in favor of Bank.”
5
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10.
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The Loan Agreement shall be amended by inserting the following new definitions to appear alphabetically in Section 13.1 thereof:
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““
Adjusted Quick Ratio
” is the ratio of (a) Quick Assets to (b) Current Liabilities minus the current portion
of Deferred Revenue.”
““
AQR Threshold
” means that Borrower has achieved as of the last day of the immediately
preceding month, calculated on a consolidated basis with respect to Borrower and its Subsidiaries, an Adjusted Quick Ratio of at least 1.25 to 1.00.”
““
Current Liabilities
” are all obligations and liabilities of Borrower to Bank, plus, without duplication, the aggregate
amount of Borrower’s Total Liabilities that mature within one (1) year.”
““
Fourth Amendment Effective
Date
” is September 20, 2012.”
““
Quick Assets
” is, on any date, Borrower’s consolidated,
unrestricted cash maintained with Bank plus net billed accounts receivable, determined according to GAAP.”
““
Tangible
Net Worth
” is, on any date, stockholder equity of Borrower,
minus
intangible assets,
plus
(c) Subordinated Debt.”
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11.
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The Borrowing Base Certificate appearing as
Exhibit C
to the Loan Agreement is hereby replaced with the Borrowing Base Certificate attached as
Schedule 1
hereto.
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12.
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The Compliance Certificate appearing as
Exhibit D
to the Loan Agreement is hereby replaced with the Compliance Certificate attached as
Schedule 2
hereto.
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4.
FEES
. Borrower shall pay to Bank (a) a Revolving Line commitment fee equal to Twenty Thousand Dollars ($20,000.00), and (b) a Growth
Capital Advance commitment fee equal to Five Thousand Dollars ($5,000.00), which fees shall be due on the date hereof and shall be deemed fully earned as of the date hereof. Borrower shall also reimburse Bank for all legal fees and expenses incurred
in connection with this amendment to the Existing Loan Documents.
5.
RATIFICATION OF PERFECTION CERTIFICATE
. Borrower hereby ratifies, confirms
and reaffirms, all and singular, the terms and disclosures contained in a certain Perfection Certificate dated as of June 9, 2011 between Borrower and Bank, and acknowledges, confirms and agrees the disclosures and information above Borrower
provided to Bank in the Perfection Certificate has not changed, as of the date hereof.
6.
CONSISTENT CHANGES
. The Existing Loan Documents are
hereby amended wherever necessary to reflect the changes described above.
6
7.
RATIFICATION OF LOAN DOCUMENTS
. Borrower hereby ratifies, confirms, and reaffirms all terms and
conditions of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
8.
NO DEFENSES OF BORROWER
. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and
Borrower hereby RELEASES Bank from any liability thereunder.
9.
CONTINUING VALIDITY
. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing
Loan Documents remain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly
released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.
10.
COUNTERSIGNATURE
. This Loan Modification
Agreement shall become effective only when it shall have been executed by Borrower and Bank.
[
The remainder of this page is
intentionally left blank
]
7
This Loan Modification Agreement is executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first written above.
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BORROWER:
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BANK:
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ACACIA COMMUNICATIONS, INC.
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SILICON VALLEY BANK
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By:
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/s/ Raj Shanmogaraj
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By:
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/s/ Glen R. Mello
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Name:
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Raj Shanmogaraj
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Name:
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Glen R. Mello
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Title:
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President & CEO
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Title:
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DTL
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Schedule 1
EXHIBIT C - BORROWING BASE CERTIFICATE
Borrower: Acacia Communications, Inc.
Lender: Silicon Valley
Bank
Commitment Amount: $8,000,000.00
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ACCOUNTS RECEIVABLE
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1.
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Accounts Receivable (invoiced) Book Value as of
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$
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2.
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Additions (please explain on next page)
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$
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3.
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Less: Intercompany / Employee / Non-Trade Accounts
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$
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4.
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NET TRADE ACCOUNTS RECEIVABLE
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$
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ACCOUNTS RECEIVABLE DEDUCTIONS (without duplication)
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5.
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90 Days Past Invoice Date
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$
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6.
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Credit Balances over 90 Days
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$
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7.
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Balance of 50% over 90 Day Accounts (cross-age or current affected)
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$
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8.
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Foreign Account Debtor Accounts (except for Eligible Foreign Accounts and the Specified Accounts)
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$
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9.
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Foreign Invoiced and/or Collected Accounts
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$
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10.
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Contra/Customer Deposit Accounts
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$
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11.
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U.S. Government Accounts
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$
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12.
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Promotion or Demo Accounts; Guaranteed Sale or Consignment Sale Accounts
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$
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13.
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Accounts with Memo or Pre-Billings
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$
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14.
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Contract Accounts; Accounts with Progress/Milestone Billings
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$
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15.
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Accounts for Retainage Billings
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$
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16.
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Trust / Bonded Accounts
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$
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17.
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Bill and Hold Accounts
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$
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18.
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Unbilled Accounts
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$
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19.
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Non-Trade Accounts (if not already deducted above)
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$
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20.
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Accounts with Extended Term Invoices (Net 90+)
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$
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21.
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Chargebacks Accounts / Debit Memos
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$
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22.
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Product Returns/Exchanges
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$
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23.
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Disputed Accounts; Insolvent Account Debtor Accounts
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$
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24.
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Deferred Revenue, if applicable/Other (please explain on next page)
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$
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25.
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Concentration Limits 25% (except for Specified Accounts)
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$
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26.
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TOTAL ACCOUNTS RECEIVABLE DEDUCTIONS
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$
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27.
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Eligible Accounts (#4 minus #26)
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$
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28.
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ELIGIBLE AMOUNT OF ACCOUNTS (80% of #27)
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$
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29.
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ELIGIBLE PURCHASE ORDERS
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$
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30.
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ELIGIBLE INVENTORY
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31.
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ELIGIBLE AMOUNT OF PURCHASE ORDERS (50% of #29 and #30, not to exceed $2,000,000)
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$
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32.
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ELIGIBLE AMOUNT OF PURCHASE ORDERS (50% of #29 and #30, not to exceed $1,000,000) (
subject to the AQR Threshold
)
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$
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BALANCES
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33.
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Maximum Loan Amount
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$
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34.
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Total Funds Available (Lesser of #33 or (#28 plus #31 plus #32))
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$
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35.
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Present balance owing on Line of Credit
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$
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36.
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RESERVE POSITION (#34 minus #35)
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$
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[Continued on following page.]
Explanatory comments from previous page:
The undersigned represents and warrants that
this is true, complete and correct, and that the information in this Borrowing Base Certificate complies with the representations and warranties in the Loan and Security Agreement between the undersigned and Silicon Valley Bank.
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COMMENTS:
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By:
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Authorized Signer
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Date:
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BANK USE ONLY
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Received by:
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AUTHORIZED SIGNER
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Date:
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Verified:
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AUTHORIZED SIGNER
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Date:
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Compliance Status:
|
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Yes No
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Schedule 2
EXHIBIT D
COMPLIANCE CERTIFICATE
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TO:
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SILICON VALLEY BANK
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Date:
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FROM:
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ACACIA COMMUNICATIONS, INC.
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|
The undersigned authorized officer of Acacia Communications, Inc. (“Borrower”) certifies that under the terms and
conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”):
(1) Borrower is in complete compliance for the
period ending with all required covenants except as noted below; (2) there are no Events of Default; (3) all
representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations and warranties that
already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material respects as of such
date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed by Borrower except
as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits of which Borrower
has not previously provided written notification to Bank.
Attached are the required documents supporting the certification. The undersigned certifies
that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may be requested at any time or date of
determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not otherwise defined herein shall have the
meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under “Complies” column.
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Reporting Covenant
|
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Required
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Complies
|
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Monthly financial statements with Compliance Certificate
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Monthly within 30 days
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Yes No
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Annual financial statement (CPA Audited)
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FYE within 180 days
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Yes No
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10-Q, 10-K and 8-K
|
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Within 5 days after filing with SEC
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Yes No
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Borrowing Base Certificate A/R & A/P Agings
|
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Monthly within 30 days
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Yes No
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Board-approved Projections
|
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First Business Day of month following Board approval; at least annually
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Yes No
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Financial Covenant
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Required
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Actual
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Complies
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Maintain at all times (tested monthly)
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Tangible Net Worth
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$
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7,500,000.00
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$
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Yes No
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The following are the exceptions with respect to the certification above. (If no exceptions exist, state
“No exceptions to note.”)
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Acacia Communications, Inc.
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By:
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Name:
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Date:
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BANK USE ONLY
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Received by:
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AUTHORIZED SIGNER
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Date
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Verified:
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AUTHORIZED SIGNER
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Date:
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Compliance Status:
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Yes No
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Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated:
|
I.
|
Tangible Net Worth
(Section 6.11)
|
Required: $7,500,000.00
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A.
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Stockholder equity of Borrower
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$
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B.
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Aggregate value of intangible assets
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$
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C.
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Subordinated Debt
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$
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H.
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Tangible Net Worth (line A minus line B minus,
plus
Line C)
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$
|
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|
Is line H equal to or greater than $7,500,000.00?
|
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No, not in compliance
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Yes, in compliance
|
FIFTH LOAN MODIFICATION AGREEMENT
This Fifth Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of September 12, 2013, but is
effective as of August 6, 2013, by and between
SILICON VALLEY BANK
, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove
Street, Suite 2-200, Newton, Massachusetts 02466 (“Bank”) and
ACACIA COMMUNICATIONS, INC.
, a Delaware corporation (“Borrower”).
1.
DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS
. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of June 9, 2011, evidenced by, among other documents, a certain Loan and Security Agreement dated as of June 9, 2011, between Borrower and Bank, as amended by that certain First Loan
Modification Agreement dated as of March 13, 2012, between Borrower and Bank, as amended by that certain Second Loan Modification Agreement dated as of June 8, 2012, between Borrower and Bank, as further amended by that certain Third Loan
Modification Agreement dated as of July 10, 2012, between Borrower and Bank, and as further amended by that certain Fourth Loan Modification Agreement dated as of September 20, 2012, between Borrower and Bank (as amended, the “Loan
Agreement”). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.
2.
DESCRIPTION OF
COLLATERAL
. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any other collateral security granted to Bank, the “Security Documents”). Hereinafter, the Security Documents,
together with all other documents evidencing or securing the Obligations shall be referred to as the “Existing Loan Documents”.
3.
DESCRIPTION OF CHANGE IN TERMS
.
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|
A.
|
Modifications to Loan Agreement.
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|
|
1
|
The Loan Agreement shall be amended by deleting Section 2.2 (Overadvances) thereof and inserting in lieu thereof the following:
|
“
2.2 Intentionally Omitted.
”
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|
2
|
The Loan Agreement shall be amended by deleting the following appearing as Section 2.3(a)(i) (Interest Rate; Advances) thereof:
|
“(i)
Advances
. Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at
a floating per annum rate equal to (a) prior to the 2012 Effective Date, one and one half of one percentage point (1.50%) above the Prime Rate, and (b) on and after the 2012 Effective Date, two percentage points (2.0%) above the
Prime Rate, which interest, in each case, shall be payable monthly in accordance with Section 2.3(f) below.”
and inserting in lieu thereof the following:
“(i)
Advances
. Subject to Section 2.3(b), the principal amount outstanding under the Revolving Line shall accrue interest at
a floating per annum rate equal to (a) prior to the 2012 Effective Date, one and one half of one percentage point (1.50%) above the Prime Rate, (b) on and after the 2012 Effective Date through and including the Payment Date
immediately prior to the 2013 Effective Date, two percentage points (2.0%) above the Prime Rate, and (c) on the first Payment Date following the 2013 Effective Date and at all times thereafter, one half of one percentage point (0.5%) above
the Prime Rate, which interest, in each case, shall be payable monthly in accordance with Section 2.3(f) below.”
|
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3
|
The Loan Agreement shall be amended by deleting Section 5.3 (Accounts Receivable) thereof and inserting in lieu thereof the following:
|
“
5.3 Intentionally Omitted.
”
|
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4
|
The Loan Agreement shall be amended by deleting Section 6.2(a) (Borrowing Base Reports) and Section 6.2(b) (Borrowing Base Certificate) thereof and inserting in lieu thereof the following:
|
“(a)
Intentionally Omitted
.”
“(b)
Intentionally Omitted
.”
|
|
5
|
The Loan Agreement shall be amended by deleting the following appearing as Section 6.6(a) (Operating Accounts) thereof:
|
“(a) Maintain all of its and all of its Subsidiaries’ operating, depository, and securities accounts with Bank and Bank’s
Affiliates.”
and inserting in lieu thereof the following:
“(a) Maintain its primary and its Subsidiaries’ primary operating, depository, and securities accounts with Bank and Bank’s
Affiliates, which accounts shall be in the name of Borrower and shall represent at least seventy-five percent (75.0%) of the dollar value of Borrower’s and such Subsidiaries accounts at all financial institutions.”
- 2 -
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6
|
The Loan Agreement shall be amended by deleting the following appearing as Section 6.11 (Financial Covenant) thereof:
|
“
6.11 Financial Covenant
. Maintain at all times, once a Growth Capital Advance is requested, to be tested as of the last day of
each month, calculated on a consolidated basis with respect to Borrower and its Subsidiaries, a Tangible Net Worth of at least Seven Million Five Hundred Thousand Dollars ($7,500,000.00).”
and inserting in lieu thereof the following:
“
6.11 Financial Covenants
. Maintain at all times, subject to periodic reporting as of the last day of each month, unless otherwise
noted, on a consolidated basis with respect to Borrower and its Subsidiaries:
(a)
Minimum EBITDA
. Commencing with
the month ending July 31, 2013, and as of the last day of each month thereafter, through and including the month ending February 28, 2014, minimum EBITDA, measured monthly on a trailing three (3) month basis, of at least One Million
Dollars ($1,000,000.00); and
(b)
Minimum Net Income
. Commencing with the month ending March 31, 2014, and as
of the last day of each month thereafter, minimum Net Income, measured monthly on a trailing three (3) month basis, of at least Two Million Dollars ($2,000,000.00).”
|
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7
|
The Loan Agreement shall be amended by deleting the following definitions appearing in 13.1 thereof:
|
““
Availability Amount
” is (a) the lesser of (i) the Revolving Line or (ii) the amount available under the
Borrowing Base minus (b) the outstanding principal balance of any Advances.”
““
Revolving Line Maturity
Date
” is August 6, 2013.”
and inserting in lieu thereof the following:
““
Availability Amount
” is the Revolving Line minus the outstanding principal balance of any Advances.”
““
Revolving Line Maturity Date
” is August 5, 2015.”
|
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8
|
The Loan Agreement shall be amended by inserting the following new terms and their respective definitions to appear alphabetically in Section 13.1 thereof:
|
““
2013 Effective Date
” is August 6, 2013.”
- 3 -
““
EBITDA
” shall mean (a) Net Income, plus (b) Interest Expense,
plus (c) to the extent deducted in the calculation of Net Income, depreciation expense and amortization expense, plus (d) income tax expense.”
““
Interest Expense
” means for any fiscal period, interest expense (whether cash or non-cash) determined in accordance
with GAAP for the relevant period ending on such date, including, in any event, interest expense with respect to any Credit Extension and other Indebtedness of Borrower and its Subsidiaries, including, without limitation or duplication, all
commissions, discounts, or related amortization and other fees and charges with respect to letters of credit and bankers’ acceptance financing and the net costs associated with interest rate swap, cap, and similar arrangements, and the interest
portion of any deferred payment obligation (including leases of all types).”
““
Net Income
” means, as
calculated on a consolidated basis for Borrower and its Subsidiaries for any period as at any date of determination, the net profit (or loss), after provision for taxes, of Borrower and its Subsidiaries for such period taken as a single accounting
period.”
|
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9
|
The Compliance Certificate appearing as
Exhibit D
to the Loan Agreement is hereby replaced with the Compliance Certificate attached as
Exhibit 1
hereto.
|
4.
FEES
. Borrower shall pay to Bank a fully-earned non-refundable commitment fee equal to Forty Thousand Dollars ($40,000.00), which fee shall be due
on the date hereof and payable as follows: (a) Twenty Thousand Dollars ($20,000.00) is payable on the 2013 Effective Date, and (b) Twenty Thousand Dollars ($20,000.00) is payable on the earliest to occur of (i) the first anniversary
of the 2013 Effective Date, (ii) an Event of Default, or (iii) the early termination of the Revolving Line. Borrower shall also reimburse Bank for all legal fees and expenses incurred in connection with this amendment to the Existing Loan
Documents.
5.
UPDATED PERFECTION CERTIFICATE
. Borrower has delivered an updated Perfection Certificate in connection with this Loan Modification
Agreement dated as of September 12, 2013 (the “
Updated Perfection Certificate
”), which Updated Perfection Certificate shall supersede in all respects that certain Perfection Certificate dated as of June 9, 2011. Borrower
agrees that all references in the Loan Agreement to “Perfection Certificate” shall hereinafter be deemed to be a reference to the Updated Perfection Certificate.
6.
CONSISTENT CHANGES
. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
- 4 -
7.
RATIFICATION OF LOAN DOCUMENTS
. Borrower hereby ratifies, confirms, and reaffirms all terms and
conditions of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
8.
NO DEFENSES OF BORROWER
. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and
Borrower hereby RELEASES Bank from any liability thereunder.
9.
CONTINUING VALIDITY
. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing
Loan Documents remain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly
released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.
10.
COUNTERSIGNATURE
. This Loan Modification
Agreement shall become effective only when it shall have been executed by Borrower and Bank.
[
The remainder of this page is
intentionally left blank.
]
- 5 -
This Loan Modification Agreement is executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first written above.
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BORROWER:
|
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|
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BANK:
|
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|
|
|
ACACIA COMMUNICATIONS, INC.
|
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|
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SILICON VALLEY BANK
|
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|
|
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|
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By:
|
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/s/ Raj Shanmugaraj
|
|
|
|
By:
|
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/s/ Brendan P. Quinn
|
|
|
|
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|
|
|
Name:
|
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Raj Shanmugaraj
|
|
|
|
Name:
|
|
Brendan P. Quinn
|
|
|
|
|
|
|
|
Title:
|
|
President and CEO
|
|
|
|
Title:
|
|
Vice President
|
- 6 -
Exhibit 1
EXHIBIT D - COMPLIANCE CERTIFICATE
|
|
|
|
|
|
|
TO:
|
|
SILICON VALLEY BANK
|
|
Date:
|
|
FROM:
|
|
ACACIA COMMUNICATIONS, INC.
|
|
|
The undersigned authorized officer of Acacia Communications, Inc. (“Borrower”) certifies that under
the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”):
(1) Borrower is in
complete compliance for the period ending with all required covenants except as noted below; (2) there are no Events of
Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material
respects as of such date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed
by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits
of which Borrower has not previously provided written notification to Bank.
Attached are the required documents supporting the
certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may
be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not
otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under
“Complies” column.
|
|
|
|
|
|
|
Reporting Covenant
|
|
Required
|
|
Complies
|
|
|
|
|
|
Monthly financial statements with Compliance Certificate
|
|
Monthly within 30 days
|
|
Yes No
|
|
Annual financial statement (CPA Audited)
|
|
FYE within 180 days
|
|
Yes No
|
|
10-Q, 10-K and 8-K
|
|
Within 5 days after filing with SEC
|
|
Yes No
|
|
Board-approved Projections
|
|
First Business Day of month following Board approval, but at least annually
|
|
Yes No
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Covenant
|
|
Required
|
|
|
Actual
|
|
|
Complies
|
|
|
|
|
|
|
|
Maintain at all times (tested monthly on a consolidated basis):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Minimum EBITDA
|
|
|
|
*
|
|
$
|
|
|
|
|
Yes No
|
|
|
Minimum Net Income
|
|
|
|
**
|
|
$
|
|
|
|
|
Yes No
|
|
|
*
|
As set forth in Section 6.11(a) of the Agreement.
|
|
**
|
As set forth in Section 6.11(b) of the Agreement.
|
The following financial covenant
analysis and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.
Other
Matters
|
|
|
|
|
Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? If yes, provide copies of any such amendments or changes with this
Compliance Certificate.
|
|
Yes No
|
The following are the exceptions with respect to the certification above: (If no exceptions exist, state
“No exceptions to note.”)
|
|
|
|
|
|
|
|
|
|
|
ACACIA COMMUNICATIONS, INC.
|
|
|
|
BANK USE ONLY
|
|
|
|
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|
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By:
|
|
|
|
|
|
Received by:
|
|
|
|
Name:
|
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|
|
|
|
|
|
AUTHORIZED SIGNER
|
|
Title:
|
|
|
|
|
|
|
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|
|
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|
|
Date:
|
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|
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|
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|
|
|
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|
|
Verified:
|
|
|
|
|
|
|
|
|
|
|
|
AUTHORIZED SIGNER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compliance Status: Yes
No
|
Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated:
|
I.
|
Minimum EBITDA
(Section 6.11(a))
|
|
|
|
|
|
Required:
|
|
Commencing with the month ending July 31, 2013, and as of the last day of each month thereafter, through and including the month ending February 28, 2014, minimum EBITDA, measured monthly on a trailing three (3) month
basis, of at least One Million Dollars ($1,000,000.00)
|
|
|
|
|
Actual:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A.
|
|
Net Income (as defined in the Loan Agreement)
|
|
$
|
|
|
|
B.
|
|
Interest Expense (as defined in the Loan Agreement)
|
|
$
|
|
|
|
C.
|
|
To the extent deducted in the calculation of Net Income:
|
|
$
|
|
|
|
|
|
1. Depreciation expense
|
|
$
|
|
|
|
|
|
2. Amortization expense
|
|
$
|
|
|
|
D.
|
|
Income tax expense
|
|
$
|
|
|
|
E.
|
|
EBITDA (sum of lines A, B, C.l, C.2, and D)
|
|
$
|
|
|
|
|
|
|
|
No, not in compliance
|
|
Yes, in compliance
|
|
II.
|
Minimum Net Income
(Section 6.11 (b))
|
|
|
|
|
|
Required:
|
|
Commencing with the month ending March 31, 2014, and as of the last day of each month thereafter, minimum Net Income, measured monthly on a trailing three (3) month basis, of at least Two Million Dollars
($2,000,000.00)
|
|
|
|
|
Actual:
|
|
$
|
|
|
|
|
|
No, not in compliance
|
|
Yes, in compliance
|
SIXTH LOAN MODIFICATION AGREEMENT
This Sixth Loan Modification Agreement (this “
Loan Modification Agreement
”) is entered into as of September 18,
2014, by and between
SILICON VALLEY BANK
, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove Street, Suite 2-200, Newton,
Massachusetts 02466 (“
Bank
”) and
ACACIA COMMUNICATIONS, INC
., a Delaware corporation with its chief executive office located at 3 Clock Tower Place, Suite 130, Maynard, Massachusetts 01754 (“
Borrower
”).
1.
DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS
. Among other indebtedness and obligations which may be owing by Borrower to Bank,
Borrower is indebted to Bank pursuant to a loan arrangement dated as of June 9, 2011, evidenced by, among other documents, a certain Loan and Security Agreement dated as of June 9, 2011, between Borrower and Bank, as amended by that
certain First Loan Modification Agreement dated as of March 13, 2012, between Borrower and Bank, as amended by that certain Second Loan Modification Agreement dated as of June 8, 2012, between Borrower and Bank, as further amended by that
certain Third Loan Modification Agreement dated as of July 10, 2012, between Borrower and Bank, as further amended by that certain Fourth Loan Modification Agreement dated as of September 20, 2012, between Borrower and Bank, and as further
amended by that certain Fifth Loan Modification Agreement dated as of September 12, 2013, but effective as of August 6, 2013, between Borrower and Bank (as amended, the “
Loan Agreement
”). Capitalized terms used but not
otherwise defined herein shall have the same meaning as in the Loan Agreement.
2.
DESCRIPTION OF COLLATERAL
. Repayment of the Obligations is
secured by the Collateral as described in the Loan Agreement (together with any other collateral security granted to Bank, the “
Security Documents
”). Hereinafter, the Security Documents, together with all other documents evidencing
or securing the Obligations shall be referred to as the “
Existing Loan Documents
”.
3.
DESCRIPTION OF CHANGE IN TERMS
.
|
|
A.
|
Modifications to Loan Agreement.
|
|
|
1
|
Notwithstanding Section 6.2(e) of the Loan Agreement, Borrower shall be required to deliver to Bank audited consolidated Financial statements prepared under GAAP, consistently applied, together with an unqualified
opinion on the financial statements from an independent certified public accounting firm acceptable to Bank in its reasonable discretion for Borrower’s fiscal year ending December 31, 2013, on or before July 31 2014.
|
|
|
2
|
The Loan Agreement shall be amended by deleting the following appearing as Section 6.11 (Financial Covenant) thereof:
|
“
6.11 Financial Covenants
. Maintain at all times, subject to periodic reporting as of the last day of each month, unless otherwise
noted, on a consolidated basis with respect to Borrower and its Subsidiaries:
(a)
Minimum EBITDA
. Commencing with
the month ending July 31, 2013, and as of the last day of each month thereafter, through and including the month ending February 28, 2014, minimum EBITDA, measured monthly on a trailing three (3) month basis, of at least One Million
Dollars ($1,000,000.00); and
(b)
Minimum Net Income
. Commencing with the month ending March 31, 2014, and as
of the last day of each month thereafter, minimum Net Income, measured monthly on a trailing three (3) month basis, of at least Two Million Dollars ($2,000,000.00).”
and inserting in lieu thereof the following:
“
6.11
Financial Covenants
. Maintain at all times, subject to periodic reporting as of the last day of each month, unless
otherwise noted, on a consolidated basis with respect to Borrower and its Subsidiaries:
(a)
Minimum EBITDA
.
Minimum EBITDA, measured monthly on a trailing three (3) month basis as of the last day of each month of at least the following:
|
|
|
|
|
|
|
Month ending
|
|
Minimum
EBITDA
|
|
|
July 31, 2013 through February 28, 2014
|
|
$
|
1,000,000.00
|
|
|
April 30, 2014 through June 30, 2014
|
|
$
|
1,000,000.00
|
|
|
July 31, 2014
|
|
($
|
500,000.00
|
)
|
|
August 31, 2014
|
|
$
|
500,000.00
|
|
|
September 30, 2014 and as of the last day of each month thereafter
|
|
$
|
1,000,000.00
|
|
(b)
Minimum Net Income
. For the month ending March 31, 2014, minimum Net Income,
measured monthly on a trailing three (3) month basis, of at least Two Million Dollars ($2,000,000.00); and
(c)
Adjusted Quick Ratio
. Commencing with the month ending June 30, 2014, and as of the last day of each month thereafter, an Adjusted Quick Ratio of at least 1.25 to 1.00.”
- 2 -
|
|
3
|
The Loan Agreement shall be amended by deleting the following definition appearing in 13.1 thereof:
|
““
Revolving Line
” is an Advance or Advances in an amount equal to Eight Million Dollars ($8,000,000.00).”
and inserting in lieu thereof the following:
““
Revolving Line
” is an Advance or Advances in an amount equal to Fifteen Million Dollars ($15,000,000.00).”
|
|
4
|
The Loan Agreement shall be amended by inserting the following new term and its definition to appear alphabetically in Section 13.1 thereof:
|
““
Total Liabilities
” is on any day, obligations that should, under GAAP, be classified as liabilities on Borrower’s
consolidated balance sheet, including all Indebtedness.”
|
|
5
|
The Compliance Certificate appearing as
Exhibit D
to the Loan Agreement is hereby replaced with the Compliance Certificate attached as
Exhibit 1
hereto.
|
|
|
1
|
Bank hereby waives Borrower’s existing defaults under the Loan Agreement by virtue of Borrower’s failure to comply with (a) Section 6.2(c) (Monthly Financial Statements) and Section 6.2(d)
(Monthly Compliance Certificate) thereof for the months ending October 31, 2013, November 30, 2013, December 31, 2013, January 31, 2014 and February 28, 2014, (b) the Minimum EBITDA financial covenant set
forth in Section 6.11(a) thereof as of the month ending December 31, 2013, and (c) the Minimum Net Income financial covenant set forth in Section 6.11(b) thereof as of the month ending March 31, 2014 (the “
Existing
Defaults
”). Bank’s waiver of the Existing Defaults shall apply only to the foregoing specific periods. Borrower hereby acknowledges and agrees that except as specifically provided herein, nothing in this Section or anywhere in this
Loan Modification Agreement shall be deemed or otherwise construed as a waiver by Bank of any of its rights and remedies pursuant to the Loan Documents, applicable law or otherwise.
|
4.
FEES
. Borrower shall pay to Bank a fully-earned non-refundable amendment fee equal to Ten Thousand Dollars ($10,000.00) on the date hereof,
which, for the avoidance of doubt, is due and payable to Bank
in addition to
the fee of Twenty Thousand Dollars ($20,000.00) which
- 3 -
is due and payable on the earliest to occur of (a) August 6, 2014, (b) an Event of Default, or (c) the early termination of the Revolving Line. Borrower shall also reimburse
Bank for all legal fees and expenses incurred in connection with this amendment to the Existing Loan Documents.
5.
RATIFICATION OF PERFECTION
CERTIFICATE
. Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in that certain Perfection Certificate dated as of September 12, 2013 delivered by Borrower to Bank (the
“
Perfection Certificate
”), and acknowledges, confirms and agrees the disclosures and information above Borrower provided to Bank in the Perfection Certificate have not changed, as of the date hereof.
6.
CONSISTENT CHANGES
. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
7.
RATIFICATION OF LOAN DOCUMENTS
. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of all security or other collateral
granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
8.
NO DEFENSES OF BORROWER
.
Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or
counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.
9.
CONTINUING VALIDITY
. Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrower’s
representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and
effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by
virtue of this Loan Modification Agreement.
10.
COUNTERSIGNATURE
. This Loan Modification Agreement shall become effective only when it shall have
been executed by Borrower and Bank.
[
The remainder of this page is intentionally left blank.
]
- 4 -
This Loan Modification Agreement is executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first written above.
|
|
|
|
|
|
|
|
|
|
|
BORROWER:
|
|
|
|
BANK:
|
|
|
|
|
|
ACACIA COMMUNICATIONS, INC.
|
|
|
|
SILICON VALLEY BANK
|
|
|
|
|
|
|
|
By:
|
|
/s/ John Gavin
|
|
|
|
By:
|
|
/s/ Nick Currie
|
|
|
|
|
|
|
|
Name:
|
|
John Gavin
|
|
|
|
Name:
|
|
Nick Currie
|
|
|
|
|
|
|
|
Title:
|
|
CFO
|
|
|
|
Title:
|
|
Vice President
|
- 5 -
Exhibit 1
EXHIBIT D - COMPLIANCE CERTIFICATE
|
|
|
|
|
|
|
TO:
|
|
SILICON VALLEY BANK
|
|
Date:
|
|
FROM:
|
|
ACACIA COMMUNICATIONS, INC.
|
|
|
The undersigned authorized officer of Acacia Communications, Inc. (“Borrower”) certifies that under
the terms and conditions of the Loan and Security Agreement between Borrower and Bank (the “Agreement”):
(1) Borrower is in
complete compliance for the period ending with all required covenants except as noted below; (2) there are no Events of
Default; (3) all representations and warranties in the Agreement are true and correct in all material respects on this date except as noted below; provided, however, that such materiality qualifier shall not be applicable to any representations
and warranties that already are qualified or modified by materiality in the text thereof; and provided, further that those representations and warranties expressly referring to a specific date shall be true, accurate and complete in all material
respects as of such date; (4) Borrower, and each of its Subsidiaries, has timely filed all required tax returns and reports, and Borrower has timely paid all foreign, federal, state and local taxes, assessments, deposits and contributions owed
by Borrower except as otherwise permitted pursuant to the terms of Section 5.9 of the Agreement; and (5) no Liens have been levied or claims made against Borrower or any of its Subsidiaries relating to unpaid employee payroll or benefits
of which Borrower has not previously provided written notification to Bank.
Attached are the required documents supporting the
certification. The undersigned certifies that these are prepared in accordance with GAAP consistently applied from one period to the next except as explained in an accompanying letter or footnotes. The undersigned acknowledges that no borrowings may
be requested at any time or date of determination that Borrower is not in compliance with any of the terms of the Agreement, and that compliance is determined not just at the date this certificate is delivered. Capitalized terms used but not
otherwise defined herein shall have the meanings given them in the Agreement.
Please indicate compliance status by circling Yes/No under
“Complies” column.
|
|
|
|
|
|
|
Reporting Covenant
|
|
Required
|
|
Complies
|
|
|
|
|
|
Monthly financial statements with Compliance Certificate
|
|
Monthly within 30 days
|
|
Yes No
|
|
Annual financial statement (CPA Audited)
|
|
FYE within 180 days
|
|
Yes No
|
|
10-Q, 10-K and 8-K
|
|
Within 5 days after filing with SEC
|
|
Yes No
|
|
Board-approved Projections
|
|
First Business Day of month following Board approval, but at least annually
|
|
Yes No
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial Covenant
|
|
Required
|
|
|
Actual
|
|
|
Complies
|
|
|
|
|
|
|
Maintain at all times (tested monthly on a consolidated basis):
|
|
|
|
|
|
|
|
|
|
|
|
Minimum EBITDA
|
|
|
|
*
|
|
$
|
|
|
|
Yes No
|
|
Minimum AQR
|
|
|
1.25:1.0
|
|
|
$
|
:1.0
|
|
|
Yes No
|
|
*
|
As set forth in Section 6.11(a) of the Agreement.
|
The following financial covenant
analysis and information set forth in Schedule 1 attached hereto are true and accurate as of the date of this Certificate.
Other
Matters
|
|
|
|
|
Have there been any amendments of or other changes to the capitalization table of Borrower and to the Operating Documents of Borrower or any of its Subsidiaries? If yes, provide copies of any such amendments or changes with this
Compliance Certificate.
|
|
Yes No
|
The following are the exceptions with respect to the certification above: (If no exceptions exist, state
“No exceptions to note.”)
|
|
|
|
|
|
|
|
|
|
|
ACACIA COMMUNICATIONS, INC.
|
|
|
|
BANK USE ONLY
|
|
|
|
|
|
|
|
By:
|
|
|
|
|
|
Received by:
|
|
|
|
Name:
|
|
|
|
|
|
|
|
AUTHORIZED SIGNER
|
|
Title:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Verified:
|
|
|
|
|
|
|
|
|
|
|
|
AUTHORIZED SIGNER
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Date:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compliance Status: Yes
No
|
- 7 -
Schedule 1 to Compliance Certificate
Financial Covenants of Borrower
In the event of a conflict between this Schedule and the Loan Agreement, the terms of the Loan Agreement shall govern.
Dated:
|
I.
|
Minimum EBITDA
(Section 6.11(a))
|
|
Required:
|
Minimum EBITDA, measured monthly on a trailing three (3) month basis as of the last day of each month of at least the following:
|
|
|
|
|
|
|
|
Month ending
|
|
Minimum EBITDA
|
|
|
July 31, 2013 through February 28, 2014
|
|
$
|
1,000,000.00
|
|
|
April 30, 2014 through June 30, 2014
|
|
$
|
1,000,000.00
|
|
|
July 31, 2014
|
|
($
|
500,000.00
|
)
|
|
August 31, 2014
|
|
$
|
500,000.00
|
|
|
September 30, 2014 and as of the last day of each month thereafter
|
|
$
|
1,000,000.00
|
|
Actual:
|
|
|
|
|
|
|
|
|
A.
|
|
Net Income (as defined in the Loan Agreement)
|
|
$
|
|
|
|
B.
|
|
Interest Expense (as defined in the Loan Agreement)
|
|
$
|
|
|
|
C.
|
|
To the extent deducted in the calculation of Net Income:
|
|
$
|
|
|
|
|
|
1. Depreciation expense
|
|
$
|
|
|
|
|
|
2. Amortization expense
|
|
$
|
|
|
|
D.
|
|
Income tax expense
|
|
$
|
|
|
|
E.
|
|
EBITDA (sum of lines A, B, C.l, C.2, and D)
|
|
$
|
|
|
Is line E equal to or greater than the required level for the specific period?
|
|
|
|
|
No, not in compliance
|
|
Yes, in compliance
|
- 8 -
|
II.
|
Adjusted Quick Ratio
(Section 6.11(c))
|
|
Required:
|
Commencing with the month ending June 30, 2014, and as of the last day of each month thereafter, an Adjusted Quick ratio of at least 1.25 to 1.00.
|
Actual:
|
|
|
|
|
|
|
|
|
A.
|
|
Aggregate value of Borrower’s consolidate, unrestricted cash maintained with Bank
|
|
$
|
|
|
|
B.
|
|
Aggregate value of Borrower’s consolidated net billed accounts receivable, determined according to GAAP
|
|
$
|
|
|
|
C.
|
|
Quick Assets (the sum of lines A and B)
|
|
$
|
|
|
|
D.
|
|
Aggregate value of all obligations and liabilities of Borrower to Bank
|
|
$
|
|
|
|
E.
|
|
Aggregate value of obligations that should, under GAAP, be classified as liabilities on Borrower’s consolidated balance sheet,
including all Indebtedness, not otherwise reflected in line D above, that mature within one (1) year
|
|
$
|
|
|
|
F.
|
|
Current Liabilities (the sum of lines D and E)
|
|
$
|
|
|
|
G.
|
|
Aggregate value of current portion of all amounts received or invoiced by Borrower in advance of performance under contracts and not
yet recognized as revenue
|
|
$
|
|
|
|
H.
|
|
Line F minus G
|
|
$
|
|
|
|
I.
|
|
Adjusted Quick Ratio (line C divided by line H)
|
|
|
|
|
Is line I equal to or greater than 1.25:1.00?
|
|
|
|
|
No, not in compliance
|
|
Yes, in compliance
|
- 9 -
SEVENTH LOAN MODIFICATION AGREEMENT
This Seventh Loan Modification Agreement (this “
Loan Modification Agreement
”) is entered into as of August 5,
2015, by and between
SILICON VALLEY BANK
, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove Street, Suite 2-200, Newton,
Massachusetts 02466 (“
Bank
”) and
ACACIA COMMUNICATIONS, INC.
, a Delaware corporation with its chief executive office located at 3 Clock Tower Place, Suite 130, Maynard, Massachusetts 01754 (“
Borrower
”).
1.
DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS
. Among other indebtedness and obligations which may be owing by Borrower to Bank,
Borrower is indebted to Bank pursuant to a loan arrangement dated as of June 9, 2011, evidenced by, among other documents, a certain Loan and Security Agreement dated as of June 9, 2011, between Borrower and Bank, as amended by that
certain First Loan Modification Agreement dated as of March 13, 2012, between Borrower and Bank, as amended by that certain Second Loan Modification Agreement dated as of June 8, 2012, between Borrower and Bank, as further amended by that
certain Third Loan Modification Agreement dated as of July 10, 2012, between Borrower and Bank, as further amended by that certain Fourth Loan Modification Agreement dated as of September 20, 2012, between Borrower and Bank, and as further
amended by that certain Fifth Loan Modification Agreement dated as of September 12, 2013, but effective as of August 6, 2013, as further amended by that certain Sixth Loan Modification Agreement dated as of September 18, 2014, between
Borrower and Bank (as amended, the “
Loan Agreement
”). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.
2.
DESCRIPTION OF COLLATERAL
. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any other
collateral security granted to Bank, the “
Security Documents
”). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “
Existing Loan
Documents
”.
3.
DESCRIPTION OF CHANGE IN TERMS
.
|
|
A.
|
Modifications to Loan Agreement.
|
|
|
1
|
The Loan Agreement shall be amended by deleting the following definition appearing in 13.1 thereof:
|
““
Revolving Line Maturity Date
” is August 5, 2015”
and inserting in lieu thereof the following:
““
Revolving Line Maturity Date
” is November 5, 2015”
4.
FEES
. Borrower shall pay to Bank a fully-earned non-refundable modification fee equal to Three Thousand Six Hundred Ninety Eight Dollars and Sixty
Three Cents ($3,698.63) which fee shall be due and payable as of the Seventh Loan Modification date.
5.
RATIFICATION OF’ PERFECTION CERTIFICATE
. Borrower hereby ratifies, confirms and reaffirms, all and
singular, the terms and disclosures contained in that certain Perfection Certificate dated as of September 12, 2013 delivered by Borrower to Batik (the “
Perfection Certificate
”), and acknowledges, confirms and agrees the
disclosures and information above Borrower provided to Bank in the Perfection Certificate have not changed, as of the date hereof.
6.
CONSISTENT
CHANGES
. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
7.
RATIFICATION OF LOAN
DOCUMENTS
. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
8.
NO DEFENSES OF BORROWER
. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and
Borrower hereby RELEASES Bank from any liability thereunder.
9.
CONTINUING VALIDITY
. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing
Loan Documents remain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly
released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.
10.
COUNTERSIGNATURE
. This Loan Modification
Agreement shall become effective only when it shall have been executed by Borrower and Bank.
[
The remainder of this page is
intentionally left blank.
]
- 2 -
This Loan Modification Agreement is executed as a sealed instrument under the laws of
Commonwealth of Massachusetts as of the date first written above.
|
|
|
|
|
|
|
|
|
|
|
BORROWER:
|
|
|
|
BANK:
|
|
|
|
|
|
ACACIA COMMUNICATIONS, INC.
|
|
|
|
SILICON VALLEY BANK
|
|
|
|
|
|
|
|
By:
|
|
/s/ John Gavin
|
|
|
|
By:
|
|
/s/ Nick Currie
|
|
|
|
|
|
|
|
Name:
|
|
John Gavin
|
|
|
|
Name:
|
|
Nick Currie
|
|
|
|
|
|
|
|
Title:
|
|
CFO
|
|
|
|
Title:
|
|
Vice President
|
- 3 -
PRO FORMA INVOICE FOR LOAN CHARGES
BORROWER: ACACIA COMMUNICATIONS, INC.
|
|
|
|
|
|
|
A.
|
|
LOAN OFFICER:
|
|
Nick Currie
|
|
|
|
|
|
B.
|
|
DATE:
|
|
August 11, 2015
|
|
|
|
|
|
C.
|
|
Modification Fee:
|
|
$3,698.63
|
|
|
|
|
TOTAL FEES DUE
|
|
$3,698.63
|
|
|
|
|
{ }
|
|
A check for the total amount is attached.
|
|
|
|
|
{X}
|
|
Debit DDA #
3300676311
for the total amount.
|
|
|
|
|
|
BORROWER:
|
|
|
|
|
/s/ John Gavin
|
|
8/11/2015
|
|
|
|
Authorized Signer
|
|
(Date)
|
|
|
|
SILICON VALLEY BANK:
|
|
|
|
|
/s/ Nick Currie
|
|
|
|
|
|
Loan Officer Signature
|
|
(Date)
|
- 4 -
Exhibit K
EIGHTH LOAN MODIFICATION AGREEMENT
This Eighth Loan Modification Agreement (this “
Loan Modification Agreement
”) is entered into as of November 4, 2015, by
and between
SILICON VALLEY BANK
, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove Street, Suite 2-200, Newton,
Massachusetts 02466 (“
Bank
”) and
ACACIA COMMUNICATIONS, INC
., a Delaware corporation with its chief executive office located at 3 Clock Tower Place, Suite 130, Maynard, Massachusetts 01754 (“
Borrower
”).
1.
DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS
. Among other indebtedness and obligations which may be owing by Borrower to Bank, Borrower is
indebted to Bank pursuant to a loan arrangement dated as of June 9, 2011, evidenced by, among other documents, that certain Loan and Security Agreement between Borrower and Bank dated as of June 9, 2011, as amended by that certain First
Loan Modification Agreement between Borrower and Bank dated as of March 13, 2012, as amended by that certain Second Loan Modification Agreement between Borrower and Bank dated as of June 8, 2012, as amended by that certain Third Loan
Modification Agreement between Borrower and Bank dated as of July 10, 2012, as amended by that certain Fourth Loan Modification Agreement between Borrower and Bank dated as of September 20, 2012, as amended by that certain Fifth Loan
Modification Agreement between Borrower and Bank dated as of September 12, 2013, as amended by that certain Sixth Loan Modification Agreement between Borrower and Bank dated as of September 18, 2014, and as further amended by that certain
Seventh Loan Modification Agreement between Borrower and Bank dated as of August 5, 2015 (as amended, the “
Loan Agreement
”). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan
Agreement.
2.
DESCRIPTION OF COLLATERAL
. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together
with any other collateral security granted to Bank, the “
Security Documents
”). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the
“
Existing Loan Documents
”.
3.
DESCRIPTION OF CHANGE IN TERMS
.
|
|
A.
|
Modifications to Loan Agreement.
|
|
|
1
|
The Loan Agreement shall be amended by deleting the following definition appearing in 13.1 thereof:
|
“ “
Revolving Line Maturity Date
”
is November 5, 2015.”
and inserting in lieu thereof the following:
“ “
Revolving Line Maturity Date
”
is January 4, 2016.”
4.
FEES
. Borrower shall pay to Bank a fully-earned non-refundable modification fee equal to Two Thousand Four
Hundred Sixty Five Dollars and Seventy Five Cents ($2,465.75) which fee shall be due and payable as of the date hereof.
5.
RATIFICATION OF PERFECTION
CERTIFICATE
. Borrower hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in that certain Perfection Certificate dated as of September 12, 2013 delivered by Borrower to Bank (the
“
Perfection Certificate
”), and acknowledges, confirms and agrees the disclosures and information Borrower provided to Bank in the Perfection Certificate have not changed, as of the date hereof.
6.
CONSISTENT CHANGES
. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
7.
RATIFICATION OF LOAN DOCUMENTS
. Borrower hereby ratifies, confirms, and reaffirms all terms and
conditions of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
8.
NO DEFENSES OF BORROWER
. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and
Borrower hereby RELEASES Bank from any liability thereunder.
9.
CONTINUING VALIDITY
. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing
Loan Documents remain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly
released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.
10.
COUNTERSIGNATURE
. This Loan Modification
Agreement shall become effective only when it shall have been executed by Borrower and Bank.
[The remainder of this page is
intentionally left blank.]
This Loan Modification Agreement is executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first written above.
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BORROWER:
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BANK:
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ACACIA COMMUNICATIONS, INC.
|
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SILICON VALLEY BANK
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By:
|
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/s/ Raj Shanmugaraj
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By:
|
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/s/ Nick Currie
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Name:
|
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Raj Shanmugaraj
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Name:
|
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Nick Currie
|
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Title:
|
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Chief Executive Officer
|
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|
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Title:
|
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Vice President
|
NINTH LOAN MODIFICATION AGREEMENT
This Ninth Loan Modification Agreement (this “Loan Modification Agreement”) is entered into as of January 13, 2016, but
effective as of January 4, 2016, by and between SILICON VALLEY BANK, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove
Street, Suite 2-200, Newton, Massachusetts 02466 (“Bank”) and ACACIA COMMUNICATIONS, INC., a Delaware corporation with its chief executive office located at 3 Clock Tower Place, Suite 130, Maynard, Massachusetts 01754
(“Borrower”).
1.
DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS
. Among other indebtedness and obligations which may be owing by
Borrower to Bank, Borrower is indebted to Bank pursuant to a loan arrangement dated as of June 9, 2011, evidenced by, among other documents, that certain Loan and Security Agreement between Borrower and Bank dated as of June 9, 2011, as
amended by that certain First Loan Modification Agreement between Borrower and Bank dated as of March 13, 2012, as amended by that certain Second Loan Modification Agreement between Borrower and Bank dated as of June 8, 2012, as amended by
that certain Third Loan Modification Agreement between Borrower and Bank dated as of July 10, 2012, as amended by that certain Fourth Loan Modification Agreement between Borrower and Bank dated as of September 20, 2012, as amended by that
certain Fifth Loan Modification Agreement between Borrower and Bank dated as of September 12, 2013, as amended by that certain Sixth Loan Modification Agreement between Borrower and Bank dated as of September 18, 2014, as amended by that
certain Seventh Loan Modification Agreement between Borrower and Bank dated as of August 5, 2015, and as further amended by that certain Eighth Loan Modification Agreement between Borrower and Bank dated as of November 4, 2015 (as amended,
the “
Loan Agreement
”). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the Loan Agreement.
2.
DESCRIPTION OF COLLATERAL
. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement (together with any other collateral security granted to Bank, the “
Security Documents
”). Hereinafter, the
Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the “
Existing Loan Documents
”.
3.
DESCRIPTION OF CHANGE IN TERMS
.
|
|
A.
|
Modifications to Loan Agreement.
|
1 The Loan Agreement shall be amended by deleting the
following definition appearing in 13.1 thereof:
““
Revolving Line Maturity Date
” is January 4, 2016.”
and inserting in lieu thereof the following:
““
Revolving Line Maturity Date
” is March 4, 2016.”
4.
FEES
. Borrower shall pay to Bank a fully-earned non-refundable modification fee equal to Two Thousand Four Hundred Sixty-Five Dollars and
Seventy-Five Cents ($2,465.75) which fee shall be due and payable as of the date hereof.
5.
RATIFICATION OF PERFECTION CERTIFICATE
. Borrower
hereby ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in that certain Perfection Certificate dated as of September 12, 2013 delivered by Borrower to Bank (the “
Perfection Certificate
”),
and acknowledges, confirms and agrees the disclosures and information Borrower provided to Bank in the Perfection Certificate have not changed, as of the date hereof.
6.
CONSISTENT CHANGES
. The Existing Loan Documents are hereby amended wherever necessary to reflect the changes described above.
7.
RATIFICATION OF LOAN DOCUMENTS
. Borrower hereby ratifies, confirms, and reaffirms all terms and
conditions of all security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
8.
NO DEFENSES OF BORROWER
. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with
respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and
Borrower hereby RELEASES Bank from any liability thereunder.
9.
CONTINUING VALIDITY
. Borrower understands and agrees that in modifying the
existing Obligations, Bank is relying upon Borrower’s representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing
Loan Documents remain unchanged and in full force and effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the
Obligations. Nothing in this Loan Modification Agreement shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly
released by Bank in writing. No maker will be released by virtue of this Loan Modification Agreement.
10.
COUNTERSIGNATURE
. This Loan Modification
Agreement shall become effective only when it shall have been executed by Borrower and Bank.
[The remainder of this page is
intentionally left blank.]
This Loan Modification Agreement is executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first written above.
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BORROWER:
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BANK:
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ACACIA COMMUNICATIONS, INC.
|
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SILICON VALLEY BANK
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By:
|
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/s/ Murugesan Shanmugaraj
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By:
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/s/ Nick Currie
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Name:
|
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Murugesan Shanmugaraj
|
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Name:
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Nick Currie
|
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Title:
|
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President and CEO
|
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Title:
|
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Vice President
|
TENTH LOAN MODIFICATION AGREEMENT
This Tenth Loan Modification Agreement (this “
Loan Modification Agreement
”) is entered into as of January 27, 2016, by and
between
SILICON VALLEY BANK
, a California corporation, with its principal place of business at 3003 Tasman Drive, Santa Clara, California 95054 and with a loan production office located at 275 Grove Street, Suite 2-200, Newton,
Massachusetts 02466 (“
Bank
”) and
ACACIA COMMUNICATIONS, INC.
, a Delaware corporation with its chief executive office located at 3 Clock Tower Place, Suite 130, Maynard, Massachusetts 01754 (“
Borrower
”).
1.
DESCRIPTION OF EXISTING INDEBTEDNESS AND OBLIGATIONS
. Among other indebtedness and obligations which may be owing by Borrower to Bank,
Borrower is indebted to Bank pursuant to a loan arrangement dated as of June 9, 2011, evidenced by, among other documents, that certain Loan and Security Agreement between Borrower and Bank dated as of June 9, 2011, as amended by that
certain First Loan Modification Agreement between Borrower and Bank dated as of March 13, 2012, as amended by that certain Second Loan Modification Agreement between Borrower and Bank dated as of June 8, 2012, as amended by that certain
Third Loan Modification Agreement between Borrower and Bank dated as of July 10, 2012, but effective as of July 8, 2012, as amended by that certain Fourth Loan Modification Agreement between Borrower and Bank dated as of September 20,
2012, but effective as of August 7, 2012, as amended by that certain Fifth Loan Modification Agreement between Borrower and Bank dated as of September 12, 2013, but effective as of August 6, 2013, as amended by that certain Sixth Loan
Modification Agreement between Borrower and Bank dated as of September 18, 2014, as amended by that certain Seventh Loan Modification Agreement between Borrower and Bank dated as of August 5, 2015, as amended by that certain Eighth Loan
Modification Agreement between Borrower and Bank dated as of November 4, 2015, and as further amended by that certain Ninth Loan Modification Agreement between Borrower and Bank dated as of January 13, 2016, but effective as of
January 4, 2016 (as the same may from time to time be further amended, modified, supplemented or restated, the “
Loan Agreement
”). Capitalized terms used but not otherwise defined herein shall have the same meaning as in the
Loan Agreement.
2.
DESCRIPTION OF COLLATERAL
. Repayment of the Obligations is secured by the Collateral as described in the Loan Agreement
(together with any other collateral security granted to Bank, the “
Security Documents
”). Hereinafter, the Security Documents, together with all other documents evidencing or securing the Obligations shall be referred to as the
“
Existing Loan Documents
”.
3.
DESCRIPTION OF CHANGE IN TERMS
.
|
|
A.
|
Modification to Loan Agreement.
|
|
|
1
|
The Loan Agreement shall be amended by deleting the following definition appearing in 13.1 thereof:
|
““
Revolving Line Maturity Date
” is March 4, 2016.”
and inserting in lieu thereof the following:
““
Revolving Line Maturity Date
” is June 2, 2016.”
4.
FEES
. Borrower shall pay to Bank a fully-earned non-refundable modification fee equal to Three Thousand Six Hundred Ninety-Eight Dollars and
Sixty-Two Cents ($3,698.62) which fee shall be due and payable as of the date hereof.
5.
RATIFICATION OF PERFECTION CERTIFICATE
. Borrower hereby
ratifies, confirms and reaffirms, all and singular, the terms and disclosures contained in that certain Perfection Certificate dated as of September 12, 2013 delivered by Borrower to Bank (the “
Perfection Certificate
”), and
acknowledges, confirms and agrees the disclosures and information Borrower provided to Bank in the Perfection Certificate have not changed, as of the date hereof.
6.
CONSISTENT CHANGES
. The Existing Loan Documents are hereby amended wherever necessary to reflect the
changes described above.
7.
RATIFICATION OF LOAN DOCUMENTS
. Borrower hereby ratifies, confirms, and reaffirms all terms and conditions of all
security or other collateral granted to the Bank, and confirms that the indebtedness secured thereby includes, without limitation, the Obligations.
8.
NO DEFENSES OF BORROWER
. Borrower hereby acknowledges and agrees that Borrower has no offsets, defenses, claims, or counterclaims against Bank with respect to the Obligations, or otherwise, and that if Borrower now has, or ever did have, any
offsets, defenses, claims, or counterclaims against Bank, whether known or unknown, at law or in equity, all of them are hereby expressly WAIVED and Borrower hereby RELEASES Bank from any liability thereunder.
9.
CONTINUING VALIDITY
. Borrower understands and agrees that in modifying the existing Obligations, Bank is relying upon Borrower’s
representations, warranties, and agreements, as set forth in the Existing Loan Documents. Except as expressly modified pursuant to this Loan Modification Agreement, the terms of the Existing Loan Documents remain unchanged and in full force and
effect. Bank’s agreement to modifications to the existing Obligations pursuant to this Loan Modification Agreement in no way shall obligate Bank to make any future modifications to the Obligations. Nothing in this Loan Modification Agreement
shall constitute a satisfaction of the Obligations. It is the intention of Bank and Borrower to retain as liable parties all makers of Existing Loan Documents, unless the party is expressly released by Bank in writing. No maker will be released by
virtue of this Loan Modification Agreement.
10.
COUNTERSIGNATURE
. This Loan Modification Agreement shall become effective only when it shall have
been executed by Borrower and Bank.
[The remainder of this page is intentionally left blank.]
108
This Loan Modification Agreement is executed as a sealed instrument under the laws of the
Commonwealth of Massachusetts as of the date first written above.
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BORROWER:
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BANK:
|
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ACACIA COMMUNICATIONS, INC.
|
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SILICON VALLEY BANK
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By:
|
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/s/ John Gavin
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By:
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/s/ Nick Currie
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Name:
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John Gavin
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Name:
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Nick Currie
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Title:
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CFO
|
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Title:
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Vice President
|
Exhibit 10.17
Confidential Materials omitted and filed separately with the
Securities and Exchange Commission. Double asterisks denote omissions.
ZTE/Acacia Confidential
p
Agreement No:
ZTE Kangxun Telecom Co. Ltd
GENERAL CONDITIONS OF PURCHASE
(Applicable for Purchasing from Overseas Suppliers)
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ZTE Kangxun Telecom Co. Ltd Copyright Reserved
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Page 1 of 35
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Ver.2008-10
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ZTE/Acacia Confidential
p
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GENERAL CONDITIONS OF PURCHASE
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1.
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Buyer and Other Definitions
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4
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2.
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Acceptance and Terms and Conditions:
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4
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3.
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Purchase Order
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4
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4.
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Shipping Information
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5
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5.
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Terms of Payment
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5
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6.
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Terms of Delivery
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6
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7.
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Lead Time
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6
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8.
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PO Reschedule and Cancel
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6
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9.
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Tender/Bid
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6
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10.
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Pricing
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7
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11.
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Forecast and Inventory
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8
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12.
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Delivery
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8
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13.
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Inspection, Acceptance and Rejection
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9
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14.
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Quality Control and Quality Issues Handling
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10
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15.
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Spate Parts and Service
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12
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16.
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NPI (New Product Introduction)
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12
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17.
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License Grant (Not applicable for hardware purchase only)
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12
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18.
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Software Updates and Upgrades (Not applicable for hardware purchase only)
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13
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19.
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Important Information Exchange
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13
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20.
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Trademarks
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13
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21.
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Warranties
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13
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22.
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Publication
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15
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23.
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Records and Audits
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15
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24.
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Default and Indemnifications
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15
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25.
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Product/Process Change Notice (“PCN”)
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17
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26.
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Product Recall
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18
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27.
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Non-Infringement of Intellectual Property Rights
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19
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28.
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Intellectual Property Rights
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20
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29.
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Non-Assignment
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20
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30.
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Confidentiality
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20
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31.
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Force Majeure
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21
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32.
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Disputes Resolution
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21
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33.
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Applicable Laws
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22
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ZTE Kangxun Telecom Co. Ltd Copyright Reserved
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Page 2 of 35
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34.
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Effective Period, Modification and Termination
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22
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35.
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Entire Agreement
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24
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36.
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Limitation of Liability
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24
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37.
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Terms of [**]
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25
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38.
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Appendixes
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25
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ZTE Kangxun Telecom Co. Ltd Copyright Reserved
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Page 3 of 35
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ZTE/Acacia Confidential
p
|
GENERAL CONDITIONS OF PURCHASE
This “General Conditions of Purchase” (also referred to as, the “Agreement”) is made as of October
, 2010 (the “Effective Date”) by and between
ZTE Kangxun Telecom Co. Ltd.
, with its registered address at
Plant No. 1, Da Mei Sha, Yan Tian District, Shenzhen, P.R.China
(hereafter
“Buyer”) and Acacia Communications, Inc., with its registered address at Three Clock Tower Place, Suite 210, Maynard, MA 01754, USA (hereafter “Supplier”).
|
1.
|
Buyer and Other Definitions
|
In the General Conditions of Purchase, Buyer is defined as
ZTE Kangxun Telecom Co. Ltd.
|
2.
|
Acceptance and Terms and Conditions:
|
This “GENERAL CONDITIONS OF PURCHASE”,
including any exhibit contained herein, along with the Framework Contract or Purchase Contract and Purchase Order (PO) as stipulated in Section 9 Tender/Bid, shall be deemed collectively as a Contract. Written acceptance of the PO or
commencement of performance of the work specified in the PO shall be deemed acceptance of the Contract. This “GENERAL CONDITIONS OF PURCHASE” does not, expressly or impliedly, constitute an acceptance by Buyer of any Supplier’s offer
to sell, quotation, or proposal, nor any intent or indication by Buyer to be bound by any such offer, quotation or proposal. Buyer is not committed to purchase any products, equipment and/or services (the “Product(s)”) except for such
Products and in such quantity as may be specified in PO.
ANY AMENDMENT hereto SHALL BE signed by representatives duly authorized BY BOTH PARTIES IN WRITING.
(a) The detailed purchase items are stipulated in the PO. The items
include, but are not limited to: PO number, Buyer’s Part/Number (P/N), Supplier’s P/N, Product name, specification, quantity, price, delivery time. Supplier shall sign and stamp the received PO to confirm acceptance, and send it back to
Buyer within [**] working days after the PO is received and then Buyer will stamp the PO. The PO will become effective after Buyer has stamped it. Supplier shall not reject any PO which complies with the terms and conditions in this document. Each
party agrees that the delivery of the PO by facsimile shall have the same force and effect as delivery of original PO with signatures and that each party may use such facsimile signatures as evidence. In such case, the Supplier shall deliver the
accepted PO with original signature to the Buyer after facsimile.
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ZTE/Acacia Confidential
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(b) In the event Supplier fails to accept or reject the PO within the agreed upon time frame
or gives no response on Buyer’s documental inquiry within [**] days period on more than [**] occasions during any consecutive [**] months period, Buyer reserves the right to terminate the Contract.
The shipping information is as follows:
|
|
(a)
|
Ship-to address: [**]
|
|
|
(b)
|
Bill-to address: [**]
|
The terms of payment will be T/T [**] days after Buyer’s Delivery
Inspection. (after month close). In the event Supplier has not received payment as agreed, Supplier will notify Buyer to make prompt payment. One original and two copies of invoices are required by Buyer for each shipment. The invoices shall be made
by Supplier itself and attached to the delivered goods. The information showed on the invoice shall include, without limitation: Supplier name, PO number, Buyer P/N, Supplier P/N, Products name, quantity, unit price, total amount, currency and
receiving bank account. All amounts due hereunder shall be paid in US dollars at Supplier’s address (or, at its option, to an account specified by Supplier).
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ZTE Kangxun Telecom Co. Ltd Copyright Reserved
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Page 5 of 35
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[**]
The terms shall be subject to the “International Rules for the Interpretation of Trade Terms” (INCOTERMS2000) provided by
International Chamber of Commerce (ICC) unless otherwise stipulated herein.
Buyer shall place PO in advance according to the lead time agreed upon
mutually between the parties. Supplier shall try to reduce lead time as much as possible. In the event Buyer places PO of which regular lead time is not enough due to urgent demand, Supplier shall do its best to meet Buyer’s demand. If the
delivery cannot be available with Supplier’s effort, Supplier will show the earliest delivery date on the PO when it is accepted.
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8.
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PO Reschedule and Cancel
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Buyer can reschedule or cancel the unimplemented PO outside
the PO reschedule and cancel windows [**]. Reschedule window is a period of time before the confirmed delivery date for a specific PO, within which the Buyer cannot reschedule the PO. Cancel window is a period of time before the confirmed delivery
date for a specific PO, within which the Buyer cannot cancel the PO.
The lead time, reschedule and cancel windows might be different in
respect of different product family offered by Supplier, a detailed table which stipulates the specific lead time, reschedule and cancel windows of different product family will be attached as Appendix 1 of this “General Conditions of
Purchase”.
(a) According to forecast quantity in a period, Buyer allocates supply share
by means of competitive bidding. The evaluating factors include but not limited to Supplier’s Product price, historical quality record, and delivery and service performance.
(b) Considering the bidding results, and/or upon agreement by negotiation, Buyer and Supplier may sign a framework contract (“Framework
Contract”) or purchase contract (“Purchase Contract”). The Framework Contract or Purchase Contract shall be based on this “General
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Conditions of Purchase”. The parts list, forecast quantity, and price will be stipulated in the Framework Contract or Purchase Contract. Each specified PO Buyer places to Supplier will be
governed by the Framework Contract or Purchase Contract and the General Conditions of Purchase except otherwise specified in this Contract or agreed upon by both parties in writing.
(c) Once Supplier gets bidding share, Supplier shall implement it and non-fulfillment is not allowed.
(a) Supplier offers Products to Buyer according to price in PO. The price
stipulated in PO is the only basis for which the Buyer pays Supplier, and is not amendable unilaterally. Both parties agree to keep the PO price confidential according to the terms of the Non-Disclosure Agreement currently in effect.
(b) Quotation must be offered by the persons authorized by Supplier in the way acceptable to Buyer. The prices quoted shall constitute the
entire consideration to Supplier for the Products and their boxing, crating and other packaging. Shipping terms will be included with the quotation and no other charge shall be made therefore. The quotation Supplier offers to Buyer should be based
on honesty.
(c) [**].
(d)
If actual quantity of goods purchased by Buyer grows far beyond the quantity of goods forecast by Buyer, Buyer has the right to ask Supplier to adjust the price to a more favored level.
(e) Supplier agrees if Supplier reduces its price to bid during the bidding organized by Buyer, when the bidding project is closed, the price
of the material in Supplier’s all unfulfilled POs under which the Supplier has not delivered the Products to the designated address shall be updated to the lower price bid by the Supplier. The updating will be done automatically by Buyer’s
IT system. After price updating, both parties shall perform the POs with the updated price.
(f) The Price mentioned above is applicable
for all the Purchase Orders issued by the Buyer with respect to the Products covered under this Agreement during the term. Buyer shall have the right to review with the Supplier, the Unit Prices/Prices and arrive at freshly mutually agreed Unit
Price/Prices for any Subsequent Purchase Order(s). However such right to review the
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Prices shall only be with Buyer and Buyer if so desirous may issue Subsequent Purchase Orders at the Price already being agreed for which the Supplier agrees not to raise any objections with
respect to said level of pricing.
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11.
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Forecast and Inventory
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(a) Buyer provides Supplier with a [**] weeks’ rolling
forecast which is updated [**]. The forecast information Buyer provides to Supplier is only for reference usage and shall in no event be construed as an obligation of purchase.
(b) Supplier shall be well prepared for each forecasted delivery item, and maintain buffer inventory for long lead time parts to ensure
meeting Buyer’s normal and urgent demand.
(c) In the event Buyer requires Supplier to set up VMI (Vendor Managed Inventory) or JMI
(Joint Managed Inventory), Supplier shall do its best to meet Buyer’s requirement.
(a) Time is of the essence under this Contract. Except for Buyer’s
written consent, the delivery time cannot be delayed. Delivery in advance shall be no more than [**] days prior to the delivery date, relating to every specific PO, stated in Buyer’s
e-business
website.
(b) Supplier agrees to prepare all documents and materials regarding law, regulation, import/export license, and other administration
needed for shipping Products to the delivery place stipulated in Section 6. When make each shipment, Supplier should login Buyer’s e-business website to feedback shipment information. For avoidance of doubt, as the Products may need to
[**], the Supplier is required to deliver the Products [**] at the place stated in Section 6. The Supplier should obtain any necessary export license or other documentation prior to the delivery of Products and inform the Buyer of such
information. The Buyer should provide necessary assistance for the Supplier’s application.
(c) If Supplier for any reason
anticipates that deliveries will not be made as required, it shall immediately give Buyer written notice setting forth the details and plan for corrective action. Such data shall be informational only and shall not be construed as a waiver by Buyer
of any delivery schedule or of any such rights or remedies. If delay or inability to perform arises from interruption of supply or scarcity of raw materials or parts used by Supplier, Buyer’s orders shall be given priority in production
scheduling to the same extent as Supplier’s other strategic partners.
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(d) Once Products have passed Buyer’s Delivery Inspection, which will be promptly
confirmed and publicized on the Buyer’s website, ownership and risk of Products shall be transferred to Buyer.
(e) All Products
shall be packed by Supplier in suitable containers with sufficient protection together with proper and necessary marks during shipment and storage. The package shall be reasonably suitable to prevent Products from damages caused by moisture,
vibration or contamination. The marks shall include but not limited to shipping mark, Indicative Mark, Warning Mark. Supplier will be liable for any damages to the Products prior to delivery due to insufficient packaging or improper marks by
Supplier.
(f) Supplier is required to print Buyer’s barcode labels from Buyer’s e-business website and stick them to the
minimum packages of delivered goods. Information on Supplier’s container labels will include, without limitation: Supplier name, Supplier P/N, Buyer P/N, PO number, production lot number, quantity, weight, carton number. Products delivered
shall be attached with packing list and three copies of invoices.
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13.
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Inspection, Acceptance and Rejection
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(a) All Products covered by this Contract shall be
received subject to Buyer’s right of inspection, count, testing (which shall be completed within [**] working days after delivery, “Delivery Inspection”), and rejection in accordance with Section 13(c). Supplier shall provide and
maintain inspection/quality and process control systems reasonably acceptable to Buyer for production of the Products. Records of all inspections by Supplier shall be kept complete and available to Buyer during the performance of this Contract or
for such longer period as may be required by law. Buyer may inspect Products at Supplier’s plant and any other place of manufacture at any time without waiving its right subsequently to reject or revoke acceptance of such Products for any
defects.
(b) Delivering Products to Buyer doesn’t mean Buyer’s final acceptance. The Products are just in a stage of delivery
inspection according to respective specifications and criteria. Payment for Products delivered hereunder shall not constitute acceptance thereof, and all
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payments against documents shall be made with a reservation of rights by Buyer for defects in Products or documents, including, without limitation, defects apparent on the face thereof. Failure
of Buyer to inspect shall not relieve Supplier from any of its responsibilities hereunder. Buyer, at its expense, shall furnish, or cause to be furnished, facilities and assistance reasonably necessary to ensure the safety and convenience of any
such inspections.
(c) When the Products do not pass delivery inspection, Buyer shall inform Supplier the delivery inspection result
within [**] working days following the Products receiving date. For avoidance of doubt, passing the delivery inspection including the LAR (Lots Accepted Rate) inspection only means the Buyer’s acceptance on the package and quantity of Products,
and does not constitute the Buyer’s acceptance on the quality of Products and will not relieve Supplier of any inability for defects.
For the product that Supplier provides to Buyer in batch, LAR shall be no less than [**]%.
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LAR =
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Number of qualified batches in IQC during each statistic period
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Number of delivery batches during each static period
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IQC: Incoming Quality Control.
If any of the Products are found at any time, whether during or after examination, to be defective in design, materials or workmanship or
otherwise to be not in conformity with the requirements of this Contract, including any applicable specifications, samples, drawings, designs, plans or instructions, Buyer, in addition to such other rights as it may have under this Contract, at law
and/or in equity, at its option may: (a) reject the whole batch and Supplier shall be liable for recovery and replacement of Products within [**] working hours; (b) require Supplier to inspect Products and remove and replace nonconforming
Products with Products conforming to this Contract. Buyer may at its option inspect, sort, remove, correct and replace such Products and Supplier shall pay the actual cost thereof. If any Products are rejected, Buyer will deduct from the current
invoice of Supplier the cost of rejected Products.
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14.
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Quality Control and Quality Issues Handling
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(a) In the event quality problems of
Products are found, whether in production or application, Supplier shall respond within [**] working hours, feedback the action plan within [**] working hours and provide failure analysis report within [**] working days. Supplier will
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replenish the material firstly and make efforts not to impact Buyer’s production and application. Then Supplier shall conduct failure analysis on defect samples and provide Buyer the failure
analysis report and corrective action report.
(b) Supplier shall provide and maintain an inspection/quality control system reasonably
acceptable to Buyer covering the Products and shall tender to Buyer for acceptance only Products that have been inspected in accordance with the inspection system and have been checked by Supplier to be in conformity with Order requirements.
(c) Supplier shall combine the quality target required by Buyer with the aims of ISO9000 quality management system, implement internal control
and evaluate the rationality and perform ability of the quality target annually, and upon request, feedback the evaluation result to Buyer.
(d) When necessary, Buyer may audit Supplier’s quality assurance system on Supplier’s premises, and Buyer shall comply with all
security, safety and confidentiality requirements applicable to such facility. Supplier shall furnish, without additional charge, all reasonable facilities and assistance for the auditing personnel to perform their duties safely and conveniently.
(e) Supplier shall permit and obtain from its sub-suppliers the right for Buyer or its agents to enter Supplier’s and
sub-suppliers’ premises at reasonable times to determine Supplier’s adherence to this Contract, and Buyer shall comply with all security, safety and confidentiality requirements applicable to such facility. This provision shall include the
right to inspect and test all Products, tooling and workmanship. However, the failure of the Buyer to test or inspect will neither relieve Supplier of any liability for defects, nor create any liability on the part of Buyer for non-inspection.
(f) Buyer’s testing of any kind of Products, whether for performance or reliability, shall not negate, diminish or relieve
Supplier’s obligation or responsibility existing at law or under this Contract.
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15.
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Spare Parts and Service
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Supplier shall guarantee that all spare parts, module or goods
required for the Products will be produced or available in the market for a minimum period of [**] years from the date of passing the inspection.
Supplier shall provide Buyer the technical service and support, which include, without limitation: samples, Products technical document,
quality certification, training, technical consulting, necessary develop tools and software. In the event Buyer requests the technical service and support, Supplier shall respond within [**] working hours.
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16.
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NPI (New Product Introduction)
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(a) Sample: Before providing sample, Supplier shall
ensure that every index is in accordance with the specification (including the local and international industry standard or the specification from Buyer), except special indication by Buyer with written record. The specification and test report
including sample’s dimension, index, performance and reliability shall be provided with the sample.
(b) Pilot Run: After the sample
having been approved with the sample approval report, Supplier shall do the trial-production for pilot to evaluate the working procedure capability. After eligibility is confirmed, the trial-production sample shall be provided to Buyer for
confirming. The specification and test report including sample’s dimension, index, performance and reliability shall be provided with the trial-produce sample.
(c) Batch Approve: Supplier warrants that the batch production will be held until the sample and trial-production product have been approved
by Buyer. The quality of the batch product shall not be lower than that of the sample.
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17.
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License Grant (Not applicable for hardware purchase only)
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Subject to the terms and
conditions in the Contract, Supplier hereby grants Buyer a non-exclusive, worldwide, non-transferable license to:
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Use and copy Internally licensed software solely in order to perform this Contract;
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(ii)
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Use, make, import, offer for sale, sublicense, sell or otherwise commercially distribute such license software world-wide to Buyer’s customers;
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Other than the specific license granted herein, Licensee has no rights, by license or
otherwise, to use, copy, sublicense, duplicate and/or distribute the licensed software, in whole or in part.
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18.
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Software Updates and Upgrades (Not applicable for hardware purchase only)
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(a) Software
Maintenance Updates. Supplier shall provide Buyer [**] software maintenance updates (i.e. bug fixes) during the warranty period. Supplier shall supply Buyer software maintenance updates in electronic format suitable for dissemination by Buyer via
the internet and CD ROM. During the warranty period, whenever a software maintenance update requires the use of a software upgrade, Supplier, at its option, will provide Buyer either with the patch allowing such software maintenance update or with
the software upgrade [**].
(b) Software Upgrade Releases. New software upgrade releases for the Supplier’s Products will be offered
to Buyer [**] during the warranty period and at prices negotiated and agreed upon in good faith between the Parties after expiration of the warranty period.
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19.
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Important Information Exchange
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Both Supplier and Buyer will notify each other in
writing immediately when event occurs which may impact significantly the implementation of the Contract hereunder. Both parties shall make efforts to reduce any losses to each other.
The names and trademarks of each party and its affiliates shall remain the
sole and exclusive property of that party or its affiliates and shall not be used by the other party for any purpose whatsoever unless authorized expressly by the owning party.
Supplier warrants that:
(a) All Products will be free of any claim of any nature by any third party and that Supplier will convey unencumbered and clear title to
Buyer;
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(b) All documents and information provided to Buyer relating to Products delivered hereunder
are real and correct;
(c) All Products sold to Buyer will be new, merchantable, fit and sufficient for Buyer’s particular purpose
and will contain new parts and components and be free from all defects, whether latent or patent, in design, workmanship and materials, and shall comply with all applicable national, state and local laws, rules and regulations to which it is, or
becomes subject, that are specifically identified in the PO.
(d) All Products delivered hereunder will comply with related standards of
safety, and related standards of environment protection, including but not limited to, not containing and not manufactured using ozone depleting substances as defined by the Montreal Protocol and as required by the RoHS Directive. “RoHS
Directive” means Directive 2002/95/EC on the Restriction of the Use of Certain Hazardous Substances in Electrical and Electronic Equipment, O.J. (L 19) (Jan. 27, 2003), as amended, and applicable European Union Member State implementing
legislation and regulation, as may be amended or modified from time to time.
(e) Supplier further warrants that all Products will
strictly conform to the Specification, for a period of [**] months from Delivery Inspection by Buyer. Any goods repaired or replaced or service re-performed under this provision shall be warranted for a period of another [**] after re-delivery.
(f) The above warranties shall be deemed to cover the Products which are procured by Supplier from its sub-suppliers. To the maximum extent
permitted, Supplier hereby extends to Buyer any and all warranties received from Supplier’s sub-suppliers and agrees to enforce such warranties on Buyer’s behalf. All of Supplier’s warranties shall run collectively and separately to
Buyer, its successors, and permitted assigns, customers and users of Products sold by Buyer.
(g) The foregoing warranties shall survive
Buyer’s inspection, acceptance, sale and use of the Products. The warranties contained in this section shall be in addition to, and shall not be construed as restricting or limiting any warranties or remedies of Buyer which are provided by
contract or law.
(h) These warranties shall not apply to any Product that was (a) used, handled, transported, operated, maintained
or stored improperly provided that the product failure arises
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exclusively due to such verifiable improper use, handling, transportation, operation, maintenance or storage, or in any manner not in accord with Supplier’s written instructions or industry
standard practices or (b) repaired, altered or modified other than by Supplier or its authorized agents.
(i) EXCEPT AS SPECIFICALLY
PROVIDED IN THIS SECTION 21, ALL PRODUCTS AND SERVICES ARE PROVIDED “AS IS” WITHOUT WARRANTY OF ANY KIND. SUPPLIER HEREBY DISCLAIMS ALL OTHER WARRANTIES, EXPRESS OR IMPLIED, ORAL OR WRITTEN, INCLUDING WITHOUT LIMITATION, ALL IMPLIED
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE AND ALL WARRANTIES ARISING FROM ANY COURSE OF DEALING OR PERFORMANCE OR USAGE OF TRADE.
Without Buyer’s prior written consent, Supplier shall not advertise,
promote, or publish the fact that Buyer has contracted to purchase Products from Supplier, not disclose information relating to this Contract and not use the name of Buyer or any of Buyer’s customers in advertising or any other publications.
Buyer has the right at any reasonable time and upon reasonable
notice to verify any data Supplier has submitted under this Contract, including requesting financial information of Supplier, its sub-suppliers and its affiliates.
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24.
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Default and Indemnifications
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(a) The Buyer reserves the right, without inability, to
take any or all of the following actions if for any reason Supplier does not comply with substantially its delivery obligations: (i) Terminate the unfilled relevant items on PO without any payment; (ii) Terminate the unfilled relevant
items on PO, purchase replacements for the unfilled relevant items on the PO elsewhere and Supplier will be liable for actual and reasonable additional procurement costs that Buyer incurs; (iii) Require Supplier to specify faster freight,
and/or to do whatever is necessary to avoid the delay, and to pay any and all transportation charges, concessions to Buyer’s customers, liquidated damages, and any other costs and expenses incurred by Buyer; (iv) Charge 0.1% of the total
amount of each Purchase Order as liquidated damages for each day delayed;(v) Claim for other losses and damages that cannot be covered by the liquidated damages and take other actions that is lawful, fair and in accordance with this Contract.
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(b) In the event Products fail to meet the Specification, or the defect rate is higher than
the respective criteria, or is not in accordance with the warranty, Buyer reserves the right to choose a remedy measure (repairing Products, replacing Products or refunding payments). Supplier should send the repaired or replaced Products to Buyer
in time and be responsible for the charges needed. If Supplier cannot repair or replace the Products promptly, Buyer reserves the right to dispose of the Products or return them, and Supplier should refund the Buyer the contract amount of such
Products and indemnify Buyer for actual and reasonable costs and charge of disposal and return. Supplier is liable to take back the rejected Products from Buyer’s warehouse, and Buyer shall render reasonable access, cooperation and assistance.
(c) In the event Supplier’s Products fail to pass Buyer’s inspection and Supplier can not replenish the needed quantity in
time, Buyer may make a waive decision and ask for a price discount from Supplier.
(d) In the event Supplier’s Products cause
economic loss to Buyer and is confirmed as quality problem that Supplier’s Products can not meet the Specification, Buyer reserves right to claim for damages for bodily injury and damages to real property and tangible personal property due to
quality problem.
(e) In the event loss has been brought or will be brought to Buyer because of Supplier’s failure to execute the
warranty specified in item 21 of this “General Conditions of Purchase”, Buyer reserves the right to claim for compensation from Supplier in relation to non-conforming Products, and terminate the Contract and any unimplemented PO.
(f) Should Supplier breach any section of this Contract, including any delay in shipping resulted from the fault or negligence of Supplier,
Buyer shall have the right immediately to terminate this Contract without further obligation or liability and shall have all remedies available to it under this Contract, at law, or in equity. If Buyer fixes an additional period for Supplier to cure
such breach, Buyer may exercise the right above after the expiration of the period if that breach remains uncured.
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(g) The Buyer is entitled to take any or all of the above remedies according to real
situation. The foregoing right should not limit Buyer’s other legal remedy under contract and/or applicable law, subject to all terms and conditions of this Contract.
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25.
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Product/Process Change Notice (“PCN”)
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(a) Supplier shall notify Buyer through
Buyer’s PCN platform [**] of any and all proposed changes in design, material, procedure, specification, test method, plant location, packing and shipping for Product, With Buyer’s consent (which consent shall not be unreasonably delayed,
conditioned or withheld) the changes may be implemented and it shall be noted on the bill of delivery for the [**] times.
PCN notice
shall include but not limit to: PCN number, release date; Specific reason for changes in detail; Explanation for changes and its affect in detail; Date of take effect; P/N list of being affected material; Supplier’s data and report for changes;
Demands for customers’ feedback; Data for providing the changed sample; The last date of receiving an order, the last date of shipment, and the attached items in the last PO; Complaint or feedback method for customer.
PCN including the changes in material, its relative data and information should keep in accordance with the following PCN procedure:
1) Discontinue the manufacture and/or sale of any Product: Supplier shall give the notice about the information at least [**] months in
advance.
2) Update of version or model: Supplier shall give the notice about the information at least [**] months in advance.
3) Changes in production plant: Supplier shall give the notice about the information at least [**] months in advance.
4) Changes in main process or procedure: Supplier shall give the notice about the information at least [**] in advance.
5) Changes in main equipment or facility: Supplier shall give the notice about the information at least [**] in advance.
6) Supplier shall give notice about the reproduction at least [**] in advance if the equipment or facility is out of use for more than [**]
months.
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7) Changes in main raw material or accessories: Supplier shall give the notice about the
information at least [**] in advance.
8) Changes in design or parameter: Supplier shall give the notice about the information at least
[**] in advance.
9) Changes in appearance (including outlook, size, tolerance, color, logo, surface material, packing, etc.), Supplier
shall give the notice about the information at least [**] in advance.
10) Changes in RoHS or environment protection: Supplier shall give
the notice about the information at least [**] months in advance.
11) Changes occasionally: The notice about the information shall be
given before delivery at latest.
12) Other Changes for inform: The notice about the information shall be given before delivery at latest.
The Supplier shall comply with the PCN procedure timely and strictly. In case any damages arising, which related to the product quality
and/or delivery and/or service of Buyer, is due to the Supplier’s non-performance and/or improper performance of its obligation under this section, the Supplier should compensate such damages to the Buyer. For avoidance of doubt, Buyer is
entitled to claim for its damages due to Supplier’s changes occasionally or other changes for inform as mentioned above in this section 25.
If any Product are determined by Supplier, Buyer or any governmental
agency or court to contain a defect or a quality or performance deficiency, or not be in compliance with any standard or requirement so as to make it advisable that such Product be reworked or recalled, Supplier or Buyer will promptly communicate
relevant facts to each other and shall undertake to develop and implement a mutually agreeable corrective action, provided that Buyer shall cooperate with and assist Supplier in any necessary filings and corrective action, and provided that nothing
contained in this section shall preclude Buyer from taking such action as may be required of it under any such law or regulation. Where applicable, Supplier shall pay all reasonable expenses associated with determining whether a recall or rework is
necessary. Supplier shall perform all necessary repairs
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or modifications at its sole expense, except to any extent Supplier and Buyer agree to the performance of such repairs by Buyer upon mutually acceptable terms. The parties recognize that it is
possible that other Supplier-manufactured products might contain the same defect or noncompliance condition as do Products manufactured for Buyer. Each party shall consult the other party before making any statements to the public or a governmental
agency relating to potential safety hazards affecting Products, except where such consultation would prevent timely notification required by law.
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27.
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Non-Infringement of Intellectual Property Rights
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Supplier warrants that Products do not
infringe any patent, copyright or other intellectual property tight of any third party. Supplier shall hold Buyer harmless against and handle, defend or settle any claim, demand, suit or proceeding brought against Buyer or Buyer’s customers
that is based on an allegation that any article, apparatus, material, component or part thereof constituting Products, as well as any article, device or process resulting from the intended use thereof or any process or method furnished by Supplier
for making or using Products, constitutes an infringement of any patent, copyright or other intellectual property right, and Supplier shall pay all damages and costs awarded therein or all costs incurred and payment due in settlement thereof,
including but not limited to any royalties due for the continuing purchase of, or use of Products from Supplier. Notwithstanding the above, if any article, apparatus, material, component or part thereof, or any device or process necessarily
resulting from the use thereof or process or method for using Products, is held in such suit or proceeding to constitute infringement or misappropriation and the manufacture, sale or use of the article, apparatus, material, component, part, device,
process or method is enjoined, Supplier shall, at its own expense and at Buyer’s option: (i) obtain for Buyer the rights to continue using or selling the article, apparatus, material, component, part, device, process or method;
(ii) if the form, fit, function or performance thereof will not be materially adversely affected, replace it with a non-infringing article, apparatus, material, component, part, device, process or method ; (iii) if the form, fit, function
or performance thereof will not be materially adversely affected, modify it so it becomes non-infringing; or (iv) remove the article, apparatus or material or component and refund the purchase price and the transportation and installation costs
thereof. The foregoing shall be in addition to and shall not be construed as restricting or limiting, any of the foregoing remedies of Buyer. All authors have waived all their rights to the Products and Services’ integrity and to be associated
with them as authors.
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28.
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Intellectual Property Rights
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As between the parties, Supplier shall own and retain all
tights, title and interests (including without limitation, all patent rights, copyright rights, trade secret rights and other intellectual property and proprietary rights) embodied in the Products, Specification and other Supplier Confidential
Information except to the extent expressly licensed to Buyer in accordance with Contract or any other written agreement between both Parties. Buyer agrees not to take any action inconsistent with such ownership subject to all terms and conditions of
this Contract.
Supplier shall not assign this Contract, or any interest, right or
obligation created hereby or any payment due or to become due hereunder without Buyer’s written consent (not be unreasonably delayed or withheld), except no consent will be required for any assignment due to sale of assets or equity, merger,
consolidation or otherwise and (a) Supplier notifies Buyer in writing promptly after such assignment and (b) once assigned the successor/acquiring company agrees to honor this agreement and all obligations. Buyer may require that the
successor/acquiring company needs to re-qualify as an approved vendor with Buyer, qualification not to be unreasonably delayed conditioned or withheld (and if the successor/acquiring company is not so approved, then Buyer may terminate under
Section 34(d)(iii)).
Any attempt to make any other assignment by Supplier without Buyer’s written consent shall be null and
void. If Supplier or Buyer ceases to conduct its operations in the normal course of business (including inability to meet its obligations as they come due), or if any proceeding under the bankruptcy or insolvency laws is brought by or against
Supplier or Buyer, or a receiver for Supplier or Buyer is appointed or applied for or an assignment for the benefit of creditors is made by Supplier or Buyer, then upon at least thirty (30) days prior written notice, the other party may
terminate this Contract where allowed by law.
Any information furnished to Supplier by Buyer orally or in writing and
whether marked or not with a restrictive label, shall be held in strict confidence by Supplier and not disclosed by Supplier, and be protected in the same fashion as Supplier would protect its own proprietary information, and be used only to the
extent necessary to perform the PO. The confidentiality terms
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in details are stipulated in the Non-Disclosure Agreement (“NDA”) which is signed by both parties and attached as Appendix 2. The existence, terms and related discussion of this
Contract should be deemed as Confidential Information. The Buyer may disclose Confidential Information to its employees, contractors, consultants, vendors and contract manufacturers, and also to the Supplier’s local agent and/or authorized
service provider as listed in Appendix 3, for the sole purpose of performing this Contract. Notwithstanding anything to the contrary herein (including Appendix 2), either Party may provide a copy of this Contract or otherwise disclose its terms in
connection with any financing transaction or due diligence inquiry, or if ordered by a government or court having jurisdiction over it.
Where the performance hereof is delayed, hindered by or is absolutely
impossible under the terms and conditions herein on account of Force Majeure”), including earthquakes, typhoon, flood, fires, war and other unexpected, irresistible or unavoidable forces in respect of their consequence or results, the party in
contingency shall inform the other party of such contingency by fax or telegram immediately and within [**] days present the other party valid documents signed by the notarial agency of the locale, or a certificate of the accident issued by the
government authorities or chamber of commerce at the place of such accident as evidence thereof, stating the details of the incident and proving it is impossible to perform whole or part of this Contract or that extension of time of performance
hereof is necessary. In case that this Contract is not able to be performed because of Force Majeure, the liabilities shall be exempted in part or wholly in light of the effects of Force Majeure. If the said Force Majeure lasts for [**] consecutive
days, either of the parties to the Contract shall have the right to terminate the Contract upon written notice to the other party, without incurring any inability under the said Contract.
(a) Any dispute arising from, or in connection with the Contract
shall be first settled through friendly negotiation by both Parties. In case no settlement to disputes can be reached through amicable negotiation by both Parties within a [**] day period beginning from the date when the request for settlement of
dispute is sent to the other Party, it shall be submitted to Hong Kong International Arbitration Center (“HKIAC”) for arbitration by three arbitrators under its rules in force at the time of application for arbitration. The place of
arbitration shall be in Hong Kong.
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All proceedings shall be conducted, and the evidence shall be translated into English where applicable. The arbitral award is final and binding upon both Parties. The arbitration fees shall be
borne by the losing Party except otherwise awarded by the arbitration commission.
(b) To the fullest extent permitted by law, this
arbitration proceeding and the arbitrator’s award shall be maintained in confidence by the Parties so as to protect the relevant valuable information or intellectual property rights.
(c) Notwithstanding any reference to arbitration, both Parties shall continue to perform their respective obligations under the Contract
except for those matters under arbitration.
The Contract, including without limitation its conclusion, validity,
construction, performance and settlement of the disputes, shall be governed by the law of [**], without giving effect to the principles of conflict of law. [**].
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34.
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Effective Period, Modification and Termination
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(a) This “General Conditions of
Purchase” is effective for an initial period of one (1) years commencing on the Effective Date (the “Initial Term”). After the expiration of the Initial Term, this “General Conditions of Purchase” will continue to renew
for successive one (1) year terms until either party terminates it upon at least ten (10) days prior written notice.
(b) Any
modification of the terms and conditions of this “General Conditions of Purchase” shall be proposed by either party before the expiration due date by given [**] days written notice to the other. After agreed upon, the modification shall be
made and take effect thereafter.
(c) This Contract may be terminated at any time prior to the expiration date by a mutual written
Contract of the Parties.
(d) At any time prior to the expiration date, the Buyer may terminate this Contract through notice to the
Supplier in writing if:
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The Supplier breaches this Contract, and such breach is not cured within [**] days after written notice from the Buyer of such breach; or
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(ii)
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The Supplier becomes bankrupt, or is the subject of proceedings for liquidation or dissolution, or ceases to carry on business or becomes unable to pay its debts as they come due; or a third party legally confiscates or
takes over the Supplier s title or assets, or a receiver is designated to take control of the Supplier’s assets; or
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(iii)
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The Supplier assigns without Buyer’s consent in connection with a process of merger, consolidation, reorganization or transferring substantial assets and business to any individual or entity and, after such
transactions, the assignee or successor is not approved by ZTE as re-qualifying vendor (such re-qualification not to be unreasonably delayed conditioned or withheld) or
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(iv)
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The conditions or consequences of Force Majeure which have a material adverse effect on the Supplier’s ability to perform continue for a period in excess of [**] days and the Parties have not agreed on an equitable
solution; or
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(v)
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Supplier is in breach of Section 37 Terms of Exclusiveness.
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(e) At any time prior to the
expiration date, the Supplier may terminate this Contract through notice to the Buyer in writing if:
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(i)
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The Buyer breaches any material provision of this Contract, and such breach is not cured within [**] days after written notice from the Supplier of such breach; or
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(ii)
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The Buyer becomes bankrupt, or is the subject of proceedings for liquidation or dissolution, or ceases to carry on business or becomes unable to pay its debts as they come due; or a third party legally confiscates or
takes over the Buyer’s title or assets without Buyer’s consent, or a receiver is designated to take control of the Buyer’s assets; or
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(iii)
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The conditions or consequences of Force Majeure which have a material adverse effect on the Buyer’s ability to perform continue for a period in excess of [**] days and the Parties have not agreed on an equitable
solution.
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(f) Notwithstanding the above, Section 20 (Trademarks), 21 (Warranties), 24 (Default and
Indemnifications), 26 (Product Recall), 27 (Non-Infringement of Intellectual Property Rights), 30 (Confidentiality), 32 (Disputes Resolution), 33 (Applicable Laws), 34 (Effective Period, Modification and Termination), 36 (Limitation of Liability),
and any other provision of this Contract and/or the obligation to its nature which shall survive, shall survive after termination of this Contract.
(a) This “General Conditions of Purchase” will take effect
after having signed by authorized representatives of each party. This “General Conditions of Purchase” is in two (2) copies, each party hold one and each of the copy shall be deemed an original and has the same effectiveness.
(b) This General Conditions of Purchase, Nondisclosure Agreement entered into by the parties, and anything referred and incorporated herein,
including all terms and conditions on the Framework Contract/Purchase Contract and PO and NDA, set forth the entire agreement between the parties as to the subject matter herein and supersedes any prior or contemporaneous agreements between the
parties, understandings, promises and representations made by one party to the other concerning the subject matter, written or oral. The headings of the sections of this General Conditions of Purchase are just for convenience and are not to be used
in interpreting. The order of precedence for resolution of conflicts is: 1) PO; 2) Framework Contract or Purchase Contract; 3) General Conditions of Purchase. Any amendment shall be agreed by both parties in writing. This Contract is in English
only, which language shall be controlling in all respects. No version of this Contract in another language shall be binding or of any effect.
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36.
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Limitation of Liability
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TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE LAW, SUPPLIER
SHALL NOT BE LIABLE CONCERNING THE SUBJECT MATTER OF THIS CONTRACT, REGARDLESS OF THE FORM OF ANY CLAIM OR ACTION (WHETHER IN CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHERWISE), FOR AGGREGATE DAMAGES, IN EXCESS OF EITHER 1) THE VALUE OF THE
PURCHASE ORDERS PLACED BY BUYER IN THE TWELVE(12) CONSECUTIVE MONTHS TILL A CLAIM IS MADE AGAINST BUYER OR; 2) FIVE (5) MILLION US
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DOLLARS, WHICHEVER IS HIGHER FOR CALENDAR YEARS 2010, 2011 AND 2012, AND 1) THE VALUE OF THE PURCHASE ORDERS PLACED BY BUYER IN THE TWELVE(12) CONSECUTIVE MONTHS TILL A CLAIM IS MADE AGAINST
BUYER OR; 2) FIFTEEN (15) MILLION US DOLLARS, WHICHEVER IS HIGHER FOR CALENDAR YEARS AFTER 2012 EVEN IF SUPPLIERS HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THESE LIMITATIONS SHALL NOT APPLY WITH RESPECT TO: (I) A BREACH OF THIS
CONTRACT BY GROSS NEGLIGENCE OR INTENTIONAL MISCONDUCT; (II) LIABILITY ARISING FROM ARTICLE 27, RELATING TO INFRINGEMENT OF INTELLECTUAL PROPERTY RIGHT; (III) A BREACH OF ARTICLE 30, RELATING TO CONFIDENTIALITY; (IV) A BREACH OF ARTICLE 37 RELATING
TO TERMS OF EXCLUSIVENESS; AND (V) DEATH OR PERSONAL INJURY. THESE LIMITATIONS ARE INDEPENDENT FROM ALL OTHER PROVISIONS OF THIS CONTRACT AND SHALL APPLY NOTWITHSTANDING THE FAILURE OF ANY REMEDY PROVIDED HEREIN.
By way of this Contract [**]. Supplier [**] ZTE. [**].
Supplier acknowledges and agrees that its complete and full fulfillment of the provisions set forth in the paragraph above constitutes the
precondition and foundation for Buyer’s will to enter into this Contract. Breaches of this section will cause immeasurable damage to Buyer. In case of any violation of the provisions set forth in the paragraph above by Supplier, Buyer shall
have the right to take any and all remedies it deems necessary to recover its loss, which will be without prejudice to any of its rights under this Contract to claim any cost, loss, damages hereunder.
Notwithstanding anything to the contrary herein, the provisions of this Section 37 shall terminate and be of no further effect upon the
earlier of (a) January 1, 2014 and (b) any expiration or termination of this Contract.
Appendixes to this General Conditions of Purchase include:
Appendix 1: Lead Time, Reschedule and Cancel windows Table
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Appendix 2: Non-Disclosure Agreement
Appendix 3: List of Authorized Agent and/or Service Provider
Appendix 4: Product Specification
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IN WITNESS WHEREOF, the parties by their duly authorized representatives have executed this
Contract as of the Effective Date first set forth above
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Buyer
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Supplier
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ZTE Kangxun Telecom Co., Ltd.
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Acacia Communications, Inc.
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By:
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By:
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/s/
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/s/ Raj Shanmugaraj
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(Signature)
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(Signature)
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Name:
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Name:
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Raj Shanmugaraj
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(Typed Name)
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(Typed Name)
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Title:
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Title:
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President/CEO
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Date:
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Date:
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10/26/10
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2010.12.3
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Appendix 1: Lead
Time, Reschedule and Cancel windows Table
APPENDIX 1:
LEAD TIME, RESCHEDULE AND CANCEL WINDOWS TABLE
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Product Category
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Type
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Products 2011
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Lead Time
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Standard
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[**]
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Reschedule Window
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Standard
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Multiple reschedules allowed for any Purchase Order, Buyer may extend (by up to [**] days) the delivery date(s) under an accepted PO, by giving written notice to Supplier at least [**] days prior to the initial delivery date for
that PO.
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Cancel Window
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Standard
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None
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The first [**] units purchased and delivered to ZTE are guaranteed under the Development Agreement negotiated with ZTE
Corporation (the “Development Agreement”). The first [**] units are to be delivered over the period from 2011 to [**]. These purchase orders will be non cancelable. The reschedule terms will be reschedule window [**] days prior to original
delivery date reschedule-able up to [**] days after original delivery date. This delivery can be rescheduled multiple times but deliveries will not extend beyond [**] days after the original schedule delivery date. Reschedule terms after the first
[**] units will be [**] notice for cancelation and [**] notice for reschedule. Lead time is quoted as follows:
[**]
Note: [**].
Except as expressly provided
above, Buyer may not cancel, reschedule or otherwise modify any order after acceptance, without Supplier’s prior written consent.
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Appendix 2:
Non-Disclosure Agreement
APPENDIX 2: NON-DISCLOSURE AGREEMENT
This Agreement is made and entered into this day of
October 2010
(“Effective Date”), by and between
ZTE Kangxun Telecom Co. Ltd, a Chinese corporation, having its principal place of business at
Plant No. 1. Da Mei Sha, Yan Tian
District, ,
Shenzhen, P.R. China (hereinafter “Kangxun”),
And
Acacia Communications, Inc., a Delaware corporation, having its principal place of business at Three Clock Tower Place, Suite 210, Maynard, MA
01754, USA (hereinafter “Acacia”),
WITNESSETH
WHEREAS, Kangxun and
Acaica
, both have as their purpose an interest in exploring a possible business relationship, and in order for the
parties to explore this relationship, it may be necessary for the parties to disclose certain of their proprietary and other information to each other, which information each of the parties regards as confidential.
NOW, THEREFORE, the parties hereto agree as follows:
1. (a) All of the confidential information (hereinafter “Confidential Information”), including, without limitation , all information
relating to business plans, financial or technical matters, trade secrets, designs, know-how, inventions, test results, operations and any other information received or acquired by one party (or its affiliates or their representatives, the
“Receiving Party”) from or on behalf of the other (“Disclosing Party”) in the course of exploring the possible business relationships shall be in written or other tangible form and marked “CONFIDENTIAL” in conspicuous
position. Information from ZTE Corporation which complied with above mentioned requirements shall be deemed as Confidential Information from Kangxun, and information disclosed by or for Acacia to ZTE Corporation shall be treated by Kangxun as
Acacia’s Confidential Information for the purposes of this Agreement. If the Confidential Information is initially disclosed orally, the Disclosing Party shall use reasonable efforts to cause that it shall be reduced to written or other
tangible form by the Disclosing Party (including the date of the oral disclosure and name of the Disclosing Party) and presented or mailed to the Receiving Party within [**] days from the first oral disclosure.
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Appendix 2:
Non-Disclosure Agreement
(b) The Confidential Information shall remain the property of the Disclosing Party.
(c) All information disclosed which is not marked “CONFIDENTIAL”, or is not reduced to written form and marked
“CONFIDENTIAL” if initially disclosed in intangible form (orally, visually, by demonstration or inspection) shall be considered to be non-confidential, and shall not be subject to the obligations imposed by this Agreement. All Confidential
Information disclosed under this Agreement shall be limited to the subject matter mentioned in the Recital. The existence and terms and conditions of this Agreement shall be treated as Confidential Information.
2. The Receiving Party shall:
(a) Hold the Confidential Information in confidence and not disclose it to third parties, except in the limited cases referred to in paragraph
“6”; and
(b) Use reasonable efforts to safeguard the Confidential Information from unauthorized access, use and disclosure; and
(b) Not use the Confidential Information for any purpose other than exploring or examining the possibility of a business relationship
between the parties.
3. Either party hereto shall have the right, at any time, to terminate in writing the discussions and exchange of
information in connection with the exploration of the possibilities of a business relationship between the parties without any further obligations or liabilities to the other party, other than the obligations of confidentiality hereunder, or any
right or obligation relating to the Confidential Information hereunder.
4. (a) The obligations of the above paragraph “2” shall
not apply to any information which:
(i) Is generally available to the public through no breach of this Agreement by the Receiving Party
(or any of its affiliates or their representatives); or
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Appendix 2:
Non-Disclosure Agreement
(ii) Was already rightfully in the possession of the Receiving Party on a non-confidential
basis, prior to receipt from the Disclosing Party; or
(iii) Is received independently and on a non-confidential basis from a third party
who is free to disclose such information to the Receiving Party without conflict with any of its legal or contractual obligation; or
(iv) Is subsequently developed independently by the Receiving Party without breaching of its obligation hereunder; or
(v) Has been or is made public by the Disclosing Party, such as commercial use or sale or publications or patents, or otherwise; or
(vi) Is approved for release by prior written consent of the Disclosing Party.
(b) Disclosure of Confidential Information shall not be precluded if such disclosure is pursuant to the requirement or request of a
governmental agency or operation of law. Provided, however, the Receiving Party shall promptly give a written notice to the Disclosing Party prior to such disclosure so that the Disclosing Party may seek an appropriate protective order.
5. All Confidential Information delivered to and/or in the possession of the Receiving Party shall be returned or delivered to the Disclosing
Party or destroyed by the Receiving Party, if the Disclosing Party so requests in writing, including without limitation to, all documents and computer files containing summaries, analyses or conclusions derived from such Confidential Information,
with all copies made thereof, in forms whatsoever, except for one copy of each which the Receiving Party may retain for the only purpose of identification of the scope of Confidential Information and avoid misunderstanding of Confidential
Information in the future.
6. The Receiving Party agrees that the Confidential Information shall be disclosed to only those people within
its respective organizations or its subsidiaries, agents, consultants, representatives or advisors who have a need to know the information and who are obligated under terms no less restrictive than those imposed in this Agreement on the Receiving
Party.
7. Each party shall have the right to refuse to accept any information under this Agreement, and nothing herein shall obligate
either party to disclose to the other party any
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Appendix 2:
Non-Disclosure Agreement
particular information. Further, each party acknowledges that no contract or agreement providing for a business relationship, of any nature, shall be deemed to exist unless and until a final
definitive agreement has been executed and delivered.
8. If any official approval is required by a government authority to disclose the
Confidential Information hereunder, such disclosure is subject to that approval. Both parties shall comply in all respects with applicable laws, regulations and court orders, including but not limited to laws and regulations on export control, in
both parties’ countries and other applicable countries.
9. Disclosure of any information under this Agreement, or otherwise, shall
not be construed as granting, directly or by implication, any license under or interest of any kind in any patent, patent application, copyright or other intellectual property rights.
10. The parties hereto shall not be obligated to compensate each other for the disclosure and/or use pursuant to the terms of this Agreement
of any information exchanged in connection with this Agreement or the discussions between the parties.
11. This Agreement supersedes all
prior agreements, understandings, representations and statements, whether oral or written, between the parties relating to the disclosure of the Confidential Information. The terms of this Agreement may not be changed except by subsequent written
agreement duly signed by an officer with appropriate authority of each of the parties.
12. Subject to Paragraph “4” hereof the
obligation of the Receiving Party provided in Paragraph “2” hereof and elsewhere in this Agreement shall continue for [**] years from the date of each receipt of the Confidential Information, even after termination of this Agreement
according to paragraph “3” hereof.
13. This Agreement shall be governed, construed and interpreted in accordance with the laws
of Hong Kong, without giving effect to the principles of conflict of law.
Any disagreement or dispute which may arise in connection with
this Agreement, and which the Parties are unable to settle by mutual agreement, shall be finally settled by Arbitration and submitted to Hong Kong International Arbitration Center (“HKIAC”) in accordance with its Rules. The place of
arbitration shall be in Hong Kong. There shall be three arbitrators. All proceedings shall be conducted, and the evidence submitted in English where applicable. The award of arbitration shall be final and binding upon both parties. The arbitration
fees shall be
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Appendix 2:
Non-Disclosure Agreement
borne by the losing party except otherwise awarded by the arbitration commission. Notwithstanding the above, the parties acknowledge that a violation of the Receiving party obligations with
respect to Confidential Information could cause irreparable harm to the Disclosing party for which a monetary remedy at law would be inadequate. Therefore, in addition to any and all remedies available at law, the Disclosing Party shall be entitled
to an injunction or other equitable remedies in all legal proceedings in the event of any threatened or actual violation of any or all of the provisions hereof.
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Appendix 2:
Non-Disclosure Agreement
IN WITNESS WHEREOF, the parties by their duly authorized representatives have executed this
Agreement as of the Effective Date first set forth above.
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ZTE Kangxun Telecom Co., Ltd.
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Acacia Communications, Inc.
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By:
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By:
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/s/
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/s/ Raj Shanmugaraj
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(Signature)
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(Signature)
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Name:
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Name:
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Raj Shanmugaraj
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(Typed Name)
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(Typed Name)
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Title:
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Title:
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President/CEO
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Date:
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Date:
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10/26/10
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2010.12.3
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ZTE Kangxun Telecom Co. Ltd Copyright Reserved
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Page 34 of 35
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Ver.2008-10
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ZTE
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ZTE/Acacia Confidential
p
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APPENDIX 3: List of Authorized Agent and/or Service Provider
The Supplier herein authorizes that the Buyer may disclose the Confidential Information to the following agents and/or service providers for the sole purpose
of performing this Contract or using products/service provided under this Contract:
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No
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Name
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Registered Address
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ZTE Kangxun Telecom Co. Ltd Copyright Reserved
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Page 35 of 35
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Ver.2008-10
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Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the use in this Amendment No. 1 to Registration Statement No. 333-208680 of our report dated February 19, 2016 relating to the consolidated
financial statements of Acacia Communications, Inc. and subsidiaries appearing in the Prospectus, which is part of this Registration Statement, and to the reference to us under the heading “Experts” in such Prospectus.
/s/ Deloitte & Touche LLP
Boston, Massachusetts
February 24, 2016